Lambard_Street

Lombard Street and the City of London

The financial sector from the 1600s, focusing on the return of Jewish bankers from Italy and the invention of lending to merchants.

The origins of modern capitalism and corporate governance.​​​​​​​​​​​​​​​​

This research details how the City of London emerged through two distinct waves: first with Italian Lombard bankers (13th century) establishing Lombard Street after Jewish expulsion, then with the return of Jewish financiers from Amsterdam (not Italy) under Cromwell in the 1650s; and covering banking innovations, key historical figures, institutional developments, primary sources, and the lasting impact of both communities on modern finance.​​​​​​​​​​​​​​​​

Lombard Street’s Financial Revolution: From Medieval Italian Bankers to Jewish Readmission

The development of London’s financial sector involved two distinct but complementary waves of foreign banking expertise that fundamentally shaped the City of London as a global financial center. However, the historical record requires important clarification: the “Jewish bankers returning from Italy” narrative conflates separate phenomena occurring centuries apart.

The medieval foundation: Italian Lombards fill the Jewish vacuum

The first financial revolution occurred in the late 13th century when Italian merchants from Lombardy replaced expelled Jewish financiers. After Edward I’s expulsion of Jews in 1290— ending centuries of Jewish banking dominance since Norman times— Italian goldsmiths and merchants from Northern Italy’s great trading cities filled the financial void. These “Lombard” bankers established themselves on what became known as Lombard Street, transforming it into London’s first organized financial district.

The Lombards brought sophisticated financial techniques from Italian city-states including bills of exchange, international currency trading, and merchant financing systems. Edward I granted them specific plots of land, mentioned in a Charter of Edward II in 1319, creating the institutional foundation for English commercial banking. These Italian financiers remained dominant for centuries, developing the goldsmith-banking system that would eventually evolve into England’s early private banks.

Key innovations from Lombard banking included: the development of negotiable instruments, international trade financing, currency exchange services, and the physical infrastructure of banking houses with their distinctive hanging signs that became synonymous with financial services. Many terms we use today derive from this period—“cash” comes from the Italian cassa for box, reflecting the Lombards’ influence on English financial vocabulary.

The second financial revolution: Jewish readmission under Cromwell

The actual return of Jewish financiers occurred in the 1650s under Oliver Cromwell—not from Italy, but primarily from Amsterdam and the Dutch Republic. This represented an entirely separate historical development, occurring over 350 years after the Jewish expulsion and centuries after Lombard Street’s initial establishment.

Menasseh ben Israel’s mission in 1655 marked the pivotal moment when systematic Jewish resettlement became possible. The Amsterdam rabbi’s petition to Cromwell, combined with the Whitehall Conference of December 1655, established the legal framework for Jewish return. Crucially, judges declared “there was no law which forbade the Jews’ return to England,” opening the door for what John Evelyn recorded on December 14, 1655: “Now were the Jews admitted.”

The returning Jewish community was primarily Sephardic Jews from Amsterdam, not Italian communities. These were Portuguese and Spanish Jews who had fled the Inquisition, settled in the Netherlands, and built sophisticated international trading networks. Their return was driven by Cromwell’s recognition of their commercial expertise and his desire to compete with Dutch financial supremacy.

Strategic context driving London’s financial emergence

Cromwell’s commercial calculations were explicit: attract “the richest Jews of Amsterdam to London so that they might transfer their important trade interests with the Spanish Jews from the Netherlands to England.” This represented direct competition with Amsterdam’s position as Europe’s premier financial center, featuring the Bank of Amsterdam (1609) and the world’s first sophisticated stock exchange.

The broader economic context creating opportunities for financial innovation included England’s colonial expansion requirements, particularly massive capital needs for Caribbean sugar plantations, West Indies trade, and colonial settlement financing. The English Civil War had also disrupted traditional goldsmith-banking through Charles II’s “Stop of the Exchequer” (1672), creating demand for alternative financial systems.

Religious and political factors converged favorably: Protestant Hebraism among Puritans, millenarian beliefs about Jewish resettlement preceding Christ’s return, and pragmatic recognition of Jewish commercial skills. The Glorious Revolution (1688) would later provide the constitutional framework ensuring property rights and parliamentary oversight of government finance—essential for credible public debt.

Jewish integration into London’s financial system

The resettled Jewish community quickly established crucial roles in London’s emerging financial infrastructure. Antonio Fernandez Carvajal, the first Jew granted British citizenship in 1655, exemplified this integration— his extensive West Indies trade enabled him to serve as grain contractor for Parliamentary forces and provide crucial intelligence against the Dutch.

By the 1660s, Jewish merchants had established synagogues (Creechurch Lane in 1657), acquired burial grounds, and developed trading networks spanning from Brazil to Barbados with connections to Amsterdam and London. Their wholesale merchant turnover was estimated at one-twelfth of total commerce across England, Scotland, and Ireland, paying thousands in customs duties annually.

Key Jewish financial families emerged as major players: Solomon de Medina became a prominent banker during William III’s reign, the Salvador family gained influence in East India Company operations, and figures like Samson Gideon would later become crucial government bond dealers during the 18th century’s military financing needs.

The financial revolution and institutional development

The Financial Revolution (1688-1720) created the institutional framework within which both established Italian-derived banking and new Jewish financial expertise could flourish. The founding of the Bank of England in 1694 by William Paterson represented the culmination of financial innovations that had been developing since the 13th-century Lombard period.

Parliamentary oversight of government borrowing after 1688 created “credible commitment” to public debt, allowing Britain to borrow more cheaply than absolute monarchies. This system relied on sophisticated financial intermediation that drew on both Italian-derived goldsmith banking traditions and new Jewish international trading networks.

Corporate governance structures evolved from medieval Italian banking partnerships through English joint-stock company innovations. The East India Company, Bank of England, and South Sea Company created frameworks for permanent capital stock, transferable shares, and professional management that would become foundations of modern capitalism.

Primary sources and archival evidence

Contemporary documentation includes Menasseh ben Israel’s “Humble Addresses to the Lord Protector” (1655), the Robles case legal proceedings (1656), and synagogue records from Bevis Marks beginning in the 1660s. The National Archives holds crucial documents including Jewish petitions, naturalization records, and commercial correspondence.

Institutional archives at the Bank of England, City of London Corporation, and Guildhall Library contain extensive documentation of goldsmith-banking evolution, early stock trading, and the transition from private to institutional finance. Court records document the gradual legal integration of Jewish merchants into English commercial law.

Contemporary accounts by figures like John Evelyn, Samuel Pepys (who knew goldsmith Humphrey Stokes of the Black Horse sign), and government correspondence reveal the practical details of this financial transformation. Church and parliamentary records document both opposition and support for Jewish commercial integration.

Historical significance and lasting impact

The development of Lombard Street and London’s financial supremacy resulted from the unique convergence of Italian medieval banking innovations with Jewish international trading expertise, occurring within a constitutional framework that provided security for both private property while creating and increasing public debt. This combination created institutional advantages that positioned London to surpass Amsterdam and other European financial centers.

Rather than a single “return of Jewish bankers from Italy,” London’s financial development represented the successful integration of multiple waves of international financial expertise over several centuries. The medieval Lombard foundation provided institutional infrastructure, while the 17th-century Jewish readmission brought global trading networks and capital market sophistication essential for England’s imperial expansion.

The legacy of both communities remains embedded in modern London finance: Lombard Street terminology, corporate governance structures derived from Italian banking partnerships, international trading practices perfected by Sephardic networks, and the institutional framework of public-private financial cooperation that enabled British global dominance. This financial revolution established precedents for risk distribution, government bond markets, and international capital flows that remain fundamental to modern capitalism.

The story thus represents not just the return of Jewish bankers from Italy, but rather the successful synthesis of Italian institutional foundations with Jewish commercial networks, creating the world’s first modern financial system within a constitutional framework that protected both creditors — the essential innovation that enabled London’s emergence as the global financial center.