The Emergence Of Banking In The Fifteenth Century

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The emergence of banking in the fifteenth century

In our day, banking, is a fundamental part of the world economy. Its role as a financial intermediary allows agents in need of financing to obtain funds that banks capture from savers. Unlike its beginnings, banking is one of the businesses that current.

Modern bench emerged in Italy from the late Middle Ages and beginnings of the Renaissance (15th century), by the hand of powerful families such as the Strozzi, the Peruzzi or the Bardi. However, it was the Medici family starting with Giovanni Di Bicci de ’Medici, founder of the very important Bank Medici (1397-1494). Which would revolutionize the concept of banking, making it a profitable and respectable business, although it was not simple. One of the main problems facing the lenders during the Middle Ages in Italy, was the importance that religion had (Catholicism in this case) in all aspects of everyday life and among them, of course, were the business. The Catholic religion prohibited the collection of interests in loans, activity to which Christianity called usura and that was considered sin, and therefore was punishable. Previously the Jews had already managed to overcome this problem, because in Judaism the usury was also considered sin, yes, if a borrower and lender were Jew. So, if a Jew lent a Christian and not another Jew was not considered a sin, and that was how the Jews managed to make way in the loan business. For their part, the Medici found another way to deal. Thus they avoided "sin" and raised the social status of banking.

In addition, they managed to make the bank a profitable business, as the banks were usually very diversified and depended on a few debtors (generally blue blood characters), which increased the risk and consequently costs. The Medici extended the bank by cities such as Florence, Venice and Rome and increased their magnitude, achieving thanks to this diversification the expected reduction of risk and costs.

In this way the Medici became an especially rich family, which thanks to their money also reached political and even religious power (several family members became potatoes and occupied important positions in the nobility).

To understand the work of the Medici, it is also important. It is interesting to observe how being a document of six centuries ago, many issues appear that, if we see the document to create a company of our day would also be reflected. I refer to issues such as differentiation in the participation of the partners or the distribution of benefits at the end of the year. Although we also find information that does not appear in current documents, this is the case of the date of the solution of the company that was established in the contract itself (in this specific case it is specified that the company would initiate its activity in 1456 and cease the same In 146). The fact that companies had a stipulated closing date was a strategy to avoid possible losses that at that time could be unrecoverable, in addition, it was also common that after the dissolution of the company another with the same members was created (which, which, which, which, which, which, which, which, which, which, which, which, which, which, something that In fact, it had occurred before the training of this company).

In conclusion, the Medici family had the ability to overcome the innumerable restrictions on the business of diverse nature at that time. Achieving the establishment of banking as an extremely profitable and honorable business, their business ability and their immense wealth opened doors in politics and various family members managed to become the most influential people in cities such as Florence. And not only that, but also thanks to the work of artists like Botticelli they managed to look before society as authentic gods. In short, they were ahead of their time in business that, with tricks and intelligence they made a hole in the history of business that will last forever.   

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