the world of private banking

90
THE WORLD OF PRIVAtE BANKING
had become significant by the late 1870s, being equivalent to about a fifth of the
deposits held by all United Kingdom domestic banks. 68
VI
Probably the most explosive element of the mid-nineteenth century ‘Big Bang’ was
the finance companies. Some of their multifarious activities during the hectic boom
of the mid-1860s have already been referred to en passant in previous sections. 69
Between 1863 and 1865, 35 finance companies were formed publicly in both the
City and the provinces, as were seven closely related land-finance companies.
Each had a particular origin, but the general, seminal forces that shaped their birth
and subsequent nature were the London money market’s ‘exceptional’ business
from the 1850s, industrial banking and the marked increase in British capital
exports after the mid-1850s. These generalities were mixed with particularities,
such as Anglo-European financial co-operation from the 1850s and a strong
business emphasis upon the Near East and the Orient. The latter had arisen, first,
from Europe’s financial penetration of the Ottoman Empire brought about by the
Crimean War, second, the Indian Mutiny and, third, the American Civil War and
the ensuing ‘Cotton Famine’. 70
Their room for manoeuvre within the City and the English financial sector was
constrained in part because of the already well-filled, established specialist niches
that comprised the markets. There was little opportunity for the finance companies
to penetrate domestic banking, beyond promoting further corporate institutions,
although a few raised some loan capital by taking term deposits and issuing shortterm
debentures, which totalled £0.35m. in mid-1865. Their own record shows
that there were few possibilities for their managements and staffs to deal in fine
bills, a business which many of the lesser corporate discount houses also found
difficult to penetrate. As will be discussed later, the finance companies’ bill cases
largely arose from facilities provided to railway contractors, paper also taken up
by Overend, Gurney along with the corporate discount companies and some of
the new limited banks. Being forced to work largely upon the basis of their own
equities and creditworthiness, they had no substantial openings for developing
as fully fledged investment or universal banks despite outwardly being modelled
upon the Crédit Mobilier.
In any case, the Mobilier was rightly distrusted within the City and England
during the early 1860s. Even the one finance company that came from within the
‘square mile’, the International Financial Society, immediately ran up against this
opposition, while an invitation to Barings to be one of its founders received the
68
Capie and Webber, Monetary History of the United Kingdom, pp. 253–4.
69
For a full account and analysis, see Cottrell, Investment Banking, I, pp. 175–417,
II, pp. 418–56.
70
See Cottrell, Investment Banking, vol. I, pp. 86–128.