CHRISTIAN UNIVERSITY DIMITRIE CANTEMIR

Faculty of Touristic & Commrcal Ma!a"m!t

SU#$ECT EN%&ISH &AN%UA%E
PAPER
LOMBARD BANKING
Teacher: A. TEODORESCU
Stu'!t( IVAN )VASI&ESCU* SIM+NA
Yar III "rou, A FR
- Dcm.r /001 -
Lombard banking is a historical term for a pawn shop in the Middle ages, a type of banking
that originated with the prosperous northern Italian region of Lombardy (hence the name).
The term was sometimes used in a derogatory sense as townspeople often accused lombards
of usury. The lombards were never very popular for this reason and often had trouble with
local governments. They were careful to write down all of the terms of contracts, to protect
themselves, but that was no guarantee for success in times when few others could read and
write, including local leaders.
History
Though ope Leo forbade charging interest on loans by canon law, it was not forbidden to
take collateral on loans. awn shops operate on the basis of a contract that fi!es in advance
the "fine" for not respecting the nominal term of the "interest free" loan. It is no surprise that
the pawn shops of #ome were the most prosperous of all, especially in the $%th century
under opes ius I& and 'i!tus &. The Italian pawn shop method grew slowly from city to
city, and became prevalent in (ahors, southern )rance, from where the Cahorsins moved as
far *orth as +msterdam in the $,th century, where they were called Cahorsijnen, Cawarsini
or Coarsini.
+ (atholic prohibition on profit from money "without working" made banking sinful. +s no
economy or money-based society can prosper without any credit, various ways around the
prohibition were devised, such as a contract that stipulates no interest, but fi!es in advance
the "fine" for not respecting the nominal term of the "interest free" loan. 'imilar conventions
e!ist in modern Islamic banking.
Lombards and others free of religious scruple, filled a gap in the market. + conse.uence of
this has been the disproportionately large share of /ews in finance and the diamond market
(diamonds being a lightweight alternative to gold). The near-monopoly position of the /ews
in finance became less prominent as various rotestant factions after the #eformation rela!ed
the religious restrictions on banking. In the $0th century many bankers were 1uakers.
In $234 )erdinand and Isabella of 'pain signed a decree e!pelling all /ews who refused to be
converted to (hristianity. + considerable number moved into ortugal. Many members of the
migrant /ewish community in ortugal proceeded to start lucrative pawn shops in
commercially successful ortuguese port cities. 'uch pawn shops were necessary to finance
shipping, but were banned for the natives for religious reasons. 5ecause of the Italian
Lombards already in ortugal, the ortuguese called these pawn shops 6lombards6, a term
that was used throughout 7urope as the lombards began to move from port city to city with
the 'panish In.uisition and create international networks. In )rance the Lombards became
synonymous with the (ahorsins. Most 7uropean cities still have a street named Lombard
street after the pawn shop that once housed there. In 8utch, the name for a pawn shop is still
lommerd, and the same etymology persists in the names of various banks (unless named after
some family).
The religious restrictions made banking seem immoral and Lombard bankers were often
considered to be undesirable company. These pre9udices were the reason that banking
families intermarried and kept to themselves, resulting in international dynasties of banking
families. The story of Mary oppins illustrates how banking was still considered immoral in
the 4:th century though by that time a perfectly respectable profession.