Venetian Bankers, 1496-1533: A Study in the Early Stages of Deposit Banking

Abstract

T r aHE development of negotiable commercial paper in the seventeenth century marks the end of the primitive stage of deposit banking. Earlier bankers, unable to discount bills so as to spread the risk of their loans over a multitude of mercantile operations, were lured into overambitious ventures. They held a volume of deposits which enabled them, in ordinary times, to satisfy their depositors without keeping all their funds on hand in cash. But their efforts to draw profits from the money intrusted to them led to direct participation in commercial undertakings and loans to princes. Such firms as the Bardi of Florence or the Welsers of Augsburg touched dazzling profits, grew bolder, and, engaging their depositors' funds yet more deeply in government loans or speculations in commodities, ended in sensational failures. The well-known stories of such international bankers leave the impression that the great dangers of bank failure in that early stage of deposit banking came from the two sources named -commercial speculation and loans to princes. The international bankers supplied the needs of some centers; those of other cities were met by local banks. The latter were sometimes profit-seeking ventures of private bankers, sometimes public institutions subject to the city government. Although the municipal banks of Barcelona (I400) and Valencia (I407) have sometimes been confused with giro banks, on the assumption that they merely transferred payments on their books and did not make loans, this is a mistake. Giro banks did not come into existence until the late sixteenth century, at Venice in i584 and at Amsterdam in i609. It is true, however, that the chief function assumed later by the giro banks had been performed earlier by the public or private local banks. Through the transfers of deposits