Lombard banking

Lombard banking

Lombard banking refers to the historical use of the term 'Lombard' 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.


A Christian prohibition on profit from money 'without working' made banking sinful. Though Pope Leo forbade charging interest on loans by canon law, it was not forbidden to take collateral on loans. Pawn shops operate on the basis of a contract that fixes in advance the 'fine' for not respecting the nominal term of the 'interest free' loan, or alternatively, may structure a sale-repurchase by the 'borrower' where the interest is implicit in the repurchase price. Similar conventions exist in modern Islamic banking. As no economy or money-based society can prosper without any credit, various ways around the prohibition were devised, so that the lowly pawnshop contractors could bundle their risk and investment for larger undertakings. Christianity and Judaism generally ban usury, but allow usury towards heretics. Thus Christians could lend to Jews and vice versa. The only real drawback for a young man who desired a future in the financial world of the Middle Ages was that he needed to be able to read and write. The methods used for bookkeeping were carefully kept within families and slowly spread along trade routes. This knowledge was readily available to Jesuits and Jews, who consequently played a major role in European finance. Generally the Jesuits took the role of go-between with heads of state, while the Jews manned the low-end pawnshops. This explains the disproportionately large share of Jews in the goldsmith trade and early diamond market (diamonds being a lightweight alternative to gold).

It comes as no surprise that the pawn shops of Rome were the most prosperous of all, especially in the 15th century under Popes Pius IV and Sixtus V. This Italian 'Lombard' pawn shop method became famous and had a name for reliability and honesty. The use of the term 'Lombard' for reliable pawn shop grew slowly from city to city, and became prevalent in Cahors, southern France, from where the "Cahorsins" moved as far North as Amsterdam in the 13th century, where they were called "Cahorsijnen", "Cawarsini" or "Coarsini". [http://www.groene.nl/1995/12_20/lomm.html]

15th and 16th centuries

In 1492 Ferdinand and Isabella of Spain signed a decree expelling all Jews who refused to be converted to Christianity. A considerable number moved into Portugal. Many members of the migrant Jewish community in Portugal proceeded to become wealthy in commercially successful Portuguese port cities. Being forced on the move, Jewish families remained mobile and quickly developed international family agencies for growing brokerage houses involved with shipping. Such family networks of mobile Jewish "lombards" migrated from port city to city with the Spanish Inquisition and created international networks. In France the Lombards became synonymous with the Cahorsins. Most European cities still have a street named Lombard street after the pawn shop that once housed there. In Dutch, 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). In Polish and Russian, a pawn shop is called simply "lombard".

17th and 18th centuries

The near-monopoly position of the Jewish lombards in finance became less prominent as various Protestant factions after the Reformation became just as persecuted as the Jews. In the 18th century many bankers and shipping agents were Quakers. Though the pawnshops were no longer manned by Jews and/or Jesuits, they were more and more often called Lombard houses, and most major port cities still have a 'Lombard Street' or 'Lombard Ally' today. American examples are San Francisco, New Orleans, Boston, Baltimore, and Philadelphia. The term 'Lombard' for pawnshop (or pawnshop owner) was in use well into the late 1700's, thus many of these streets were named with the establishment of shipping agents in those towns.

The religious restrictions made banking seem immoral and Lombard bankers were often considered to be undesirable company. These prejudices were the reason that banking families intermarried and kept to themselves, resulting in international dynasties of banking families. The story of Mary Poppins illustrates how banking was still considered immoral by some in the 20th century, though in the business world it was by that time a perfectly respectable profession.

Modern day

The practice of Lombard credit is still commonly used in central banking, where central banks lend against marketable securities, such as government bonds. Modern repo (repurchase-sale transactions) are also forms of Lombard lending: one bank sells marketable securities to another (at a discount), with an agreement to repurchase the securities (typically at par) in a fixed period of time. Although the legal documentation of the transaction is that of a sale and subsequent repurchase, the substance of the transaction is a secured loan (and under most accounting standards, will be treated as a loan). Pawn shops in many countries and languages are often still referred to as Lombards.

ee also

*Islamic banking
*Lombard Bank

----Lombard Banking, or Lombard Bank Limited, are a British-based finance company, that specialise in loans and insurance. They are the largest finance house in the United Kingdom. Their subsidiaries include Lombard Direct and Lombard Network Services.

Wikimedia Foundation. 2010.

Игры ⚽ Нужна курсовая?

Look at other dictionaries:

  • Lombard credit — is the granting of credit by banks against pledged items, mostly in the form of securities or life insurance policies. The pledged items must be readily sellable. Lending is via central banks, in particular the securities eligible for collateral… …   Wikipedia

  • Lombard — Cette page d’homonymie répertorie les différents sujets et articles partageant un même nom. Sur les autres projets Wikimedia : « Lombard », sur le Wiktionnaire (dictionnaire universel) les Lombards, peuple germanique qui a donné… …   Wikipédia en Français

  • Lombard — The term Lombard refers to members of or things related, directly or indirectly, to the Lombards ( Longobardi ), a Germanic tribe that dominated northern Italy and adjoining areas from the 6th to 8th centuries. Uses of the term include:History… …   Wikipedia

  • Lombard — Lom bard, prop. n. [F. lombard, fr. the Longobardi or Langobardi, i. e., Longbeards, a people of Northern Germany, west of the Elbe, and afterward in Northern Italy. See {Long}, and {Beard}, and cf. {Lumber}.] 1. A native or inhabitant of… …   The Collaborative International Dictionary of English

  • Lombard Street — Lombard Lom bard, prop. n. [F. lombard, fr. the Longobardi or Langobardi, i. e., Longbeards, a people of Northern Germany, west of the Elbe, and afterward in Northern Italy. See {Long}, and {Beard}, and cf. {Lumber}.] 1. A native or inhabitant of …   The Collaborative International Dictionary of English

  • Lombard Street, A Description of the Money Market — Lombard Street: A Description of the Money Market is a famous book by Walter Bagehot, published in 1873. Bagehot was one of the first writers to describe and explain the world of international and corporate finance, banking, and money in… …   Wikipedia

  • Lombard Bank — Infobox Company company name = Lombard Bank (Malta) Plc company company type = Public company slogan = None foundation = 1969 location = Valletta, Malta homepage = [http://www.lombardmalta.com www.lombardmalta.com] Lombard Bank Malta Plc is one… …   Wikipedia

  • Lombard Club — The Lombard Club was a European banking cartel broken up by the European Commission in 2002. The Commission found that eight Austrian banks met monthly to organize widespread price fixing across Austria. It organized before Austria was a European …   Wikipedia

  • lombard — n British a wealthy but stupid and/or unpleasant person. A late 1980s acronym from loads of money but a real dickhead , coined by yuppies to refer particularly to young moneymakers in the City of Lon don, on the lines of expressions such as dinky …   Contemporary slang

  • History of banking — The first banks were the merchants of the ancient world that made loans to farmers and traders that carried goods between cities. The first records of such activity dates back to around 2000 BC in Assyria and Babylonia. Later, in ancient Greece… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”