Modeling Florentine Banking: Part I. Deposits and Loans

In this memo, I model the domestic banking business of Renaissance Florentine bankers. "Domestic bankers," in the sense of "those doing banking business within Florence," is an elastic term, including as it does anyone from pawnbrokers to local deposit bankers to international merchant-bankers with a local branch in Florence.1 Practically speaking, my partnership data come from the records of the Arte del Cambio guild, and hence it encompasses the second and third of these three categories. But in fact, the model applies to anyone who took deposits from Florentine citizens and made investment loans to Florentine firms (e.g., wool, silk, shoemaking, etc.). I intend this model of deposits and loans to be of interest in its own right, but the reader should be aware that a second purpose of this "part I" memo is to provide a market-model foundation to a subsequent "part II" memo on banking firm formation. In other words, the actors in this memo are fixed, the issue being variable and evolving trading relations among them. The next memo deals with population dynamics and with speciation among the banks themselves.