Essay on the Rise of Medici Bank: Exploring 15th Century Financial Power

Medici Bank was a famous financial institution in Europe during the 15th Century. It was the main bank for the Roman Catholic Curia. The bank had branches in prime cities in counties such as London, Italy, Lyon, Geneva, Bruges, and Avignon. The Medici family started playing major roles in the Florentine banking in late 1300s. One of the member of the Medici family who took ownership of the Roman branch of the bank was Giovanni di Bicci de' Medici. In 1937 he moved the headquarters of the Florence bank in 1397. This is when the Medici bank was officially established. This bank had a great influence and the wealthiest in the Italian renaissance.

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The bank helped Medici gain political power in Florence although they were regarded as citizens and not monarchs (De Roover). One of the main areas that Medici played a significant role in was the in sponsorship of art and architecture. During this reign almost all Florentine art activities were sponsored by Medici family. The Medici family were in textile business which is where they derived most of their wealth. The wool and cloth businesses generated alot funds through exports. They contributed greatly in the Florence economy in the 14th and 15th century. They had a desire to expand the business so they obtained 3,000 florins from Medici bank.

In 1,408 the family opened a woolen cloth shop which was successful and they later expanded into cloth, wool, spices, jewelry, and silver plates among others. Through this money they were able to fund art activities and ensure that humanism dominated the city (Strathern). Medici family collaborated with other families such as Visconti and Sforza of Milan, the Este of Ferrara, and the Gonzaga of Mantua to propel the birth of Renaissance in Italy. Medici family was well connected socially and was an extended family because they were involved with elite families that they partnered either in business, employment or through convenience marriages.

The Medici bank was famous and the most prominent in Europe. The family was the wealthiest at the time ad their bank was recognized and respected. This was advantageous and it made them politically powerful not only in Italy but also in the entire Europe continent. The family also made an impact in the accounting profession by improving the general ledger system. This was achieved by establishing a double ledger system which could help track both the credits and the debits. Medici sometimes faced objection from the Florence's legislative councils. His power was influenced because he controlled the votes.

The Medici were pacesetters of the renaissance which occurred in the 14th and 15th century (Alexander). The arts needed excellent skills and a lot of funds to both develop and pay for. Giovanni di Bicci de' Medici was one of the earliest members of Medici family who contributed in renaissance. He was passionate about arts and commissioned some of Masaccio and Brunelleschi art work. Masaccio was born in 1401 and was a great painter of renaissance. He played a great role in the Italian painting by shifting from the ornamentations of Gothic. Since the artists of this century could not produce art work until they given advance payments Giovanni used his wealth to ensure that the artists' major commissions were completed and paid as per the artists wishes. He motivated them to produce art work that was used as an appreciation of the Italia culture. The reason why the impact of Giovanni is felt up to date is because the arts that he commissioned are in existence.

After his death his son Cosimo the Elder took up the bank the Medici's textile businesses (Ferretti). He also contributed in renaissance by supporting artists such as Donatello and Fra Angelico. Donatello was an influential Italian artist of the 15th century. He was born in Florence Italy and earned excellently the gothic style. His art was exceptional and emotional an example which is David sculptor. This exceptional artist sculptured a Pallazo Vecchio which I 26 cm high and made of bronze. This piece of art was commissioned in by Cosimo de Medici. Due to his exceptional work he attracted the support of Cosimo who just like his father was willing to support art work by paying them commission. Cosimo was preceded by Lorenzo the Magnificent (1449-1492). He was powerful during the renaissance age in Florence city of Italy. He supported many artists by providing them with commissions so that they culd produce art work. One of the greatest beneficiary of Lorenzo was Michelangelo. This artist lived with Medici family for many years and sculptured many arts for Medici family members.

Another member of the Medici family who made an impact in the Renaissance age in Italy was Cosimo I the Great who lived between 1519 and 1574 (Booth). He supported arts and one of the beneficiaries of his commission was Vassari who sculptured Uffizi. His art work are greatest globally. He not only produced art work but also established Design Academy in 1562. The Medici family was the pace setters of renaissance and there contribution is felt up to date. Through involvement in the textile industry business the Medici family became powerful and helped in promotion of the Italian culture. In this age they also played a critical role in the accounting profession by introducing accounting systems that are used up to this century.

Medici bank took advantage of the Italian Renaissance which was a cultural period that included a cultural change from different communities across Europe. The people were moving across Europe with different forms of currencies; therefore, they needed currency exchange and other banking services (Caferro). The Medici bank utilized the opportunity to become among the best bank among the people. Other banks were unable to keep up with the competition because Medici bank had won the confidence of the people. The country had also become more prosperous; hence the people needed a financial institution that they could trust in engaging in transactions as the people become richer. The rising middle class were at the centre of the people who used the services offered by the bank.

The people from Europe that were migrating across Italy were traders who bought items such as silks and spices for reselling back in the countries. The business people brought trade to Italy; hence there was a flow of money in the economy making the banking viable (Caferro). The traders used the banks to trade by keeping the money in Medici banks because it was more safe with the bank rather than carrying cash. The trade continued for some time, and the bank used the opportunity to offer banking services to the traders.

The bank was created at a time when new cities such as Venice were emerging, and the cities had huge numbers of dwellers that were engaged in various activities that needed baking. The people living in the new cities increased the customer base of the bank. The increase in customer base increased the profit margins of the bank because the bank offered banking services to them hence earning income. Even the people that were moving to urban areas become the customers of the bank.

Medici bank used a different approach that entailed not discriminating the customers to offer banking services. The strategy made the bank to have a huge customer base that used it whenever they need banking services (Wilson). This strategy made the bank to become popular among the people; hence the bank did not need to market to have customers. Other banks at the time in Italy had a specific group of people that they targeted to offer services to. This limited the number of customers that they had, also this reduced competition to the Medici bank. Many of the customers that got services from the Medici bank were engaged in international trade. The international trade entailed the customers transferring money to different countries around the world; hence they needed baking services.

Medici bank also offered banking services to foreign companies and businesspeople that were involved in international trade because they need to do transactions among themselves and the local people. When Italy began to use currency (Fazzini), the bank did not face challenges when doing an exchange with other international currencies. The international trade boosted the banking industry in helping in the stabilization of the economy.

Just like any other bank Medici was committed towards innovation that would ease financial transacting. The bank innovated three banking systems are used today. Double-entry bookkeeping invented a short while before Giovanni de Medici time. Although he was not its inventor, he and his family made it popular, and its use in the banking industry spread over time. Due to the need for minimizing errors Medici bank saw the need to implement the double-entry system (Bahtiyar, and Emin). The double entry incorporates an equation that sums liabilities and equity to get the assets. This accounting rule requires that both the assets and liabilities to be recorded. It helps in determining the financial position of the bank which helps in making sound decisions. This simple trick was effectively used in Medici bank and made it a reliable bank of the century not only in Italy but in entire Europe (Tuohy). This has since become a common accounting system that is used by almost all businesses.

The second financial system that was used by Medici bank and is applied by businesses today is a letter of credit (Bahtiyar, and Emin). This system played a significant role; it helped the bank to grow internationally. The letter of credit was used by travelling merchants in the 15th century when many traders sailed around Europe to distribute goods. A letter of credit is an agreement between the buyer's bank and the seller's bank. The buyer's bank agrees to pay the seller's bank as soon as the goods are delivered. The Medici's were the first to establish a holding company. This is a practice that mad the bank dominant in Europe in the 15th century. The company had expanded to Rome, London, Geneva, and Barcelona among other cities.

Conclusion

To summarise, it is with no doubt that Medici bank and the Medici family played a significant role in Italy renaissance. They were powerful and influential, and they were socially connected. They were involved in the textile business and obtained the funds for growing the business from the bank. The revenue realized was used in many sectors including paying commission to the artists whose work exists even today. Although the bank collapsed by the end of the 15th century they had already expanded to other cities such as Rome and London and their contribution in Italy cannot be ignored.

Works Cited

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Booth, Cecily. Cosimo I Duke of Florence. CUP Archive, 2018.

Caferro, William. "How Did The De Medici Contribute To The Renaissance? - Dailyhistory.Org." Dailyhistory.org. N.p., 2017. Web. 1 May 2019.

De Roover, Raymond. The Medici Bank: its organization, management, operations, and decline. Pickle Partners Publishing, 2017.

Fazzini, Marco. "A Modern Look at the Banco De' Medici: Governance and Accountability Systems in Europe'S First Bank Group." Clutejournals.com. N.p., 2017. Web. 1 May 2019.

Ferretti, Emanuela. "11: The Medici Palace, Cosimo the Elder, and Michelozzo: A Historiographical Survey." A Renaissance Architecture of Power. Brill, 2015. 263-289.

Strathern, Paul. The Medici: godfathers of the Renaissance. Random House, 2018...