Credit Finance in the Middle Ages: loans to the English crown c.1272-1340
The Economic and Social Research Council (ESRC) awarded Professors Adrian Bell and Chris Brooks a major research grant worth just over £350,000 (RES-062-23-0733) to investigate the early and innovative use of credit finance by medieval English monarchs. The project ran from December 2007 to December 2010 and employed a full time Research Associate, Dr Tony Moore.
The project reconstructed the financial transactions between Edward I, II and III and the successive 'bankers to the Crown', namely the Ricciardi of Lucca (1272-1294), the Frescobaldi of Florence (c.1294-1312) and the Bardi and Peruzzi (to 1345), also of Florence, from the original historical sources. These credit arrangements were analysed both from a historical perspective and also utilising the approaches and models developed recently for modern-day sovereign borrowings.
The 'credit finance' project is one of a number of collaborations based at the ICMA Centre that seek to apply modern methods of economic and financial analysis to medieval data.
Our reconstruction of sovereign borrowing under the Three Edwards found that that the king's relationship with his bankers was more like a current account with an overdraft facility than a series of separate bond issues. A key question is the interest rates that were charged for this credit. It can be difficult to identify medieval interest rates, in part because interest charges had to be disguised to circumvent the Church prohibition on usury, but we found that the king could borrow at 15% annualised interest when his finances were stable but that this could increase to more than 40% during periods of financial pressure, most notably during wartime. Moreover, our investigation of the existing historical literature on medieval interest rates uncovered serious problems. Different historians used different methods of calculating interest rates and these were repeated in economic studies. We therefore developed a new methodology for calculating historical interest rates and made this available as an online historical interest rate calculator.
The medieval English kings also have a reputation as serial defaulters who ultimately bankrupted each of the societies that lent to them. We found that the situation was more nuanced. Edward I probably had a surplus on his account with the Ricciardi, who collapsed as the result of a 'credit crunch' caused by the unexpected outbreak of war between England and France. The Frescobaldi were forced out of England in 1312 by Edward II's political opponents but they seem to have successfully minimised their financial exposure before their expulsion. It is certainly the case that Edward III owed large sums to the Bardi and Peruzzi in the early 1340s, although most of this reflected accumulated interest charges rather than principle advances, and the king never repudiated his debts. In fact, Edward continued to make repayments to the Bardi even after the company had been formally declared bankrupt in Florence.
Our research also highlighted the high degree of internationalisation of medieval finance and the close connection between trade and finance. It also stressed the Impact of politics and, especially, war on finance (as, for instance, in the 'Credit Crunch' of 1294).
Outputs to date
C. Alexander, A. R. Bell, C. Brooks and T. K. Moore, 'The Evolutionary Dynamics of the Credit Relationship between Henry III and Flemish Merchants, 1247-1270', ICMA Centre Discussion Papers in Finance No. DP2011-25 (2011).
A. R Bell, C. Brooks and T. K. Moore, 'Credit finance in the Middle Ages: Edward I and the Ricciardi of Lucca', Thirteenth-Century England XIII: England & France, c.1180-c.1330 (Woodbridge, 2011).
A. R Bell, C. Brooks and T. K. Moore, 'Interest in Medieval Accounts: Examples from England, 1272-1340', History, 94 (2009), 411-33.
Accounts of the English Crown with Italian Merchant Societies, 1272-1345, ed. A. R Bell, C. Brooks and T. K. Moore (Kew, The List and Index Society, 2009).