A History of the Credit Market in Central Europe

The Middle Ages and Early Modern Period

Pavla Slavíčková, Pavla Slavíčková

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000192223
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

This is the first comprehensive study of loans and debts in Central European countries in the Middle Ages and Early Modern Period. It outlines the issues of debts and loans in the Czech lands, Poland and Hungary, with respect to the influence of Austria and Germany. It focuses on the role of loans and debts in medieval and early modern society, credit markets in these countries, the mechanism of lending and borrowing, forms of credit, availability of loans, frequency of credits dealings, range of lending business, and last, but not least, the financial relationships inside the social classes and between them.

The research presented in the book is based on a wide range of resources including credit contracts and agreements, evidence of loans and debts of courts, accounting of nobility, towns, churches and guilds, merchant diaries and Jewish registers, as well as other financial records. It covers a wide range of historical disciplines including economic and financial history, social history, the history of economic thought as well as the history of everyday life. It also contains a wealth of case studies, which offer, for the first time in English, a comprehensive and representative sample of the most up-to-date Central European research on the history of loans and debts and serves as a basis for a comparison with the other parts of Europe during the same period.

The book is designed primarily for postgraduates, researchers and academics in financial, economic and historical sciences but will also be a valuable resource for students of business schools.

Part 1

Loans and debts as a part of royal finances

Chapter 1

Loan transactions in the Kingdom of Hungary up to the end of the 14th century

Boglárka Weisz

Introduction

The earliest known credit transaction in Hungary was a loan from the church to the king in the 12th century. Borrowing money became common in the 13th century, initially from the church and from landowners. Townsmen only appeared in significant numbers among lenders at the end of the 13th century, although Jews were prominently involved throughout the century. This was the period when coins started to be minted in substantial quantities and there was an upsurge in trade and the circulation of money. Initially, loans were not secured against estates (except loans from Jews, which always required collateral), but the mortgages first appear in the middle of the 13th century. Townsmen established a firmer presence in the credit market during the 14th century, leading to the emergence of a new form, the annuity. All forms of credit used in the Kingdom of Hungary were established by the end of the 14th century, and did not change substantially even in the rapid proliferation and increasing amounts of credit in the 15th century (Lederer 1932). Here, I first concentrate on the loans taken out by Hungarian kings, whom they borrowed from, and how they repaid them, and then I present the types of loans and the social position of the lenders.

Hungarian kings’ borrowings

The first known royal loan in Hungary came from the church. Pannonhalma Abbey, out of money received from the sale of an estate, granted Géza II (1141–1162) a loan of 40 marks of silver, and was later rewarded by a royal grant of land (ÁÚO I, p. 61). Andrew II (1205–1235) took out somewhat larger loans. He needed the money primarily to finance participation in the Fifth Crusade, on which he departed in the summer of 1217, returning only the following year (Veszprémy 2006, p. 101). The lenders were Hungarian churches, clergymen, Hungarian noblemen and Italian merchants. Hungarian monasteries provided the king with valuable jewels which he took to sell on his journey. From the Diocese of Veszprém, he took the crown of Queen Gisella (HO V, p. 8), wife of Stephen I (996/1000–1038), and from the Benedictines of Tihany, a precious-stone-encrusted chalice, mentioned as a scyphus (PRT X, p. 519). Priests provided large sums to Andrew II for his outward and return journeys (ÁÚO XI, p. 155). Italian merchants lent him silver, which he also used to finance the expedition, and the rent on the ships he hired from Venice, Ancona and Zara may also be interpreted as a loan (Robbert 1985, p. 431, Robbert 1995, p. 21). On his return from the Holy Land, the king borrowed 200 silver marks from Bán Atyus of Slavonia (ÁÚO XI, p. 161), probably to cover the costs of the campaign and to repay previous loans. Andrew repaid the loans in silver, by grants of land, and sometimes by the granting the annual salt tax. Andrew’s son Béla IV (1235–1270) was obliged to take out loans on several occasions, mainly to finance military operations and defensive works during the Mongol Invasion. Like his father, Béla mostly sought financial assistance from churches, settling the loans with grants of estates (PRT II, p. 321), but private individuals were also featured among his lenders (HO VII, p. 83). Another Árpádian king, Ladislaus IV (1272–1290), took valuables from the diocese of Veszprém with the intention of selling them to finance military campaign expenses, granting an estate in return (CD V/2, pp. 265–6). After the extinction of the house of Árpád in 1301, the Angevin kings frequently borrowed from Italian merchants. Charles I (1301–1342) took a loan of 300 ounces of gold from Florentine merchants to settle his affairs in Hungary. In exchange, his grandmother, Queen Mary of Naples, pledged a gem-encrusted crown as collateral (MDE I, p. 174; Huszti 1941, pp. 57–9). Although we have no record of loans from the later stages of his rule, we may be sure that they continued to form part of his finances. Two new types of loan were added to the royal borrowing mechanism during the reign of his son, Louis I (1342–1382). Firstly, burghers of Hungarian towns, and even the towns themselves, appeared among royal creditors (DF 238 959). Secondly, the king started to mortgage royal castles and domains (the earliest was Óvár in the 1350s [today Mosonmagyaróvár], Sopron vm I, 354.). These two forms of finance were to provide the backbone of royal loans in the 15th century. For example, in 1363, Louis I mortgaged the castle of Köpcsény (today Kittsee, Austria) to the Wolfurtis for 6000 golden florins, Bishop Stephen of Zagreb standing as guarantor (HO VII, p. 410). The mortgage deed has not survived but later contracts make it clear that the king acted with the agreement of his wife Elizabeth (maybe previously his mother Elizabeth) and the barons (1380: Frangepán I, pp. 89–91), although they did not involve a guarantor (1382: DL 6134). The date of redemption was not specified in the mortgage deeds. Louis I mostly borrowed to finance foreign military expeditions, often experiencing the need in the midst of the campaign when he was not in a position to mortgage anything and the lender had to trust the king’s word. In this case, the lender was not disappointed. On his Neapolitan campaign, for example, Marmonya, a knight of the royal court, gave the king 500 golden florins to pay his soldiers’ bounty. This loan (together with Marmonya’s other services) was repaid by a grant of land (1364: CDCr XIII, pp. 331–5). Louis I also had recourse to foreign loans to finance the campaign and found willing lenders among Italian towns (1380: MDE III, pp. 339–40, 374–86, 402–11, 420–3).

A form of ‘loan’ that emerged in the 13th century and found particular favour among Hungarian kings and queens was the leasing of royal revenues (Weisz 2010, p. 86; Weisz 2013, pp. 207–19) such as minting, tolls, customs duties [thirtieth, Hungarian: harmincad, Weisz 2018, pp. 259–60], for which the tenant paid rent in instalments. The tenant bore the costs of the operation and kept the revenue. Tenants bore liability for the source of revenue, and were obliged to sell land and other property if they did not pay their dues. The buyer subsequently enjoyed royal protection (1268: MES I, p. 551; 1369: DL 100 189). The lease system may be conceived as a kind of loan provided by the tenant, who was ‘repaid’ within a short time, although from the king’s point of view, the rent payment could be interpreted as a credit to the tenant, necessitating the tenant’s liability to the extent of his own property.

In addition to borrowing money, kings often had purchases made for themselves on domestic or foreign credit and paid for goods after receiving them. This form of purchase was already present in the royal court during the Árpádian age, and one of the most detailed sources on the practice is an account book written by Syr Wulam in the 1260s (Zolnay 1964). This is the documentation of a transaction worth 1500 silver marks, telling us about goods purchased for Stephen, ‘junior king of Hungary’ (1262–1270), and loans taken out by persons close to the king secured against pledges of chattels.

Lenders

Kings initially borrowed from churches who, in the Árpádian age, also lent to other churches and to individuals. The increasing demand for money necessitated some compromises in the church’s prohibition of interest. In Hungary, King Coloman (1095–1116) passed a law prohibiting men of the church from being ‘usurers’ (feneratores) (Decreta online, pp. 140, 151) but this only applied, in accordance with canon law, to collecting interest and not to lending money. There are several 13th-century records of church loans granted to private individuals who, in most cases, paid their debts by transferring title to an estate (1229: DF 200 627; 1256: ÁÚO VII, p. 433) but there is no record whether it was the mortgaged estate itself or was used to redeem the mortgaged estate. The churches certainly started to take mortgages against loans of money in the 13th century, and this practice became universal in the 14th century (1256: PRT II, p. 305; 1301: ZO I, p. 120; 1346: DF 210 167; 1351: AO V, pp. 509–10). In addition to landowners, townsmen (1378: CD IX/5, p. 285) also appeared among the borrowers, and loans were also provided to clergymen who provided collateral in the form of valuables, religious objects or land (1307: DF 200 084).

Starting in the Árpádian age, landowners lent money to other landowners, taking mortgages on their estates. Mortgaging usually took place before a place of authentication (loca credibilia) (1261: ÁÚO VIII, pp. 13–4), a county authority (1298: HO VII, pp. 267–8, 1338: CD VIII/4, pp. 367–8), or even the king (1301: CD VII/4, p. 262; 1346: HO II, pp. 84–6), and these institutions made out the associated documents. The documents concerning the mortgaged estate were also taken by the mortgagee as security. The estate remained in the lender’s possession until it was redeemed by repayment of the principal (debitum principale), an act performed before the same office that had overseen the mortgage. Upon repayment of the loan, the lender was required to return the estate and its documents together with the mortgage deed, which thus lapsed (1358: DL 94 081). In most cases, the mortgage was given for a fixed term (anything from a few months to 20 years), and at the end date, the amount borrowed had to be repaid. If the borrower was unable to pay, the amount was increased, indeed doubled (1334: DL 2804), or the parties could agree that the unredeemed estate (or a part equivalent in value to the loan) became the property of the mortgagee (1334: DL 2804; 1351: DL 68 898). There were also cases where the mortgage was made for an indefinite period (1351: AO V, pp. 425–6; 1365: DL 5380). The amount repayable did not increase with the passage of time but the mortgagee took the estate’s income, providing the borrower with a motive to repay the loan whenever he could. The assignment of the mortgaged estate’s revenue was therefore equivalent to payment of interest on an interest-free loan. The lender sometimes retained the revenue from the mortgaged estate until the end of the term even if the loan was repaid early (1269: UB I, p. 352; 1352: UGDS II, pp. 88–9). The revenue did not count as repayment of the loan (1338: MES III, p. 327), and many mortgage deeds expressly prohibited redemption before time. If the loan agreement provided for the original owner to retain the estate revenues, the borrower was obliged to pay the mortgagee a fixed annual sum (1351: DL 101 904), and thus paid interest. We know of mortgage deeds that provided for the reverse: revenue from the mortgaged estate had to be offset against the amount repayable (1352: DF 253 444; 1358: Teleki I, pp. 106–7) but this had to be explicitly stated for it to be enforced. In that case, the lender received no interest on his money. The terms of the mortgage could also state which of the estate revenues were not due to the lender. These were, for example, taxes, tolls, and revenue in kind (1346: DF 263 089). There was even a case where the borrower, upon redemption, had to pay half the costs of the new buildings put up by the lender on the mortgaged estate, failing which the lender could remove half of the buildings he had built (1365: CDCr XIII, pp. 487–8) or half of them would remain in his ownership (1351: DF 252 706). The borrower/mortgagor guaranteed that the estate would remain in mortgage, meaning that the lender could take and retain possession of the land without hindrance for the term of the mortgage, failing which the lender would have to provide another estate of equal value. This stipulation arose from the need to obtain the consent of the neighbours and relatives, who had a right of pre-emption that extended to taking a mortgage on the estate. If the original owner died, a mortgaged estate could pass to his heirs and be divided among them, but only together with the loan which meant that they had to pay it back and the mortgagee had the right of pre-emption over the estate. The mortgagee could also pass on mortgage on the estate but only in such a way that the new owner of the mortgage provided the right of redemption. In many cases, debtors repaid the loan by assignment of the estate (1346: DL 90 653) or payment with another estate (1365: Zichy III, p. 276). If the value of the assigned estate was higher than the amount of the loan, the lender had to pay the difference (1346: CDCr XI, p. 297). Several mortgage deeds, however, expressly prohibited redemption in land, meaning that the lender demanded to be repaid in cash. One mortgage deed concerning a loan given in golden florins even stipulated repayment in golden florins (1363: DL 5253). Stipulations of redemption in cash (1304: AO I, p. 88) and payment in the debtor’s his own money (1364: Héderváry I, pp. 59–60), meaning that he could not mortgage the estate to another lender, appear in the 14th century. Moreover, there were cases where the mortgagor could not re-mortgage the estate even after redemption to someone other than the previous mortgagee. Nonetheless, as we have already seen, even some 14th-century borrowers repaid their loans by assigning the mortgaged estate, re-mortgaging the property, or mortgaging another property. Mortgages were not confined to estates and could be given on property such as a mill (1364: DL 89 371) or a vineyard (1358: CD IX/2, pp. 705–7). Movable property could also be pledged as collateral, such as expensive clothes (1364: Krassó III, pp. 67–8), as could a source of income, such as a toll (1362: CD IX/3, pp. 315–16; 1376: DL 26 868) or ‘vineyard duty’ (tributum montis, Bergrecht, 1370: DL 58 587). The mortgagor/pledger and the mortgagee/pledgee could be either a man or a woman.

Some of the loans did not involve the direct provision of collateral. In some cases, the borrowers undertook to provide a mortgage of an estate if they could not repay the loan within the time limit (1341: DL 87 119), and in others, there was no such stipulation concerning the debt (1364: Sopron vm I, pp. 354–5) and the borrower merely undertook to pay it back by the due date (1329: DL 50 879). In such cases, however, especially where large amounts or tenant peasants were concerned, a guarantor was provided (1330: CD VIII/ 3, p. 509) or the peasant’s lord gave a guarantee (1374: DL 103 337). There was also a case where someone became in sudden need of a loan when abroad which he repaid upon his return by assigning an estate (1304: AO I, pp. 90–2) or the lender had to pursue his debt (1360: DL 38 831).

Private landowners also lent money to the churches against mortgages. In most of these cases, the date of redemption was not given (1346: Zichy II, pp. 186–7). Loans to churches did not always involve a mortgage, and the mode of repayment also varied. In interesting example, the archbishop of Esztergom borrowed money from Tamás Bedey to renovate the cathedral. Bedey subsequently purchased a piece of land that the archdiocese wanted but could not afford it and waived repayment of the loan on the sole condition that the archdiocese did not later challenge the purchase (CD VIII/1, pp. 175–7). Landowners also sold commodities – most commonly wine – on credit (1341: AO IV, pp. 118–9) but commercial credit was much more common among townsmen.

The first record of lending by a townsman dates from the late 13th century. A citizen of Esztergom lent money to a non-townsman, taking a mortgage on a mead...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• List of figures
• List of tables
• List of contributors
• Introduction: Credit in Central European historiography
• Part 1 Loans and debts as a part of royal finances
• Part 2 Credit market in medieval and early modern towns
• Part 3 Economic, political, legal and other consequences of debts and loans
• Index