Lombard banking

Lombard banking refers to the historical use of the term 'Lombard' for a mount of piety style of pawn shop in the Middle Ages, a type of banking that originated with the prosperous northern Italian region of Lombardy. The term was sometimes used in a derogatory sense, and some were accused of usury.

A Christian prohibition on profit from money without working made banking sinful. Though Pope Leo the Great forbade charging interest on loans by canon law, it was not forbidden to take collateral on loans. Pawn shops thus 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. 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 necessity for a young man who desired a future in the financial world of the Middle Ages was the ability to read and write; the methods used for bookkeeping were carefully kept within families and slowly spread along trade routes. Therefore, this knowledge was available most readily 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 16th century under Popes Pius IV and Sixtus V. This Italian 'Lombard' pawn shop method became famous. The use of the term 'Lombard' for pawn shop grew slowly from city to city, and became prevalent in Cahors, southern France, from where the Christian Cahorsins moved as far north as London and Amsterdam in the 13th century; at the latter, they were called Cahorsijnen, Cawarsini or Coarsini.

...
Wikipedia