Bardi

   Florentine banking family. By 1310 they were the wealthiest family in Florence. They and the other two leading family banks, the Peruzzi and the Acciaiuoli, maintained branches at locations stretching from England and the Netherlands to North Africa and the Middle East. The company's basic operating capital belonged to the family and a few close partners, but money was also received on deposit from outsiders. The foreign branches were operated by salaried employees or by individual partners sent abroad. The firm traded in agricultural commodities and industrial products, especially woollen textiles, for which Florence was a major center of production, but they drew much of their profit from fees levied on exchange of currency. These fees also served as a legal screen behind which they concealed the practice of usury (charging interest on loans), a practice outlawed by canon law. Conducting large-scale commercial and credit business over great distances was risky. The Florentine banks flourished because they had better and more current economic information than those they did business with.

   Extension of credit was the most risky activity of all, and in the 1340s the Bardi and other leading banks discovered this to their sorrow. Both firms made the mistake of lending vast sums to King Edward III of England during the 1330s as he prepared for the conflict with France that became the Hundred Years' War. The bankers soon realized that they had extended too much credit, but since they had already lent so much, they felt compelled to lend more, lest they lose what they had already lent. They also continued lending because they needed royal licenses for the export of medieval England's great international product, wool, and lending to the king was the price they had to pay for permission to export. By 1343, when it became obvious that Edward was not going to score a speedy victory, the king repudiated his debts to the unpopular foreign bankers.

   The amounts lost were enormous: 900,000 gold florins owed to the Bardi and 600,000 to the Peruzzi, none of it ever repaid. Both firms, and also several other Italian banks, were ruined; and since they also held money on deposit from wealthy individuals throughout Italy, their collapse spread financial loss far beyond their membership. The Peruzzi bank went into bankruptcy in 1343; the Bardi struggled on for three more years but were also liquidated. Smaller firms survived the crash and by the end of the century rose to great wealth and power. The new masters of Florentine banking were the Pazzi, Rucellai, Strozzi, and Medici, though these firms never had the vast capital assets of the banks that perished in the 1340s. Some economic historians have concluded that this collapse of the early Florentine banks was a major cause of a great depression that lasted beyond the 1340s.