‘Your flexible friend’: the bill of exchange in theory and practice in the fifteenth century

April 20, 2021 | Blog
Home > ‘Your flexible friend’: the bill of exchange in theory and practice in the fifteenth century

The full article from this post was published on The Economic History Review and it is available on Early View at this link: https://onlinelibrary.wiley.com/doi/10.1111/ehr.13070


by James L. Bolton (Queen Mary, London) and Francesco Guidi-Bruscoli (University of Florence) 


The bill or letter of exchange was one of the most important written instruments in inter-regional and international finance in the later middle ages.  It was short and straightforward:  a deliverer in one place, say Venice, gave money in one form or another to a taker in the same place who agreed to pay it after a certain length of time (usance) through his agents in another place, say Bruges or London, to a nominated payee at an agreed rate of exchange.

We have entered the details of nearly 2,000 of these bills, and associated documents such as protested bills of exchange and letters of advice, taken from the ledgers of the Milanese bank Filippo Borromei and Partners in  Bruges, for  1438, (Figure 1),  and Filippo Borromei and Partners in London, between 1436 and 1439).  These date were taken from an on-line database which is available online at www.queenmaryhistoricalresearch.org.

Figure 1. Bruges in the fifteenth century. Source: Chroniques de Froissart (15e eeuw) in: Staatsbibliotheek Berlijn – Slag op het Beverhoutsveld


Using this data, and a bespoke software programme, we can analyse the parties and sums involved, settlement dates, and any special conditions attached to a bill.  Further, we are able to assess these operations in practice — not through ‘ideal’ models described in contemporary book-keeping manuals and which also appear in modern literature on late-medieval Italian banking.  Based on such evidence we argue that profitability cannot be calculated from theoretical parameters (fixed settlement dates and ‘official’ exchange rates).  Instead, we should  stress the flexibility of use that permitted business to run more efficiently. Uniquely, moreover, we have been able to trace exchange across the North Sea between London, Bruges, Middleburg and the fairs at Antwerp and Bergen-op-Zoom in some detail, because of the survival of the two ledgers for the same year, 1438, which allows us to see both sides of the transaction (Figure 2a and Figure 2b).


Figure 2(a) A bill of exchange for £121 0s 10d flemish is sent from Bruges on 23 September 1438. Source: Accounts: John Young attorney in the Low Countries for Thomas Cannings, mercer, of London, Borromei Bruges ledger, F117.2 avere. Thomas Cannings, mercer of London, Borromei London ledger, F156.4 dare.  
Figure 2b. The same bill reaches London on 24 December 1438, at three rather than one month’s usuance, value £115 14s 9d sterling. Source: Ibid.


Wherever possible the Borromei used banks founded by other members of this wide-spread family. Otherwise, they dealt through a group of trusted correspondents in Genoa, Geneva, Basel, Seville, Montpellier, Avignon and locations throughout the Italian peninsula. Most of these transactions were made using ‘paper money’ or ‘money of account’ with book transfers across accounts in the ledger taking the place of coin or bullion.  Although the Borromei’s clients were mostly substantial Italian, Flemish or English merchants, their services were open to anyone who wished to transfer money from Bruges or London to another country, or vice-versa.  One such was the friar Antonio del Castel della Piana who was crossing from London to Bruges and another Nicolas Loiseleur, canon of Rouen, and one of Joan of Arc’s inquisitors.  Loiseleur had been on a mission to Henry VI in 1438 to try to persuade him to recognise the authority of the General Council of the Church at Basel rather than that of Pope Eugenius IV. He failed and used the services of the Borromei of London to transfer money to one of his companions, Ulrich, abbot of the Cistercian monastery of Bonmont in the canton of Vaud (Switzerland).


The database  provides information on a wide variety of topics: how much the staff of the Borromei bank in London paid for having their hair cut, the nature and pricing of their imports of precious cloth, and their exports of English cloth and wool, all of which were itemized in great detail. The central purpose of our article is to show that the bill of exchange was a far more flexible instrument than has been previously thought.  Firstly,  it was flexible because it served many purposes: loans at local and international level, speculation, and the transfer of funds to surety for the fulfilment of other contracts. Moreover, it was flexible because it could easily be adjusted according to contingent needs.  For example,  the maturity of bills could be changed by agreement rather than necessarily using the standard usance periods, and payment by instalments occurred, thereby extending the length of the ‘loan’ considerably.  We argue that in analysing bills of exchange we should refrain from limiting our attention to the sole difference between two exchange rates in order to calculate profit, but look at the entirety of the bank’s operations that the international transfer of capital back and forth across western Europe, made possible by bills of exchange allowed.  In the fifteenth century this ‘flexible friend’ helped make the world of international, regional and local trade and finance go round – and round.


To contact the authors:

James L. Bolton, j.l.bolton@qmul.ac.uk

Francesco Guidi-Bruscoli, francesco.guidibruscoli@unifi.it, f.guidi@qmul.ac.uk