The Knights Templars: The First City Bankers?

Introduction

A pilgrim visiting Jerusalem in 1172 puzzled: “It is not easy for anyone to gain an idea of the power and wealth of the Templars – for they, and the Hospitallers, have taken possession of almost all of the cities and villages within which Judea was once enriched… and have built castles everywhere and filled them with garrisons, besides the very many and, indeed, numberless estates which they are known to possess in other lands.” In that very same year, Henry II (1133–1189) entrusted to the Templars the so-called ‘care money’ deposited for the murder of Thomas Becket (1119–1170), enough to pay for the support of 200 knights in the Holy Land for a year. How was it that the Templars, committed to a life of frugality and abstinence, had become Europe’s wealthiest bankers?

The Reasons Why

Crusading was costly. At the Battle of Harim in 1164, only seven of the 67 Templars survived, and at La Forbie in 1244, only 33 out of 300 knights lived. Replacement costs were the equivalent to a ninth of the French monarchy’s annual income. Such costs impacted particularly hard upon the weaker kingdoms of Europe that had to look for loans. The Templars attracted a steady stream of recruits, many of whom handed over all their worldly possessions upon entry into the order. With pilgrims and would-be crusaders desperate for cash, the Templars began offering loans. In the case of a customer’s death, the Templars would also scoop up as executors of their estate. However, it was Pope Innocent II’s Bull of 1139, Omne datum optimum, that really kick-started the brothers’ rise from donated rags to vast riches. It not only exempted the Templars from paying a tenth of their produce in tithes, but also allowed them to collect tithes of their own. Their preceptories earned similar concessions from local lords across Europe, allowing them to levy tolls and customs on fairs and markets.

As monks, the Templars had the habit of obedience. Their oaths led to prudent lending. As celibates, they had no personal or dynastic ambitions to threaten jittery royal princes. Thus, with their financial acumen, Templars were often made royal almoners by European kings. Although they were monastic, owing obedience to their grand master and fealty to the Pope, nonetheless, it seems to have been accepted that they could work for monarchs whose interests diverged from each other and from those of the Pope. Under Phillip II (1165–1223), the Templars ran the French royal treasury, increasing revenues by 120 per cent. In various countries the Knights Templars formed much of national public service from time to time. Their financial network stretched beyond royalty. During the papal schism, Pope Alexander III (1159–1181) relied heavily on Templar loans and administrative services to stay afloat. When Pope Innocent III (1198–1216) rolled out proportional taxes in 1198, requiring the clergy to help fund the Crusades, he tasked the Templars with collecting funds and transporting them safely to the Holy Land.

As knights they could take on miliary duties that could physically secure property and wealth. Prior to the military orders, monasteries had traditionally guarded valuables and had been able to lend money. The Templars owned strongholds in the west and in the Crusader States providing a fantastic international and local branch network. The Knights Templars were secure in all senses of the word.

Pioneers of Banking and Financial Services

By the 1240s, the Order was providing diverse banking and financial services. In England and France, the Order gave safe storage for sensitive diplomatic documents – some of which could be used as collateral against loans. During the reign of Henry III (1207–1272), the royal treasury was deposited at the Temple, and for part of his reign Henry III even resided there whilst receiving sophisticated financial services. He repaid a substantial loan to the Count of Flanders in annual instalments, drawn from funds deposited at the Templar’s branch in Flanders, making another payment to the Byzantine Emperor by using his account at the Templar branch in Constantinople. Provision was also made for non-royal merchants to use the ‘New Temple’ in London and Paris for depositing their valuables. The Temple in Paris even sent out statements to important clients several times a year detailing the movements within their accounts. According to Frank Sanello, “Even Muslim rulers enjoyed the services of their nominal enemy and borrowed heavily from these fiscal wizards.”

The Templars also distributed pensions promised by monarchs to wartime allies. King John’s (1166–1216) allies would not trust him and insisted on brokered deals guaranteed through the Templars.

The Order also developed annuities and pensions responding to land donations made conditional upon the provision being made for a man, wife, family etc. until they died. These pension packages also included unique extras of not only spiritual salvation but the protection of the Templars in a violent age.

Debt guarantee was also provided since church institutions were readier to loan to the Crown if the Temple secured the loan. These loans could be exceptionally large. Louis VII (1120–1180) borrowed such copious amounts to finance his two-year crusade he almost bankrupted the Order. It soon revised its lending policies, requiring debtors to pledge security against their loans. This could take many forms. When King John’s excommunication was lifted in 1213, he borrowed nine marks of gold from the Templars for an offering of absolution and 2,100 marks shortly before signing the Magna Carta, with another 2,000 later that year, to pay his soldiers in Poitou and Gascony. King John placed his Crown Jewels in Temple Church effectively pawning them to the Templars.

All religious orders lent money, but Christians were generally not allowed to charge interest – the practice known as ‘usury.’ The Templars found other ways of covering the cost of a loan. In Aragon, loans were made on the security of an income from the land or benefice, or that the produce of the land did not count towards repayment of the loan, and it was often agreed that the Order could deduct part of the sum collected to cover its expenses, as was permitted under cannon law. The Templars instead billed for administrative fees and expenses, or else manipulated the currency exchange. Some Templar loans from southern France included a clause that if the coin depreciated in value between the time of the loan and the repayment then the borrower must add a fixed sum to compensate the lender. As the fixed sum would remain the same however much the coin depreciated, it is likely than an interest charge was buried in this fixed sum. Eventually, they dropped the act, flat out charging England’s Edward I (1272–1307) 5,333 livres, six sous, and eight deniers for, “administration, expenses, and interest.” On some loans they charged an interest rate of ten per cent which was “two per cent lower than the maximum allowed to Christian money lenders in Aragon and half of the Jewish rate.”

All religious orders lent money, but Christians were generally not allowed to charge interest – the practice known as ‘usury’.

The Templars pioneered money transfers and foreign exchange. Raids on Templar money houses were rare but not unknown. One of the most complicated transfers was employed by Pope Gregory IX (1170–1241) in 1249 whereby he used the French Temple to settle his debts; Papal revenues collected in Scotland, Ireland, and England were routed to the Templar house in Paris; allowing the Pope’s creditors to present themselves before the Parisian Templar brothers bearing letters of credit to redeem them for outstanding payments owed to them in Rome.

The Templars thus amassed capital at annual provincial chapter meetings with the aim of sending it to their brothers in the Holy Land but as their reputation spread across Europe, they soon found that even with all the war costs accounted for, they were running at an enormous profit.

Templar Downfall

The Templar’s fortunes were linked heavily with the success or failure of the Crusades. The fall of Acre in 1291 meant not only that the military order was severely diminished but also that royal households were heavily in debt. With defeat there was inevitable blame and humiliation. The seeds for their downfall combined with their banking success. They lived by different rules – not paying taxes, not bound by the laws and controlling markets. Like the minorities they sought to supplant in banking, the Lombards and the Jews, “they were unpopular and rich” but more peculiarly they also, “did not like women only money” and were seen “as greedy but miserly.” Historian Peter Partner estimates their moveable wealth to have been 150,000 gold florins – equal to half Edward II’s (1284–1327) annual debt. Although this figure is disputed, their wealth was considerable and the debts owed to them by various royals significant. They were also seen as elitist and perhaps even a bit smug: the future King Philip IV (1268–1314) was rejected as a member of the Templar lay order. Philip later got his revenge. Eager to relieve himself of his crushing debt to the Order, and to get his hands on their riches, Philip IV ‘the Fair’ would brutally nationalise the Templar bank coercing the weak Pope Clement V (1264–1314), located in Avignon, into ordering the seizure of all Templar assets. Whilst eventually forwarded onto the Hospitallers, the royals of Europe first dipped their hands into the Order’s wealth.

They lived by different rules – not paying taxes, not bound by the laws and controlling markets.

Most Templars were tortured and executed as heretics. In 2007, the Vatican finally unveiled a book entitled Hearing Against the Knights Templar detailing what took place at Chinon, France in August 1308. It confirmed them innocent of heresy.

Gregory Jones KC

Francis Taylor Building

Master of the Bench

Alderman for the Ward of Farringdon Without