Though initially an Order of poor monks, the official papal sanction made the Knights Templar a charity across Europe. Further resources came in when members joined the Order, as they had to take oaths of poverty, and therefore often donated large amounts of their original cash or property to the Order. Additional revenue came from business dealings. Since the monks themselves were sworn to poverty, but had the strength of a large and trusted international infrastructure behind them, nobles would occasionally use them as a kind of bank or power of attorney. If a noble wished to join the Crusades, this might entail an absence of years from their home. So some nobles would place all of their wealth and businesses under the control of Templars, to safeguard it for them until their return. The Order's financial power became substantial, and the majority of the Order's infrastructure was devoted not to combat, but to economic pursuits.
By 1150, the Order's original mission of guarding pilgrims had changed into a mission of guarding their valuables through an innovative way of issuing letters of credit, an early precursor of modern banking. Pilgrims would visit a Templar house in their home country, depositing their deeds and valuables. The Templars would then give them a letter which would describe their holdings. Modern scholars have stated that the letters were encrypted with a cipher alphabet based on a Maltese Cross; however there is some disagreement on this, and it is possible that the code system was introduced later, and not something used by the medieval Templars themselves. While traveling, the pilgrims could present the letter to other Templars along the way, to "withdraw" funds from their account. This kept the pilgrims safe since they were not carrying valuables, and further increased the power of the Templars.
The Knights' involvement in banking grew over time into a new basis for money, as Templars became increasingly involved in banking activities. One indication of their powerful political connections is that the Templars' involvement in usury did not lead to more controversy within the Order and the church at large. Officially the idea of lending money in return for interest was forbidden by the church, but the Order sidestepped this with clever loopholes, such as a stipulation that the Templars retained the rights to the production of mortgaged property. Or as one Templar researcher put it, "Since they weren't allowed to charge interest, they charged rent instead."
Their holdings were necessary to support their campaigns; in 1180, a Burgundian noble required 3 square kilometres of estate to support himself as a knight, and by 1260 this had risen to 15.6 km². The Order potentially supported up to 4,000 horses and pack animals at any given time, if provisions of the rule were followed; these horses had extremely high maintenance costs due to the heat in Outremer (Crusader states at the Eastern Mediterranean), and had high mortality rates due to both disease and the Turkish bowmen strategy of aiming at a knight's horse rather than the knight himself. In addition, the high mortality rates of the knights in the East (regularly ninety percent in battle, not including wounded) resulted in extremely high campaign costs due to the need to recruit and train more knights. In 1244, at the battle of La Forbie, where only thirty-three of 300 knights survived, it is estimated the financial loss was equivalent to one-ninth of the entire Capetian yearly revenue.
The Templars' political connections and awareness of the essentially urban and commercial nature of the Outremer communities led the Order to a position of significant power, both in Europe and the Holy Land. They owned large tracts of land both in Europe and the Middle East, built churches and castles, bought farms and vineyards, were involved in manufacturing and import/export, had their own fleet of ships, and for a time even "owned" the entire island of Cyprus.
http://en.wikipedia.org/wiki/History_of_...
The Templars’ banking wealth and power contributed to their downfall once the Muslims regained control of Jerusalem and the Holy Land. Jealousy inspired the King of France to attack them; he was supported by Pope Clement V, who just happened to be a childhood friend of Philip’s. This attack which resulted in the disbandment of the Templars and the death of most of the members. Other military orders, like the Hospitallers, quickly gave up their banking interests lest the same happen to them.
http://atheism.about.com/od/crusades/p/T...
They Knights Templar were involved in an early form of banking. Which contributed to their downfall as they had loaned Phillip IV of France a lot of money and he crushed them at the first opportunity. The fall of the Templar's led to the raise of banking in the Italian states most importantly the rise of the Medici.
