the world of private banking
the world of private banking
the world of private banking
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PRIVAtE BANKS AND INtERNAtIONAL FINANcE 151<br />
included construction <strong>of</strong> <strong>the</strong> first significant railway infrastructure, such as <strong>the</strong><br />
Grande Société des Chemins de Fer Russes and <strong>the</strong> Canadian Grand Trunk<br />
Railway. Stabilization <strong>of</strong> <strong>the</strong> Italian lira was facilitated by two especially large<br />
issues in 1881–2 for <strong>the</strong> Italian government, while <strong>the</strong> proceeds <strong>of</strong> an 1850 Russian<br />
government issue, ostensibly made to fund <strong>the</strong> Moscow to St Petersburg Railway,<br />
went instead to finance a military expedition against Hungary. In <strong>the</strong> two decades<br />
before <strong>the</strong> First World War ano<strong>the</strong>r specialization was issues for North American<br />
transcontinental railroads, including <strong>the</strong> Great Nor<strong>the</strong>rn, <strong>the</strong> Union Pacific and <strong>the</strong><br />
Canadian Pacific.<br />
By <strong>the</strong> end <strong>of</strong> <strong>the</strong> century, <strong>the</strong> development <strong>of</strong> competitor markets to London<br />
coupled with improved telegraphic communications was undermining <strong>the</strong><br />
established practice <strong>of</strong> sole management <strong>of</strong> an issue in a single market. More<br />
and more, syndicates <strong>of</strong> European and, later, New York banks were formed to<br />
handle large issues simultaneously in <strong>the</strong> different markets. Thus Barings acted as<br />
a syndicate member, <strong>of</strong>ten as its leader, alongside <strong>the</strong> likes <strong>of</strong> J.P. Morgan, Kuhn<br />
Loeb and Kidder Peabody in New York, Deutsche Bank and Disconto-Gesellschaft<br />
in Berlin and <strong>the</strong> Crédit Lyonnais and Banque de Paris & des Pays Bas in Paris.<br />
That London’s <strong>private</strong> merchant banks could hold <strong>the</strong>ir own in such company<br />
highlights <strong>the</strong> influence <strong>the</strong>y exerted.<br />
In <strong>the</strong> 1920s, bond issuing for <strong>the</strong> firm’s traditional customers in <strong>the</strong> United<br />
States, Canada and Russia dwindled to nothing, although some business was done<br />
for customers in Brazil, Argentina, Japan and elsewhere. Often in collaboration<br />
with Rothschilds and Schroders, many issues were arranged for European<br />
customers – <strong>the</strong> governments <strong>of</strong> Czechoslovakia, Hungary, Austria and Belgium<br />
and <strong>the</strong> cities <strong>of</strong> Hamburg and Berlin – to fund monetary and infrastructure<br />
reconstruction required as a result <strong>of</strong> First World War disruption. Very <strong>of</strong>ten this<br />
was done with encouragement, sometimes co-operation, from <strong>the</strong> Bank <strong>of</strong> England,<br />
which sought to promote economic stability in Europe. By <strong>the</strong> 1930s, access to <strong>the</strong><br />
London capital market for foreign borrowers was virtually at an end, on account<br />
<strong>of</strong> embargoes introduced to protect sterling. London’s merchant bankers turned<br />
away from international finance to focus on work for British industry; a generation<br />
was to pass before <strong>the</strong> emergence <strong>of</strong> a new international role made possible by <strong>the</strong><br />
Eurodollar and <strong>the</strong> Eurobond market.<br />
The Baring archives cover in considerable detail all <strong>the</strong> above transactions<br />
and capital-market developments. In particular, <strong>the</strong>y include correspondence with<br />
customers and with o<strong>the</strong>r participating banks, contracts, prospectuses, certificates<br />
and papers relating to <strong>the</strong> customer. The latter <strong>of</strong>ten deal with <strong>the</strong> underlying<br />
project, an excellent example being The Canadian Grand Trunk Railway, for which<br />
<strong>the</strong>re are annual reports, statements <strong>of</strong> account, maps and plans and so on. O<strong>the</strong>rs<br />
papers touch on <strong>the</strong> assets or revenue streams on which bonds were secured, such<br />
as detailed reports on Japanese railways, for which issues were contemplated in<br />
<strong>the</strong> early twentieth century, and papers referring to Portugal’s tobacco industry and<br />
monopoly, <strong>the</strong> tax revenue from which was allocated for interest payments in what<br />
amounted to an early form <strong>of</strong> securitization. O<strong>the</strong>r papers relate to <strong>the</strong> construction