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In the course of the 13th century Florence attracted the banking activities of central Italy and became the most important financial centre in the western world. The reasons behind Florence's status as Europe's bank are difficult to find. The town lay 80 kilometres from the sea, and it was not until the early 15th century that Florence built a port and a commercial fleet of its own. It had no conspicious advantages, differing from its rivals mainly in its character, skill and initiative. In the early fourteenth century, Florence's leading banking houses, the Bardi, Peruzzi and Acciaiuoli attained exceptional size, diversity and geographical reach thus doing business throughout western and southern Europe. If we can believe Francesco Balduccio Pegolotti, an employee of the Bardi, the Florentine banking houses could be found in every country and impinged on every branch of European trade. In 1340 there were about 80 banks in Florence.
One of the problems in analyzing these banking organizations is that all of the bore the name of a single family that was usually in control. As a result, it is often difficult to distinguish between the activities and motivations of such companies and those of the families. Admittedly, the affairs of most companies and their family shareholders were very much intermingled. However, the companies founded in the later Middle Ages which comprised of a mixture of family and non-family shareholders became increasingly common. Even these "mixed" companies were usually dominated by certain members of the controlling family, many of their close kinsmen having little or no involvement at all on the business. For example, the Bardi company insisted that none of the 16 Bardi family members who participated in the failed coup attempt in November 1340 was an active partner in the company. In the Peruzzi company there were only six to eight family shareholders at any one time between 1300 and 1335. The diverse activities of the familymembers inside as well as outside the company - in politics and military and diplomatic enterprises - all added to the prestige of the family name.
The great Florentine banking houses generally did not limit their activities only to finance, but also dealt in manufacturing and trading. The Peruzzi, Bardi and Acciaiuoli were all important international bankers while also being commodity traders and international merchants on an impressive scale. English wool trade and finance loomed large in the considerations of such super-companies, but it was the special relationship between Florence and the Kingdom of Naples, the two-way trade of grain and cloth in particular, that enabled this selected group of Florentine merchant-bankers to gain such an important position. It was their involvement in international trade and manufacture that made it possible for the companies of Florence to take part in international financing.
There is much argument on whether the banks exposed themselves to the high-risk financing of monarchies for its inherent profitability or for the lucrative privileges that such lending made possible. Financial operations in general were expected to turn a profit, and certain forms - such as cash transfers, currency exchanges, drafts and commercial loans - were clearly structured to do so. The companies also may have aimed to earn a profit on royal lending, and negotiated cash "gifts" and "damages" as euphemisms for interest in their contracts. But realistically, they expected to do no better than break even all such business, that is, to recover the money advanced and perhaps their own interest costs, because experience had taught then that cash "gifts" were elusive and that repayments were subject to lengthy delay.
France and England presented a special problem to the super-companies. They were frequently at loggerheads, but the Peruzzi maintained active, if modest, operations in both countries. The animosity of France towards England eventually forced the Bardi and the Peruzzi to make a choice. The decisions were made easier by the Frech government's lack of steady assured revenue. Thus in the early 14th century the Bardi opted for England, accepting a negligible role in France. The Peruzzi company deferred its decision until the eve of the Hundred Years' War when it began to finance Edward III's war preparations.
Papal politics were complex and problematic, too, but the super-companies were, by and large, comfortable with these politics. The Bardi and the Peruzzi in particular built good will with the papacy by providing substantial financial aid to the Knights Hospitalers after the order's conquest of Rhodes in 1309. From this the Peruzzi gained an important branch in Rhodes, a useful market in itself as well as a transit point for trade in the Levant and Asia Minor.
It was their excessive and foolish loans to Edward III that finally destroyed the great Florentine companies. In 1341 Edward defaulted on his debts thus bringing bankrupcy on the Peruzzi and the Bardi. The King of England owed them the colossal sums of 600,000 and 900,000 Florentine florins respectively, the profits of the companies being only such that they were unable to bear those losses.