the world of private banking
the world of private banking
the world of private banking
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PRIVAtE BANKS AND INtERNAtIONAL FINANcE 149<br />
When customers encountered difficulties Barings foreclosed, took possession <strong>of</strong><br />
assets and administered <strong>the</strong>m until <strong>the</strong>ir disposal. When <strong>the</strong>se assets included real<br />
estate, disposal could take years, <strong>the</strong>reby drawing Barings into <strong>the</strong>ir management<br />
as going concerns. Examples well documented in <strong>the</strong> firm’s archives are <strong>the</strong><br />
administration <strong>of</strong> sugar and c<strong>of</strong>fee estates in Ceylon between 1847 and 1896 and <strong>of</strong><br />
sugar plantations on <strong>the</strong> West Indian island <strong>of</strong> St Croix between 1825 and 1876.<br />
O<strong>the</strong>r series touching on trade finance have already been mentioned on account<br />
<strong>of</strong> <strong>the</strong>ir relevance also to merchanting. These include reports entered into character<br />
books on <strong>the</strong> standing and resources <strong>of</strong> customers. They cover details such as<br />
capital resources, background, nature <strong>of</strong> business and standing, and <strong>the</strong>refore give<br />
useful insight into an individual business or group <strong>of</strong> businesses at a particular<br />
location. Examples at Barings include reports on houses at Rio de Janeiro in<br />
1838, Madrid in 1848 and Moscow in 1867. A particularly good set for <strong>the</strong> late<br />
nineteenth and early twentieth centuries, relating especially to North America,<br />
survives amongst <strong>the</strong> archives <strong>of</strong> Barings’ Liverpool house. O<strong>the</strong>r papers, already<br />
discussed in connection with merchanting, are correspondence with overseas<br />
agents. These also deal with trade-finance issues; <strong>the</strong> correspondence exchanged<br />
with <strong>the</strong> Ward family and, later, Kidder Peabody <strong>of</strong> Boston and New York is<br />
particularly important.<br />
Security Issuance<br />
Bill finance was essentially short-term, but from <strong>the</strong> late-eighteenth century demand<br />
for long-term funds increased substantially, especially from governments. These<br />
funds were raised through <strong>the</strong> sale to investors <strong>of</strong> securities, mostly bearer bonds,<br />
repayable in, say, 20, 50 or even 100 years. Merchant banks were quick to add this<br />
to <strong>the</strong>ir portfolio <strong>of</strong> activities. While bill finance provided a steady income stream,<br />
revenue generated from issuance, while less regular, generated far greater pr<strong>of</strong>its.<br />
Few Western European countries in <strong>the</strong> nineteenth century had no internal<br />
capital market; most governments, for example, devised means <strong>of</strong> selling <strong>the</strong>ir<br />
securities to local investors even if markets were imperfect and ad hoc. That said,<br />
<strong>the</strong>re were very few international capital markets in which borrowers from countries<br />
experiencing local capital shortage could raise long-term capital. In <strong>the</strong> eighteenth<br />
century Amsterdam was <strong>the</strong> leading international market, and several European<br />
governments issued <strong>the</strong>ir bonds <strong>the</strong>re. London overhauled Amsterdam at <strong>the</strong> turn<br />
<strong>of</strong> <strong>the</strong> century and dominated <strong>the</strong> international markets until 1914, being joined in<br />
late century by Paris and Berlin and, after 1900, by New York. After 1918, London<br />
faded, having been weakened by war and restricted by regulations imposed to<br />
protect sterling, while New York was in <strong>the</strong> ascendancy and unchallenged.<br />
As <strong>the</strong> nineteenth century progressed so <strong>the</strong> range <strong>of</strong> borrowers in <strong>the</strong><br />
international markets increased. Initially access was limited to governments, a<br />
class <strong>of</strong> borrower that enjoyed <strong>the</strong> highest standing in <strong>the</strong> eyes <strong>of</strong> investors; by<br />
1900 few governments had not issued bonds in London. They did so in order