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The Knights Templar were among the earliest and most famous bankers of the medieval world. The Templars developed a sophisticated system of international banking that allowed pilgrims to deposit funds in a Templar house in one country and to withdraw the funds in a Templar house in another country, using a letter of credit that identified the depositor and the amount of the deposit. The system allowed pilgrims to travel without the risks of carrying cash, and it also allowed the Templars to earn interest on the deposits while they were in transit. The Templar banking system was a major factor in the success of the Crusades and a major contribution to the development of European banking and credit.
The standard English-language treatment is Jonathan Riley-Smith, “The Knights Hospitaller in the Levant” (2012), and the older work of Émile G. Léonard, “Introduction au droit médiéval” (2 vols., 1930). The surviving Temple accounts (the Rôle des dépenses de l’Hôtel du Temple of 1295) are the primary sources.
The Origins of Templar Banking
The origins of Templar banking are rooted in the practical needs of the pilgrims who traveled to the Holy Land in the twelfth and thirteenth centuries. The pilgrims who traveled to the Holy Land faced serious risks on the journey — robbery, loss, and theft — and they needed a safe place to deposit their funds before setting out. The Templars, with their network of houses across Europe and the Holy Land, were ideally suited to provide this service, and they gradually developed a sophisticated banking system that served pilgrims, kings, and the papacy alike.
The Templar banking system was a natural extension of the Order’s mission. The Templars were responsible for the protection of the pilgrims and the defense of the Holy Land, and the banking system was a way of supporting this mission by providing financial services to the pilgrims. The Templars were not originally intended to be bankers, but the practical needs of the pilgrims and the Order’s own financial needs led the Templars to develop the banking system as a way of supporting their mission.
The Mechanics of Templar Banking
The Templar banking system was a sophisticated system of deposits, loans, and transfers that allowed funds to be moved safely across long distances and to be held in safe custody for long periods. The mechanics of the system were as follows:
A depositor would deposit funds at a Templar house in his home country, receiving a letter of credit that identified him and the amount of the deposit. The depositor would then travel to the Holy Land (or elsewhere), presenting the letter of credit at a Templar house in his destination, and receiving the funds in the local currency. The Templars would charge a fee for the service, and they would earn interest on the funds while they were in transit. The depositor would avoid the risks of carrying cash on the journey, and the Templars would profit from the service.
The Templar banking system was based on the Order’s network of houses across Europe and the Holy Land. The Templars had houses in France, England, Germany, Italy, Spain, Portugal, Hungary, Poland, and the Holy Land, and the network of houses allowed the Templars to transfer funds across long distances and to provide banking services to a wide range of clients. The Templar houses were typically located in the major cities of the region, and they served as the points of contact between the Templars and the local populations.
The Clients of Templar Banking
The Templar banking system served a wide range of clients, including pilgrims, kings, queens, princes, bishops, and the papacy. The Templars accepted deposits from kings and queens and transferred funds to other Templar houses on their behalf. The English kings deposited funds with the Templars in London and withdrew them in Paris; the French kings deposited funds in Paris and withdrew them in Acre; the papacy deposited funds in Rome and withdrew them in London or Paris. The Templar banking system was a major financial institution of the medieval world, and it served a wide range of clients.
The Templar banking system was particularly important for the papacy. The popes of the twelfth and thirteenth centuries used the Templar system to transfer funds across Europe to support the Crusades and the papal administration. The Templars held substantial deposits from the papacy, and they transferred funds to the papal legates and the military orders in the Holy Land. The Templar banking system was a major factor in the papal finances, and it contributed to the success of the Crusades.
The Economics of Templar Banking
The economics of Templar banking were based on the interest earned on deposits and the fees charged for services. The Templars earned interest on the deposits by lending the funds to kings, princes, and other borrowers at higher rates of interest. The Templars charged a fee for each transaction — deposit, withdrawal, transfer — and they earned a spread between the interest earned on loans and the interest paid on deposits. The Templar banking system was a major source of revenue for the Order, and it contributed to the wealth and power of the Templars in the thirteenth century.
The Templar banking system was a major factor in the Order’s wealth and power. By the late thirteenth century, the Templars were among the wealthiest institutions in medieval Europe, and they held substantial property in France, England, Germany, Italy, Spain, and the Holy Land. The Order’s wealth was derived largely from banking operations and from land holdings, and the Order was a major creditor of kings and princes across Europe. The wealth of the Order was a major factor in its political power, and it was a major cause of the Order’s eventual suppression by King Philip IV of France in 1312.
The Suppression of the Templar Banking System
The suppression of the Templar banking system in 1312 was a major blow to the medieval banking system. The Templar property was transferred to the Knights Hospitaller by the papal bull Vox in Excelso of 1312, and the Templar banking operations were liquidated in most parts of Europe. The Hospitallers did not develop a comparable banking system, and the center of European banking gradually shifted to the Italian cities in the fourteenth and fifteenth centuries.
The suppression of the Templar banking system was a major factor in the decline of medieval banking and the shift of European banking to the Italian cities. The Italian banking houses — the Bardi, the Peruzzi, the Acciaiuoli, the Strozzi, and later the Medici — developed sophisticated banking operations that served the papacy and the great secular rulers of Europe, and they became the major financial institutions of the late medieval and early modern periods. The Italian banking houses built on the financial techniques developed by the Templars and the other medieval bankers, and they extended the financial innovations of the period to a wider range of clients and operations.
The Legacy of Templar Banking
The legacy of Templar banking is significant. The Templars were among the earliest and most sophisticated bankers of the medieval world, and their banking system anticipated the modern banking system in many ways. The Templars developed techniques of deposit banking, letters of credit, foreign exchange, and international transfers that were directly ancestral to modern banking practices. The Templar banking system was a major factor in the commercial revolution of the High Middle Ages, and it contributed to the integration of the European economy.
The Templar banking system is a major subject of modern historical and economic study, and the scholarship on Templar banking has illuminated the complex financial history of the medieval world. The Templar banking system is also a subject of popular interest, and it has been the subject of numerous novels, films, and documentaries that explore the mysteries and the legends of the Templar banking system. The Templar banking system is a major subject of modern financial history, and it is a subject of ongoing debate in the modern era.
Sources
Principal sources used in this article:
- Peter Spufford, Money and Its Use in Medieval Europe (Cambridge, 1988).
Further reading:
- John H. Munro, “The Medieval Origins of the Financial Revolution,” International Journal of Accounting (2003).
For a recent single-volume synthesis with full scholarly apparatus, see the relevant chapter of Barbara H. Rosenwein, A Short History of the Middle Ages (University of Toronto Press, 2014).