the world of private banking

PRIVAtE BANKS AND INtERNAtIONAL FINANcE 145
Merchanting and Agency Work
The oldest-established merchant banks were rooted in international trade where,
as merchants, they purchased commodities in one international market and sold
them in another, and in the process made a speculative profit (or loss). In theory,
merchants could deal in a vast range of goods in many different markets but, in
order to reduce risk, they specialized in particular markets and commodities and
undertook transactions on joint account with other merchants. Most transactions
were small but not always. A few were hugely ambitious and envisaged control
of entire markets, as in 1787 when Barings, with Hopes of Amsterdam and Ryans
of Cadiz, attempted to corner the European market in cochineal, and in 1830–31
when Barings, with the St Petersburg banker Baron Steglitz, sought control of the
international tallow market then largely supplied through Russian ports.
Familiarity with commodities, markets and market intermediaries inevitably
led merchants to become expert in related areas. As a merchant’s reputation grew
and as his network of contacts – especially merchants with whom he speculated
on joint account – expanded, so it was a small step for him to act as agent for
merchants located in other trading centres. The agency services he provided
included the purchase and sale of commodities, the organization of warehousing,
insurance and shipping, and the arrangement of payments and collections. These
services generated a commission income to underpin the speculative profit or
loss derived from merchanting; such low-risk business provided much-needed
stability. For merchant banks, merchanting and associate agency work remained
a significant activity in the early decades of the nineteenth century but fell away
rapidly thereafter, although at Barings its remnants were still visible in the Produce
Department as late as the 1920s.
Merchanting did not give rise to records of any great note, as the underlying
transactions were both repetitive and short-term. Thus, the related correspondence
and contractual papers were routine and were not retained long-term; relatively
few survive in the Baring archives. Significant exceptions arose in the event of
a legal dispute, when financial problems were encountered or when a transaction
was particularly large. There are, for example, many papers relating to the 1787
cochineal market ramp while other papers cover disputes involving confiscation
of cargo, condition of cargo, debt recovery and disputed insurance claims. Many
disputes arose during the period of the European Wars, 1793–1815, the result of
the practical and legal difficulties of trading internationally at that time.
Of greater potential interest but difficult to interpret are general and customer
ledgers, and supporting accounts such as journals, which detail Barings’ own
speculations as well as those of its merchant customers. This accounting archive
is complete and vast; it has seldom been used, so here there is virgin territory for
the persevering historian. Seemingly it touches every part of the world, although
the identification of a distinct geographical pattern is not easy. Early on, however,
many merchants were located in England, especially the West Country and
Yorkshire, and in Europe, especially Spain, Portugal and the Mediterranean. After