With the largest institutions decimated by the fall of an empire, people still needed some form of finance to get by. To meet this need, grain and textile merchants in Lombardy, Italy created the first merchant or investment banks. These were decentralized institutions which would provide financing, grants and investments for the entrepreneurs of the day.
Local merchants perfected ancient practices used in Middle East trade routes and the Far East silk routes which helped to finance commerce throughout the medieval world and establish grain markets as financial centers.
Deposited funds were held for the settlement of grain trades, but often were used for the bank's own trades. The term bankrupt is a corruption of the Italian banca rotta (broken bench) which is what happened when someone lost their traders' deposits (this is also where the term of being "broke" originates from).
Paper Money in the Far East
As far back as 1024 AD, the Chinese were finding new ways to facilitate the circulation of wealth. After running out of copper to mint their coins, The Qing dynasty merchants built a system involving "Letters of Credit" - and the printing of government-certified paper vouchers, which would become paper money (the most common form of currency).
Regarded by many historians as the world's first paper money, the Jiao Zi was stamped with six different inks and further secured by multiple banknote seals. It was an innovative system that would take Europe and Western Civilization many years to catch up.
The government quickly realized how powerful it was to issue currency and created their own centralized treasury (bank). By the 1120's, officials would produce their own state-issued paper money using a woodblock printing process.
The Crusades: A Banking Revival