Final answer:
The development of a banking system in Europe during the High Middle Ages was catalyzed by an increase in trade that demanded capital. The rise of capitalism, joint-stock companies, and the merchant class were central to the economic restructuring that supported trade expansion, necessitating a comprehensive financial infrastructure.
Step-by-step explanation:
The need for a banking system in Europe during the High Middle Ages was likely caused by an increase in trade to demand capital. Economic expansion during this time was challenged by the limited availability of traditional gold and silver coin currency. As trade flourished with technological and agricultural advancements resulting in increased crop yields and, by extension, a growth in the population, capitalism began to develop. This period saw a revitalization of trade routes, connecting various parts of Europe in a network economy, and the formation of financial networks and banking systems to standardize prices and manage the increased commercial activity.
Joint-stock companies and other financial innovations were introduced to facilitate trade and manage the risks associated with long-distance commerce. By the fifteenth century, small family businesses and large companies were supported by the Italian city-states, which allowed commercial and private investment to flourish, creating the necessary capital for larger economic undertakings.
Furthermore, the advent of merchant class and mercantile governing positions highlighted the need for economic restructuring, leading to the rise of urban communes in Northern Italy. As the inflationary rise of the money economy impoverished the landed nobility, financial skill became paramount, further necessitating a robust banking system to manage the complexities of the evolving economic landscape.