financial networks throughout Italy and abroad required uniformity in record keeping and reliance upon fiduciaries . Richard A . Goldthwaite , an economic historian of Renaissance Florence , observed that for these commercial relationships to be effective , a connection bound by “ their mutual dependence upon commercial contracts ” had to exist . According to Goldthwaite , what solidified that relationship was both accounting used to “ keep a record of their complex relationships ” and the bill of exchange . The latter given that it relied upon a “ financial relation with a merchant in a different place ” for the fixing of exchange rates at “ various international centers .”
Consequently , adherence to these practices allowed for the growth in banking establishments with branch offices throughout Europe and the Mediterranean . Records from this period show that Florence had between 100 – 150 men and companies operating as regional and / or international merchant bankers , although it is unclear whether they were individuals or financial institutions . However , substantial material supports the fact that branch networks of merchant banking establishments headquartered in Florence , by the late Middle Ages and into the Renaissance , staffed offices as far away as England , the Low Countries ( Belgium and Holland ), Italy , France and Turkey .
So widespread was the influence of the Florentines they established a financial lexicon in these geographic locations extant into the 21st century . For instance , many of the terms we associate with contemporary accounting and finance like cassa , which means cash ; giornale for journal ; and , specific to accounting , creditore and debitore for both creditor and debtor ; were used extensively by Florentine bankers . Aside from Florence ’ s growing commercial geographic presence , by the late 15th century , the city-state was said to have had 32 banks throughout the city with several controlled by the powerful Medici family . These banks — though not all exclusively controlled by the Medici — consisted of pawn shops ( banchi di pegno ), retail banks ( banchi a minuto ), money changers ( banchi in mercato ) and banchi grossi , or great banks .
Portrait of Giovanni de Medici , one of the most prominent members of the banking dynasty , who learned the trade from a banker ’ s guild apprenticeship .
To establish oneself as a banker , the first step required an apprenticeship , which usually meant affiliation with the banker ’ s “ guild ” ( the Arte del Cambio ) in Florence . Like the medieval guilds predating the Renaissance , the bankers , through their political affiliations , could limit the number of licensed merchant lenders , thus reducing potential competition . Those seeking apprenticeships not only had to pass an examination administered by the guild , but they also had to prove they were property owners and members in good standing within the community . Upon concluding what usually consisted of a five-to-seven-year contract , the apprentice would find employment as a clerk with a banking firm . There , he would serve the firm for at least three years before establishing himself as a private banker .
Private bankers often operated in public markets . Their offices housed a banco or bench ( the origin of the word “ bank ”) where they conducted their business . Guild membership required that transactions be initiated by the borrower , recorded by the lender , and once the transaction was complete , read aloud presumably so that both parties understood their responsibilities . So as not to confuse the public , other lenders like the pegno ( pawn brokers ) distinguished themselves by displaying a red cloth above the doors of their establishments . This denoted they engaged in the loaning of money on personal property ; pegno were excluded from the guild because they charged interest . If the former apprentice / clerk sold jewels , accepted installment payments and held “ tied ” deposits paying annual interest ( like a CD ), he served as a banchi a minuto , or retail bank .
Mercato banks would exchange money , with a common medium of exchange at the time being the florin . The florin , a gold coin named after Florence , functioned almost like a reserve currency given its value during the era . If the private banker scaled his operation by taking on deposits and financing trade , he became a banchi grossi ( great bank .) The Medici clan served in this capacity with Giovanni de Medici , one of the most prominent members of the banking dynasty , learning the trade when apprenticed under the banker ’ s guild .
The Medici acted specifically as banchi grossi in that , unlike the other banks which often conducted their business upon the streets and public areas of Florence and various cities , the grossi ’ s operations were all “ in house .” Meaning all business conducted by the Medici family functioned under one roof , or within the Palazzo Medici ( Medici Palace ). Considered to be the main source of Florence ’ s wealth and power , the grossi banks , as described by Renaissance chronicler Benedetto Dei , “ dealt in merchandise and exchange in all parts of the world .” Furthermore , organizational practices implemented by the Medici family governing their banking arrangements allowed their organization to serve as a “ going concern ” for decades . Habits that contemporary accounting partnerships and banking institutions have practiced since the last century are rooted in the framework and policies of the Medici Bank .
For example , the Medici bank served as a confederation of partnerships and not merely one large entity . These autonomous units consisted of the headquarters in Florence , branches in different countries and various unit banks throughout Florence . In doing so , the structure
34 FINANCIAL HISTORY | Winter 2025 | www . MoAF . org