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Lombard Banking

Lombard Banking Definition

Lombard banking is a historical term for a type of banking developed in the Middle ages, especially in the prosperous northern Italian region of Lombardy (hence the name) and neighbouring southern France (notable the city of Cahors, hence also known as cahorsins in French, as well as lombards).

It was based on the principle of the pawn shop, as still meant by the Dutch word lommerd, and the same etymology persists in the names of various banks (unless named after some family).

The origin of the whole thing was the catholic prohibition on making profit from money 'without working' as a sin. As no economy, indeed no money-based society, can prosper without any credit, various ways around have been found, such as a contract that stipulates no interest, but fixes in advance the 'fine' for not respecting the nominal term of the to that point 'interest free' loan. The same thing happened all over again with the revival of a similar Muslim prohibition, giving rise to (more modern) Islamic banking. Another consequence of he prohibition has been the disproportionately large share or Jews (neither Christians nor Muslims, so no sin for them even if the Old Testament ) in finance, making them alternatively envied, influential but also (even more) hated by the 'faithful' majority communities.

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