The Crusades, the Knights Templar, and Modern Banking
I’m Andy Temte and welcome to the Saturday Morning Muse! Start your weekend with musings that are designed to improve financial literacy around the world. Today is July 12, 2025.
Today, we’re going to talk about the history of banking, and our starting point may be a surprise for many listeners, so here goes…
In 1095, Pope Urban II held two ecclesiastical councils — the Council of Piacenza and the Council of Clermont. The emperor of the Byzantine Empire (330AD - 1453AD), Alexios I, had written a letter to Pope Urban II, asking for military assistance to repel advancements and territorial threats from the Seljuk Turks. The Seljuk Turks also had control of Jerusalem and other Christian Holy Sites in the Middle East — making Christian pilgrimages to the Holy Land more dangerous.
At the time, a pilgrimage to the Holy Land was the ultimate vacation destination for Christians who could afford it and weren’t subjugated to a lord or noble.
Urban was looking for a way to increase the influence of the Roman Catholic Church in Europe, and used Alexios’ plea as a tool to consolidate power. At the Council of Clermont in November of 1095, Urban gave a killer speech where he admonished the violent, immoral behavior of the European nobility and issued a rallying cry for European nobles to go help protect Christians from Turkish persecution and to protect the capitol of the Byzantine Empire — Constantinople (modern day Istanbul).
Urban used the promise of the forgiveness of sins and a fast-pass into heaven for anyone who would participate in this ‘holy war’ to protect Byzantium, eastern Christians, and as an extension, relics and sites in the Holy Land. In modern speak, he told the French nobles at Clermont:
You’re all a bunch of murderous sinners who don’t stand a chance in he!! to get into heaven, BUT if you pack your bags and go on this armed pilgrimage under my banner, your sins will be forgiven and you’ll all be redeemed in the eyes of God.
In the context of medieval Europe, this promise of eternal life and the forgiveness of sins was met with great enthusiasm. Nobles and peasants alike responded to this call to arms—which we now call the First Crusade (1096-1099). If you want to learn more about the First Crusade and the Council of Clermont, check out The British History Podcast with Jaime Jeffers. He’s talking about this period of history right now.
The Crusades’ Impact on Modern Banking
Between 1096 and 1270, there were a total of eight major Crusades to the Holy Land! If you were a European noble with property and valuables, you needed a place to securely store your wealth when you packed up for what was likely to be a multi-year journey.
In 1118 or 1119, the Poor Fellow-Soldiers of Christ and the Temple of Solomon was established as a religious military order to protect Christian pilgrims traveling to the Holy Land. This organization is known today as the Knights Templar. Knights in this order had to be single, in good health, and could hold no property or have any debts. They pledged all their assets to the order.
While originally designed as an elite fighting force, in about 1150, the Knights Templar began issuing letters of credit to European nobles who wanted to ensure their wealth was secure and that they could access their wealth during their participation in a Crusade.
A noble would ‘deposit’ their assets with a Templar ‘branch’ in their home country in Europe in return for a letter of credit. This letter of credit could be used at other Templar ‘branches’ along established routes to and from the Holy Land. The noble would present the letter of credit and could ‘withdraw’ the resources they needed to support themselves and their band of lesser nobles and peasants.
While an individual Knight in the order was sworn to poverty, the Knights Templar as an organization accumulated vast wealth through donations, various trade relationships, and what we would think of today as banking fees.
The Templars also made loans and skirted medieval usury laws by instead charging a form of rent in return for making loans to nobles and governments.
Usury is defined as the practice of making loans that unfairly enrich the lender.
Usury and the practice of charging excessive (or any) interest was considered immoral and was forbidden by the Catholic Church and other religious orders around the world, so the Templars and other early bankers had to get creative with how to make money from providing banking services to their clients.
The Modern Lesson - Usury Laws
So what have we learned today? First, modern banking can trace its roots back to the Crusades and religious conflict between Christians and Muslims. Pope Urban II’s sermon in the fall of 1095 that gave rise to the Crusades proved to be a catalyst for significant innovation in global trade, commerce, and banking.
If you’re a student of history, you know that many of the innovations we enjoy the fruits of today were born out of conflict and strife. It’s amazing how industrious and innovative humans can be when we’re under threat.
Second, the history of usury is important in banking. The act of charging interest on a loan is a relatively modern concept as interest and usury were outlawed for centuries on moral and religious grounds. Today, charging interest on a loan is commonplace, but usury laws exist in most countries around the world.
Modern usury laws typically set a maximum interest rate that can be charged on a loan. In the United States, usury laws are set at the state level and there are a wide variety of exceptions to these laws. Usury laws are supposed to protect consumers and borrowers like you and me, but there are many loopholes and exemptions that limit their effectiveness. Just take a look at the average interest rate on the credit cards you carry in your pocket—21.37 percent as of July 2025—and any rational person would likely consider the rate usurious.
In future episodes, we’re going to talk about how interest rates and other rates of return are set and how the relative risk of a loan factors in. Until next time…
Grace. Dignity. Compassion.
