That's the neat part, they didn't.

Pithy comment aside medieval banking, especially by modern financial standards, was risky. Here I'm assuming you mean Europe, specifically the various Christian parts. 'Banking' and associated terms are also slightly tricky, as the 'bank' you and I think of when we say the word is not quite representative of medieval banks. I'm also going to play a little fast and loose with the word 'medieval' (which itself is a discussion for a different time) here, concentrating on specifically the Late period.

There are a few reasons as to why medieval banking was so risky; Roman Catholicism, the clients and the Knights Templar.

i. Temple Run: Catholicism and money-lending.

As you may know of have guessed, the official Church position on money-lending was that it was a sin, on account of supposed avarice. It was therefore forbidden by canon law for one to give another a sum of money in exchange for a percentage repayment (i.e. Interest). Jesus, in Matthew, Mark and Luke, famously ejected the various businessmen (including some money-lenders) from the Temple of Herod, displaying uncharacteristic anger at the idea of a holy place being used for sordid trades. This story itself is important within the narrative, taking place just one week before Jesus' crucifixion, and can be interpreted as "the beginning of the end" as far as the Messiah's relationship with the chief priests goes. Another Abrahamic religion, Islam, is informed of its stance on usury from this story, but crucially not Judaism.

As they were not prohibited from usury by their religion, many Jews became integral to financial systems. The idea of a 'court Jew' arose, an individual who could source easy money for his patron, without the constraints and consternation of the clerics. These people were often found in the background of major events, providing the liquidity that the medieval tax machine struggled to match. For example, in 1339, Vivelin of Strasbourg lent Edward III of England 340,000 florins and the English conquest of Ireland in the late 12th century was funded in no small part by Aaron of Lincoln. However, the fact that both of lenders hail from times and areas of historic oppression of Jews (see: Massacre at York in 1190, Strasbourg Massacre in 1349) is by no means a coincidence either.

So, from the outset most Europeans are religiously intolerant to the practice. This in turn explains why we often find members of minority communities. The elephant in the room here is the Knights Templar, who we will discuss later. But, by and large, bankers in medieval Europe were minorities and were persecuted as such. This feeds into our next factor...

ii. You're Fired: Banking clientele in Medieval Europe.

While Catholicism abhorred the idea of lending sums in exchange for interest, the financial needs of its adherents nonetheless continued to exist. Chief, literally, among these were the Christian princes. Much like today, the various incomes of a state don't lend (I'll stop it with the puns now) themselves well to major upfront expenses. The pre-eminent expense being war, which necessarily required ready cash for the provisioning of men, hiring of mercenaries and any other arrangements that needed making before a sword is swung. Worthy of consideration also is the prospect of ransom, again a large cash payment. Here I refer again to the example of dear old Edward. In preparation for an offensive against France in the summer of 1346, Edward needed to field some 15,000 men, all of whom needed food, water and passage to Normandy, for which Edward once again borrowed heavily, this time from Florentine banks. There were, of course, 'regular' people who needed to borrow money too, but I will defer talking about them to a more learned speaker. In short, though, they did exist but they were not nearly as risky as the other kind of customer.

If prospective bankers anticipated that their main clients to be the great and the good, you may well be asking "Where is the risk?". Surely, those with access to the levers of state are the most likely to have the ability to pay off their creditors, or at lest secure more loans in the mean time. While this is true, it overlooks one key idea, which evidently crossed the minds of those selfsame customers from time to time: "What if I just don't pay it back?" Some of you are the back may well be shouting "Knights Templar" at the back, and I promise I will get to them soon. For now, let us return to our friend Ed, from Windsor. He had borrowed in total 1.36 million florins (approximately $150m today) from various European institutions, most of it from the companies of Bardia and Peruzzi. Deciding that this debt was insurmountable, after a final payment in March 1346 of £3,000, he refused to honour the debts any further - essentially bankrupting the merchant companies overnight.[1] In the case of Jews, as has been mentioned previously, a worse outcome was often visited upon them. Why pay back your creditors when you can either kill, exile or attainder[3] them instead?

This is perhaps the most decisive element in answering your question. Medieval bankers often did not get repaid, because their clients were usually also in possession of the legal system that the lenders would have to rely on to enforce their debts. However, what if the lenders were themselves a very powerful institution, capable of standing up to the challenge of a king. Allow me to introduce The Poor Fellow-Soldiers of Christ and of the Temple of Solomon.

iii. Indiana Jones and the Last Creditor: Templars, Torture and The Iron King.

The Knight's Templar were initially a small order of knights, charged in 1119 to protect Christian pilgrims to the Holy Places in the city of Jerusalem. By 1292, however, they were a major part of Christian life, with hundreds of local waystations, castles, banks and chanceries spread across both continents. They had also outgrown their initial military purpose, and had become the infrastructure of moving men and material from Europe to the Holy Land. The basic idea, and why they are considered a 'bank', was the innovation of letters of credit. This allowed crusaders to deposit their moveable wealth with the Order in a chancery near their home, and access an equivalent to it in the Holy Land. This cut out the often considerable risk involved with moving valuables overseas or long distances. Naturally, there was a fee for this service (which was not technically a loan), as well as fair amount of skimping off the top when it came to currency conversion. This made the Templars rich, powerful and most of all widespread.

Enter King Philip IV 'The Iron King' of France. Phil was, as often is the case, in need of money to defend his realm against the claims of Edward I (our good friend Edward III's grandad) to fiefs in France. In order to finance his campaign in Aquitaine, he borrowed heavily from both Jews and the Knights Templar, which came to a disastrous end with the Treaty of Paris in 1303, which restored Edward to the Duchy. Without the prospect of paying off his debts with reparations extracted from the English, both Philip and creditors realized that he could no longer entertain the notion of repayment. Philip had previously seized the property and persons of Lombard bankers, forcing them to buy French citizenship to be released, which amounted to a default on the debts he owed. However, the Knights Templar was too vast and widespread for the same trick, as well as having the support of Clement V, the Pope at Avignon.

In October 1307, hundreds of Templars, including Grand-Master Jacques de Molay, across France were simultaneously arrested and their property seized, on charges of blasphemy, fraud, usury, idolatry, homosexual practices and abuses of power. Following 'confessions' extracted under duress, Clement issued a bull for the arrest and seizure of the rest of the Order on the same charges. De Molay and other senior Templars was burned at the stake, despite retracting his confession, and almost all the Templars interrogated by anyone who was not French was found innocent of the charges. By 1314, the Order had been entirely dissolved (going with it all record of Philip's debts), except in Portugal, where it was reformed into another religious order. No other organisation even attempted to plug the gap in financial services on the same scale under the Italian banking families in the sixteenth century.

So, to conclude - how did medieval bankers enforce to get their money back? Outside of refusing to lend again (in the case of early repayments), not much. Banking was an incredibly risky profession, as has been shown, and it was not entered into lightly. However, the repeated occurrence of money-lender shows that it was often necessary and profitable. This in part explains the disproportionate number of religious minorities involved - there were precious few other avenues for advancement, despite the very real risk of losing everything, including your life.

[1]Curiously enough, in the Waldon Ordinances of May 1339, Edward III clamped down hard on debtors to the Crown, both reducing the time in which payments came due[2] and increasing punishments for failure to pay.

[2]This may be confusing seeing as I have previously said that interest was forbidden canon law. A common way around this was lenders charging no interest, but fining those who paid back the loan late. By convention, all debtors paid late and so paid the fine or risked never being lent to again.

[3] In England and Wales, the passing an Act of Attainder found an individual or groups guilty of a crime without a trial and the punishment was often seizure of property, forfeiture of titles, refused the right to leave a will and sentenced to death. All property and rights returned to the Crown.