the world of private banking

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THE WORLD OF PRIVAtE BANKING
rather specialized activities, free from competition from joint stock banks. They
have usually dealt with fairly exclusive customers, for example high net worth
individuals, to use today’s terminology, or foreign governments. The volume of
their business has tended to be comparatively low (if measured by the number of
customers or branches), but their profit margins relatively high. And they have
consistently been able to influence, and sometimes lead, the profession, through
their socio-professional status, their networks of relationships, but also their
innovative capacity. There have been some digressions from this pattern: private
country banks in particular, which flourished in the nineteenth century in countries
such as France and Germany, were clearly catering for ‘ordinary’ customers. And
some of the ‘specialized’ areas dominated by private bankers could be very large
indeed, for example the international issuing business in the City of London
before the First World War. But they are the exceptions that confirm the rule:
throughout their history, private banks have been specialist, rather than generalist,
financial institutions.
Private banking has also been essentially a matter of networks. First and
foremost family networks, as private banks have tended to be family firms – they
can be defined as banks whose owners are also managers, legally organized as
partnerships or general partnerships, with partners having unlimited responsibility.
As institutions, private banks can still be defined in this way today, and some
of them are still alive and kicking, especially in Geneva, the ‘capital of private
banking’. However, the notion of ‘private banking’ has changed since the last
quarter of the twentieth century and now designates a specific activity – portfolio
management on behalf of very wealthy individuals – rather than a form of business
organization. This activity is nowadays mostly being carried out by large universal
banks, and yet family networks are still part of private banking, for example in
the management of family wealth, as witnessed by the development of the
Family Office. Religious networks have been another major constituent, often
superimposed to family ones, as exemplified by national or international banking
dynasties – the Rothschilds being the most famous though by no means the only
such example. The largest networks were formed by the Protestant and Jewish
religious minorities, the former dominant in the eighteenth century, the latter in
the nineteenth, with other denominations, not least the Quakers, also leaving their
mark. Religious networks have certainly weakened, though they have not entirely
disappeared and still play a role in terms of cultural identity. Moreover, elements
of their modus operandi can be found in other types of network relationships –
political, ethnic, ‘old boys’, and others. Finally, social networks have also been part
of the fabric of private banking, here again often in conjunction with family and
religious factors. The gradual integration of private bankers into the upper classes
from the mid-nineteenth century and their ever closer links with the political elites
have been both a cause and a consequence of their moving their business upmarket
Limited partnerships and even joint stock companies whose directors retained the
major part of the capital should also be considered as ‘private banks’.