How the Knights Templar Invented Modern Banking (and Paid the Price)

The Knights Templar began in 1119 as a tiny band of warrior monks protecting pilgrims on the road to Jerusalem. Within two centuries they had become something nobody planned: the first international banking network in European history, with hundreds of commanderies from London to the Holy Land.

Their banking grew out of a practical problem. Carrying sacks of silver coin across bandit-infested roads and pirate-patrolled seas was a good way to die poor. The Templars offered a better idea.

The letter of credit: medieval traveler's check

A pilgrim or crusader could deposit money at the Temple in London or Paris and receive a letter of credit — a coded document proving the deposit. On arrival in Jerusalem, they presented the letter and withdrew their funds in local currency, minus a fee. No coin ever had to travel.

This is recognizably the ancestor of the traveler's check, the bank transfer and the letter of credit still used in international trade today. The Templars also safeguarded valuables, managed estates, collected taxes for kings and the Pope, and made loans to nobles — a full-service bank in chainmail.

Bankers to kings

Trust was the whole business. The Templars combined religious oaths, military discipline and a reputation for ruthlessly honest bookkeeping. Monks who stole were expelled. For two hundred years, a Templar letter was as good as gold.

• The Paris Temple effectively served as the French royal treasury under several kings
• English crown jewels were pawned to the Templars more than once to raise quick cash
• The order moved money for the papacy, collecting crusade taxes across Europe
• At their peak, the Templars ran around 870 commanderies and employed thousands

Friday the 13th, 1307

King Philip IV of France owed the Templars enormous sums and wanted their wealth. On Friday, October 13, 1307, he had every Templar in France arrested at dawn on fabricated charges of heresy. Under torture, some confessed to absurd crimes; many later recanted and were burned for it.

Pope Clement V dissolved the order in 1312. Its assets were supposed to pass to the Knights Hospitaller, but Philip and other rulers skimmed heavily first. The last Grand Master, Jacques de Molay, was burned at the stake in 1314 — allegedly cursing the king and pope, both of whom died within the year.

The lesson that keeps repeating

The Templars' story is the first great example of a pattern that runs through all of financial history: whoever holds everyone's money becomes a target for whoever owes the most. From medieval kings seizing temple treasuries to modern debates about banks that are 'too big to fail,' the tension between concentrated wealth and political power has never gone away.

Explore more turning points like this on the World History Timeline, or see how money itself evolved in our articles on the first coins and the gold florin.