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1397 CEReputable source · 2 sourcesWell documented

The Medici Bank Rises on Double-Entry Books and Letters of Credit

A Florentine banking house becomes Europe's most powerful business by keeping better records than its rivals

On the timeline · around 1397 CE · Medieval Banking and TradeMedieval Banking and TradeModern FinanceThe Medici Bank Rises on Double-Entry Books and Letters of Credit11001200130014001500

Quick facts

Founded
1397 CE, by Giovanni di Bicci de' Medici
Branches
Rome, Venice, Geneva, Lyon, Bruges, London, and others
Key client
The Roman Catholic curia
Bank closed
1494

What happened

Giovanni di Bicci de' Medici moved his family's small banking operation from Rome to Florence in 1397, the year historians treat as the Medici Bank's founding. The bank grew, especially under Giovanni's son Cosimo, into branches across Rome, Venice, Geneva, Lyon, Bruges, and London, serving the Roman Catholic curia as its chief banker and financing trade and rulers across Europe. The Medici, like other Italian merchant banks of the period, used double-entry bookkeeping, recording every transaction as a paired debit and credit, which let them track the health of every branch from Florence, and issued a form of letter of credit that let a customer draw funds in one city against a deposit made in another. History.com notes the family's wealth and political power in Florence grew directly out of this success in banking and commerce. The bank did not survive the century: mismanagement, bad loans to European rulers, and the Medici family's growing preoccupation with politics led to its collapse and closure in 1494.

Why it matters

The Medici Bank demonstrated at continental scale what disciplined bookkeeping and networked branches could do for a merchant banking house, and its wealth directly financed the Medici family's rise as the unofficial rulers of Florence and patrons of the Renaissance. Its failure a century later is an equally important lesson: even the most sophisticated bank of its age proved unable to manage political loan risk once its rulers overextended credit to European monarchs who then defaulted.

How we know

The Medici Bank's surviving ledgers, correspondence, and branch records, held in Florentine archives, let economic historians reconstruct its accounting practices, branch structure, and eventual collapse in detailed, transaction-level terms.

Sources

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The Medici Bank Rises on Double-Entry Books and Letters of Credit · History of Money · SourcedStory