the world of private banking

LONDON’S FIRSt ‘BIG BANG’? 89
de l’Empire ottoman and Banque de Constantinople. In the case of the Mercantile
Bank of the River Plate, foreign subscriptions comprised 45 per cent of its initial
equity capital, excluding founders’ shares.
The 1860s were also marked by a brief flurry of interest in developing Anglo-
European banking (often in terms of introducing the cheque), and Anglo-Californian
banking. Longer lasting was the development of British overseas corporate
banking in Latin America – in Argentina, Brazil, Chile and Uruguay. Some of these
particular banks extended their business to support the British building of local
railways while financing the subsequent export of crops that their lines brought to
the ports. In the case of Latin America, the new corporate British overseas banks
largely replaced British branch mercantile houses from the 1860s in the finance
of international trade, leading to a number subsequently becoming better known
by their commercial speciality than their legal title. For example, the Anglo-
South American Bank was usually referred to as the ‘nitrate’ bank. 65 This affected
particular private houses with South American interests, such as A. Gibbs & Sons
and F. Huth & Co. However, more broadly, a complementary balance of business
interests developed. Private London merchant houses and merchant banks came to
be primarily concerned with the finance of Anglo-American trade and European
trade where they were long established, while chartered banks predominated in the
Orient (along with Anglo-Indian agency houses) and Australasia, and successful
mid-century corporate overseas banks operated particularly in South America.
Nonetheless, there were always individual exceptions, and all were affected to
a degree by the further shift of the London joint-stock banks into the business
of foreign trade acceptances from the late 1860s. This development led to some
London joint-stock bankers becoming directors of British overseas corporate
banks so that at their board meetings representatives of sections of the ‘old’ and
‘new’ City sat side by side. 66
All British overseas banks largely conducted their local foreign business,
especially the finance of international trade, on the basis of deposits amassed by
their branches. This provided an in-built insurance against any arising exchange
risk. Branches that could not be self-financing and so therefore had to call upon
London head offices for funds were regarded as being in ‘overdraft’, the cost of
which was set against their profitability and viability. However, from the 1860s,
these banks turned to British depositors, often employing the arising funds to
finance medium-term overseas assets. British deposits were usually of an extended
term and, hence, matched the banks’ more illiquid foreign engagements. After the
1866 crisis, they were cheaper and so thereby generated further profits given the
‘turn’ with local rates overseas. 67 Deposits in overseas banks based in London
65
Jones, Multinational Banking, pp. 24–5, 32–3.
66
Baster, International Banks, p. 247; and Crick and Wadsworth, Hundred Years, pp.
307–9.
67
Jones, Multinational Banking, pp. 31–2.