Bank of the Medici Family

Category: Culture
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This paper will examine how the bank of the Medici family made its way to becoming the most influential and wealthiest financial institution within the Italian Renaissance. In order to comprehensively do so, the writer will first analyze what conditions of the Italian Renaissance allowed such an event to occur and how those conditions were set in the first place. Then, the specific aspects about the Medici family that allowed its bank to become more successful than the others and how the Medici were able to capitalize on it.

What exactly is the Italian Renaissance and how did it start? The term ‘renaissance’ stands for ‘rebirth’ and was used to convey the idea of a rebirth in art, classical philosophy, and literature, specifically that of the Greek and Romans. During this time period (approximately between the 1350 and 1600), the main concept of ‘humanism’ gained large popularity and traction throughout Europe. Humanism found its central focus within the idea of ‘humanitas’ which “meant the development of human virtue, in all its forms, to its fullest extent” (Grudin). One main cause for humanism’s quick growth in popularity is the timing of it — just after what is known as the ‘Dark Ages’, a time period of extreme famine, war, poverty, and disease. One could argue that it was only because of the Dark Ages that the Renaissance was able to occur. People were tired of living in such horrible conditions and sought for solutions to change their poor lifestyle. Additionally, the Renaissance helped people to realize that even if they were born into a less-fortunate family, one is able to still jump into a higher social class so as long as they worked hard and efficiently. A key catalyst for change was the bubonic plague, also known as the ‘Black Death’, which caused a shift in business and trade away from small grain and towards finer items such as oil, cheese, wine, and leather goods. The center of these business trades occured in what is now known as modern-day Italy, but more specifically, Florence.

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Florence was one of, if not, the most wealthy and influential cities which allowed it to become the birthplace of the Renaissance. One major contribution to Florence’s wealth was its’ location as the center of European wool trade. This created an abundant amount of wealthy merchants which soon gave rise to a natural competition of who could sponsor/commission either the greatest architecture or artwork for the city. It was through this competition that paved the way for the start of the Renaissance. One of the most affluent of these merchant sponsors, the Medici family, especially helped to push the Renaissance forward. The Medicis were able to do so because they were established as the chief bank for the Roman Catholic Curia and had many branches spread throughout modern-day Italy. So how exactly were the Medicis able to become the powerhouse that they did and in what ways did they contribute to the Renaissance?

It all started in 1393, when a man by the name of Giovanni di Bicci de’ Medici became the owner of the Roman branch of a bank that was owned by one of his Florentine cousins and in 1937, Medici established the official Medici bank in Florence. “At the time, Rome was a source of funds, but Florence offered more investment opportunities. Giovanni set up a system of branch banks, any one of which could be declared independent by rearranging accounts. Such arrangements protected the parent bank from the bankruptcy of individual branches caused by localized economic difficulties” ( This was a very important step in not only establishing the Medici Bank’s wide influence/control, but also in squishing out any potential competition. However, the Giovanni didn’t stop their means of investment there — in 1402, the Medicis expanded into a family partnership within woolen cloth production. This success was so huge that eventually they were able open a second, more successful shop in 1408. This soon paved the way for the Medicis to engage in trade within all sorts of different products such as; wool, cloth, alum, spices, olive oil, silk stuffs, brocades, jewelry, silver plate, and citrus fruit” (

During this time of the Renaissance, being wealthy (especially as wealthy as Giovanni was) made it near impossible not to be involved (dragged into) politics and as a result, Giovanni held a position in almost every political seat throughout his time in Florence. It was in 1419 that Giovanni made a true name for himself as the first patronage of the arts within the Medici family by having “aided Masaccio and commissioned Brunelleschi for the reconstruction of the Basilica of San Lorenzo, Florence, in 1419” (McLean), thus starting the trend of commissioning artists and their works. Unfortunately in 1429, Giovanni de’ Medici passed away and soon the torch of the Medici family was given to his eldest son, Cosimo de Medici.

Cosimo de Medici was not short in success compared to his father, opening another woolen-cloth manufacturing shop in 1435, acquiring a silk shop in 1438, and establishing more branches of the bank throughout key cities in Europe; Geneva is 1435, Bruges in 1439, London and Avignon in 1446, and Milan in 1452. Additionally, even as a private citizen, it was very widely known that Cosimo controlled Florence from the background. Despite having relied on manipulative schemes to maintain his power, Cosimo was considered in all other aspects as admirable — especially in following his father’s footsteps of supporting the arts. Cosimo’s notable commissions included those with Donatello and Fra Angelico. Donatello’s most successful work, the bronze David, ” is fully independent from any architectural surroundings that might support it. Standing a little over five feet tall, David represents an allegory of civic virtue triumphing over brutality and irrationality” ( This was significant because it was the first unsupported standing bronze work ever seen during the Renaissance, thus adding more fame to both associates. Furthermore, Fra Angelico’s work of the San Marco Altarpiece was commissioned especially to be “executed for the main altar of the church belonging to the Convent of San Marco and dedicated to the two medical saints, Cosmas and Damian” (

Following Cosimo was his grandson, Lorenzo de Medici, also known as “Lorenzo the Magnificent”, who carried on the Medici’s family of sponsoring artists and contributing to the beauty of the city of Florence. Lorenzo greatly succeeded his grandfather and expanded the Florentine economy immensely. “During the period of Lorenzo’s rule, from 1469 to 1492, Florence became undeniably the most important city-state in Italy and the most beautiful city in all of Europe” ( Lorenzo became involved with Michelangelo (before he became the famous sculpture that he was) ever since he was just a boy — inviting the young Michelangelo to study the family antiques and thus shaping his artistic influence. Lorenzo’s most prominent commissions with Michelangelo were the sculpture of Moses to be included within the tomb of Pope Julius II and of course the famous ‘The Last Judgement” which covered the altar wall of the Sistine Chapel (not to be confused with the ceiling of the Sistine Chapel which was not commissioned by the Medici).

Perhaps the only Medici artist-patron relationship that could top that of Lorenzo and Michelangelo was that of Lorenzo and Leonardo da Vinci. From the get-go Lorenzo recognized da Vinci’s talents and helped the artist connect with other patrons when he himself was unable to back da Vinci himself. Through Lorenzo’s help, Leonardo da Vinci was able to meet the Duke of Milan. Once in Milan, da Vinci’s famous Last Supper “was commissioned by Duke Ludovico Sforza for the refectory of the monastery of Santa Maria delle Grazie in Milan, and in order to paint it Leonardo used an oil/tempera mix and applied it to a drywall” ( The Last Supper is still one of the most regarded and recognizable work of out within the West today.

Florence’s art and beauty were greatly enriched due to the artist-patron relationship of 3 generations of the Medici family. Yet these commissions were only made possible because of the overwhelming wealth that was gained from the Medici’s superb main operation which was the bank briefly mentioned above. “The Medici accepted time deposits that were several times greater than the invested capital. Unlike some of the exchange banks of the time, which were primarily involved in fund transfers associated with international trade, the Medici Bank was a lending institution” ( The Medici bank took advantage of what was known as a ‘dry exchange’ which allowed the bank to go through the loophole of prohibition on usury (lending of money with interest charges). Dry exchange can be defined as “a term invented for disguising and covering usury; in which something, was pretended to pass on both sides, when in truth nothing passed on one side, whence it was called dry” (Farflex). The Medici conducted this practice through the foreign currency that would be purchased for “delivery” in a future date. Through this process, the Medici Bank was able to effectively rake in profits through interests hidden in the bills of exchange of such. Unfortunately, suspension of these dry exchanges hindered the Medici’s ability to continue receiving the huge profits that it did and a series of ill business moves caused by business inapt successors ultimately led to the fall of the Medici Bank.

Now how does the Medici Bank compare to the banks that are seen this present day? The Medici bank actually engineered/popularized a few techniques that the banks of today still use. The most fundamental accounting principle of ‘Assets = Liabilities + Owner’s Equity’ was not invented by the Medici, but was made popular by so. This method, “…meant recording both credits and debits, for an easier overview of what money the business has, and where. It helped bankers and merchants keep a more accurate account of their financial decisions- and was a simple yet hugely effective trick which helped the Medici build their reputation for reliability” ( This method of recording ensures optimal accuracy which was just one other reason that gave the Medici Bank the credibility that it possessed.

Furthermore, the Medicis were the first ones to use the concept of ‘a letter of credit’ which is considered to be the most important financial technique that aided in the growth of the 15th century. A letter of credit is the agreement between both the buyer and sellers’ bank which states that the buyer’s bank would pay the seller’s bank after the delivery of the product/service. This technique was invented to prevent traveling merchants from carrying too much money and risk getting robbed. This method was what allowed the Medici to conduct their dry exchanges (explained above).

What allowed the Medici Bank to operate smoothly even with so many different branches was the concept of holding companies.

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Bank of the Medici Family. (2021, Apr 19). Retrieved from