The English word “bank” comes from the Italian word “banco” or “banca,” which originally referred to a bench with a back, then a bench’s wooden seat. The word evolved to mean a shop counter in the 1300s, then a craftsman’s workbench in the 1500s. Finally, it evolved from meaning the counter where money was exchanged to meaning the institution itself that offers financial services.
The modern banking industry was born and developed in Italy during the Middle Ages and early Renaissance. Italy was Europe’s main economic power. Rich northern cities like Florence, Siena, Milan, Venice, Genoa and Lucca were centers of commerce, trading with foreign states. As international trade increased, journeys by land and sea to the rest of Europe and to the Orient were very long and hazardous. The establishment of banks in the trading centers was crucial to facilitating commerce. Letters of credit, which were simply the first checks, were created in order to free merchants from the dangers of being robbed and killed while carrying great amounts of cash or valuable goods during their lengthy travels. Florentine bankers invented these letters of credit, and, by the early 15th century, Florence was home to about 80 banks, which lent money to kings, emperors and popes.
It is the city of Siena in Tuscany that is home to the world’s oldest continuously operating bank. Founded in 1472, Banca Monte dei Paschi di Siena became over more than six centuries enmeshed in the identity of Siena. It has been the city’s largest employer, and its foundation has bestowed bank profits on many civic activities, including kindergartens, the university, and ambulance, hospital and health services. It has provided the costumes that rival clans wear in the processions preceding the Palio, the bareback horse race usually run twice each summer in Siena’s central plaza. The bank was known by many as Babbo Monte (“Daddy Monte”), that is, a member of the family.
But the bank is now in serious trouble stemming from a long-running saga of ill-fated deals, financial shenanigans, criminal wrongdoing and even a mysterious death. Its troubles began in 2008 after it paid more than it could afford to acquire a rival bank. In 2013 allegations were investigated that bank executives hid mounting losses from regulators and shareholders. The bank’s head of communications was found dead in an alley below his office window in an apparent suicide; the police did not find evidence of foul play. In 2019 bank executives were convicted of illegally using complex derivatives to cover up the bank’s problems.
And now Banca Monte dei Paschi has failed a stress test of its finances and has earned a new distinction as Europe’s weakest lender. Negotiations are under way for a sale to UniCredit, although talks stalled in late October 2021. If it goes through The bank’s operations would be managed from UniCredit’s headquarters in Milan rather than from the vaulted, stone-lined room with medieval and Renaissance artwork in Siena’s 15th-century fortress in the city’s old quarter. Many jobs would be lost, and the psychological toll on Siena would be high.
But Siena doesn’t have to search far to find a new mission—health care. A British drug maker has a major research center in Siena, which develops vaccines for diseases like typhoid that are prevalent in poorer countries. Toscana Life Sciences, a nonprofit in Siena, helps start-up companies to get on their feet. One of its research labs is developing an advanced monoclonal antibody treatment for coronavirus. If it is successful, it would be less expensive than other treatments and could be administered without hospitalizing patients.