the world of private banking
the world of private banking
the world of private banking
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148<br />
THE WORLD OF PRIVAtE BANKING<br />
‘financial credits’ were made available to o<strong>the</strong>r categories <strong>of</strong> business, especially<br />
financial institutions. Most notably <strong>the</strong>se included State banks, in order to assist<br />
<strong>the</strong>m in making international payments and operating in <strong>the</strong> foreign exchange<br />
markets. In <strong>the</strong> early nineteenth century, for example, <strong>the</strong> Bank <strong>of</strong> <strong>the</strong> United States<br />
figured as one <strong>of</strong> Barings’ most important customers, as did <strong>the</strong> Banco do Brasil<br />
and <strong>the</strong> Banco de la Nación Argentina at <strong>the</strong> end <strong>of</strong> <strong>the</strong> century. A development <strong>of</strong><br />
this business during <strong>the</strong> First World War was <strong>the</strong> ‘rehabilitation’ <strong>of</strong> <strong>the</strong> sterlingguilder<br />
and sterling-rouble exchanges, both <strong>of</strong> which had collapsed under pressure<br />
<strong>of</strong> wartime conditions. Financial credits, in a somewhat unlikely adaptation,<br />
were also used to finance ship construction; at Barings, for example, financial<br />
credits were provided to Cunard Steam Ship Co. to fund <strong>the</strong> construction <strong>of</strong> early<br />
twentieth-century passenger liners.<br />
Until 1900 <strong>the</strong>re is a curious absence <strong>of</strong> archives relating to trade finance<br />
in Barings’ archives; <strong>the</strong> same appears to be so at o<strong>the</strong>r merchant banks. While<br />
accounts exist in both customer and general ledgers for merchants and institutions<br />
in receipt <strong>of</strong> commercial and financial credits and while <strong>the</strong> operation <strong>of</strong> <strong>the</strong>se<br />
credits is <strong>of</strong>ten referred to in correspondence with customers, no dedicated series<br />
<strong>of</strong> archives exist for <strong>the</strong> terms and conditions <strong>of</strong> credits detailing such matters as<br />
value, commission or interest, term, security, purpose and o<strong>the</strong>r parties involved.<br />
Even schedules <strong>of</strong> credits do not exist. It is hard to think that such archives were<br />
not once kept; <strong>the</strong>ir loss much reduces our understanding <strong>of</strong> <strong>the</strong> merchant banks’<br />
role in trade finance.<br />
Never<strong>the</strong>less – as with merchanting – analysis <strong>of</strong> ledgers and <strong>the</strong>ir supporting<br />
journals would reveal much about finance <strong>of</strong> international trade. These ledgers<br />
contain a mass <strong>of</strong> data which – time and stamina permitting – is capable <strong>of</strong> a<br />
degree <strong>of</strong> scientific analysis to supplement present knowledge, which – as with<br />
merchanting – is based largely on case studies. Research would shed light on, inter<br />
alia, <strong>the</strong> obviously close relationship between <strong>the</strong> provision <strong>of</strong> agency services and<br />
trade finance, <strong>the</strong> extent to which advances were provided relative to acceptance<br />
credits, <strong>the</strong> credit mechanism, <strong>the</strong> underlying security, <strong>the</strong> spread <strong>of</strong> risk, <strong>the</strong> nature<br />
<strong>of</strong> financial credits, commissions, defaults and so on.<br />
Barings’ archives are vastly more informative about trade finance for <strong>the</strong> years<br />
after 1900 when <strong>the</strong> business was handled by a dedicated Credit Department. Now<br />
memorandum books detail <strong>the</strong> terms upon which individual credits were granted,<br />
while o<strong>the</strong>r books provide precise information about <strong>the</strong>ir administration. These<br />
archives are supplemented by detailed annual reports on <strong>the</strong> work <strong>of</strong> <strong>the</strong> Credit<br />
Department dealing with, for example, new accounts, accounts in difficulty, <strong>the</strong><br />
extent to which credits were drawn upon, <strong>the</strong> extent to which <strong>the</strong>y were provided on<br />
joint account with o<strong>the</strong>r banks, <strong>the</strong>ir geographical spread, <strong>the</strong> general environment<br />
in which <strong>the</strong> business operated, <strong>the</strong> spread <strong>of</strong> risk and so on. Ano<strong>the</strong>r supporting<br />
series from <strong>the</strong> 1920s is <strong>the</strong> Department’s ‘diary.’ These are, in fact, detailed<br />
journals summarizing meetings, correspondence and o<strong>the</strong>r events on a daily basis.<br />
Toge<strong>the</strong>r <strong>the</strong>se form a rich source for studying <strong>the</strong> trade-finance activities <strong>of</strong> a<br />
merchant bank in <strong>the</strong> first half <strong>of</strong> <strong>the</strong> twentieth century.