The Knights Templar weren’t just warriors, monks, farmers and politicians but also international bankers. But wasn’t that Templar banking activity terribly sinful? Didn’t the church say that earning interest was a crime against God?
Templar banking tutorial
What do we mean by Templar banking? Basically – you’re a stinking rich noble about to go on crusade. You don’t really want to drag your earthly possessions around with you. There’s lots of robbers out there on the roads waiting to relieve you of your gold and silver. So – what to do?
Well, you could always pop down to your local Templar preceptory and hand over some of your wealth. They would promise to keep it safe while you were away. In return, you got a kind of cheque. This could be drawn on once you arrived in the Holy Land.
The result of this innovation by the Knights Templar was that they ended up sitting on huge amounts of money behind the big thick walls of their fortresses.
Templar banking in Paris
The Paris Temple was particularly active in loaning money and funded the first King of Portugal’s wars against the Moors and even lent money to popes. Most infamously, they lent money to the King of France which would eventually prove to be their undoing. Instead of paying them back, the King of France would close the Templars down in the year 1312 with some help from the pope.
But how could the Templars have got in to money lending when it was against church law and scripture to lend with interest? Well, according to Karen Ralls – an academic specialising in the Templars – they charged a kind of handling fee.
This strikes me as very similar to the way that Islamic finance works today. With this branch of finance, interest can’t be earned by investors so they receive ‘enhanced capital’ instead. So Templars managed to work their way round the theological challenge while still covering their administrative expenses.
Templar banking just grew from strength to strength.