Money message dates back to old Italy

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You probably remember the report in local newpapers at the end of September about the Royal Bank of Canada on No. 3 Road being hit by cars twice in two weeks. Given the increase in automobile traffic (and consequently the steadily growing number of potentially distracted drivers) and the concentration of financial institutions along Richmond's main thoroughfare, I'm surprised that cars don't regularly collide with banks. I'm even more surprised that the size of our community warrants such a profusion of banks, credit unions and currency exchanges along less than one kilometre of No. 3 Road.

Long ago, in the Old World, the situation was very different. Banks existed, but not as as we know them. Six hundred years ago in Europe, the world of big finance was dominated by Italian families such as the Medici, who ran a money-lending business that catered principally to rich merchants, kings, emperors and popes. And yet, in spite of all the changes that have occurred in banking over the centuries, many of the words and concepts of monetary transactions can be traced back to the way business was conducted by people like the Medici and their antecedents.

Let's begin with the very word bank. It derives from the medieval Italian word "banca," which like "tavolo" designated the board or table in the money-lender's shop. You can see what a medieval bank looked like in old Italian and German paintings depicting money-lenders at their tables, counting coins or dealing with a client. There's never a sign of long queues of customers in those paintings.

Bankrupt is a word we hear frequently in these financially difficult times. Only recently did I learn that the term (which is composed of the Italian words "banca rotta," meaning broken table) has its origin in the medieval custom of taking the insolvent banker's board or table and breaking it to pieces, making it clear to everyone that the man was out of business. In other words, that he was broke. Had I lived in those times, I would have kept an eye open for tables that had been carefully repaired.

Any reader with links to Europe will be familiar with the concept of the giro banking system, in which the transfer of money is done not by way of cheques but rather by direct transfer between accounts. The word giro comes from the Italian "girare", to circulate, and giro banks were functioning in Italy already by the Middle Ages. One thing that struck me as odd is that medieval bankers preferred to receive oral rather than written orders for the transfer of money. Still, historians have found evidence of cheques being used in fifteenth-century Italy.

One of the most important contributions made by medieval Italians to the modern world of business is the invention of double-entry bookkeeping, which was widely used already by 1400. At the end of that century, Luca Pacioli, who knew Leonardo da Vinci, published a detailed explanation of the double-entry system in his book on mathematics, which meant even more people, also in other countries, could learn about it. Hence Pacioli is sometimes called the "father of accounting."

While writing this column my mind kept going back to the two cars crashing into the window of the Richmond bank. I suppose in medieval times a comparable danger would have been a donkey (the Volkswagen of those days) running amok and charging full speed into the money-lender's shop, scattering coins far and wide.

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This page last updated: November 20, 2011.