the world of private banking

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THE WORLD OF PRIVAtE BANKING
to their accumulated reserves. Although it is true that their capital was relatively
large in their early days, it shrank massively relative to that of publicly owned,
deposit-taking joint-stock banks as the nineteenth century progressed.
What private merchant banks lacked in balance-sheet size they made up for
in terms of reputation based on experience, expertise and standing; their ‘name’
was their greatest asset. For much of their history it underpinned their financing of
international trade via the provision of guarantees [i.e. acceptances]. Reputation
was equally vital in their securities business, where a respected name behind a
bond issue for a remote and unknown borrower sent a signal to investors that
the bonds were sound and investment in them would be safe. And smallness had
other advantages. It facilitated close contact with customers and markets and
quick decision making. New opportunities could be identified and seized far more
quickly than at large commercial banks. Ideas, innovation and delivery as well as
reputation compensated for smallness of balance sheet.
Another characteristic of merchant banks was their internationalism. They
sought their business outside Britain, especially in the eighteenth and nineteenth
centuries; only between the two world wars and in the three decades after 1945 did
they focus on British-based customers, the result largely of regulations introduced
to protect sterling. International business ran in their blood. Their origins had been
in Europe, their first work was as international merchants and their correspondent
networks always stretched around the globe. They financed international trade and
in the nineteenth century were the principal means by which sovereign states,
municipalities and large corporations from around the world gained access to the
London capital market.
The purpose of this chapter is to explain the international activities of
London’s merchant banks, to describe the archives these activities generated
and to indicate the use of these archives in historical research. It is based on the
historical experience and archives of Baring Brothers, for 250 years a leading
London merchant bank, acquired in 1995 by ING, the Amsterdam-based and
internationally spread financial-services group. Although Barings was established
several decades before its rivals and won particularly high prestige through the
quality of its business, it is typical of its kind. London’s merchant banks possessed
remarkable homogeneity in terms of ownership, outlook, management style and
activity; such characteristics enabled them for most of the twentieth century to
meet quite comfortably in the Accepting Houses Committee, from which platform
they promoted their joint interests and excluded unsuitable newcomers. They
differed mostly in the balance or focus of their activities.
It follows that Barings’ archives are broadly similar in their nature to those of
other merchant banks. Where there is difference, it is in the propensity of archives
to survive. Without doubt the largest, most comprehensive and most valuable
merchant-bank archives are those of Barings and Rothschilds. For various reasons
they have survived largely intact, and because of their size and importance are
administered by teams of professional archivists within ING and Rothschilds
respectively. The surviving archives of other houses – for example Morgan Grenfell,