the world of private banking
the world of private banking
the world of private banking
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INtRODUctION<br />
xvii<br />
– a position best described by <strong>the</strong> notion <strong>of</strong> haute banque, which has kept its<br />
resonance to this day.<br />
Networks and specialization thus best characterize <strong>the</strong> history <strong>of</strong> <strong>private</strong> banks<br />
over <strong>the</strong> last 250 years. However, identifying <strong>the</strong>se long-term features should<br />
not obscure two facts. First, that changes have taken place in <strong>the</strong>ir domains <strong>of</strong><br />
specialization – from commercial <strong>banking</strong> to wealth management for some, from<br />
trade finance to corporate finance for o<strong>the</strong>rs, to put it in very broad terms. And<br />
second, that <strong>the</strong>ir significance, in economic, political and social terms, was at<br />
its highest during <strong>the</strong> ‘classical’ period going from <strong>the</strong> late eighteenth century<br />
to <strong>the</strong> First World War. This book explores <strong>the</strong> history <strong>of</strong> <strong>private</strong> <strong>banking</strong>, in its<br />
multifarious aspects, during <strong>the</strong>se years.<br />
The Rothschilds: Archetypal and Exceptional<br />
Rothschild is <strong>the</strong> first name to spring to mind in connection with <strong>private</strong> banks<br />
– even though Walter Bagehot did not consider <strong>the</strong> Rothschilds as bankers in <strong>the</strong><br />
narrow English sense <strong>of</strong> <strong>the</strong> word, i.e. deposit takers, but as ‘immense capitalists’. <br />
As Niall Ferguson clearly shows in chapter 1, <strong>the</strong> Rothschilds were <strong>the</strong> <strong>world</strong>’s<br />
largest <strong>private</strong> bank for most <strong>of</strong> <strong>the</strong> nineteenth century and recognised as such<br />
by <strong>the</strong>ir contemporaries. The Rothschilds might appear as <strong>the</strong> archetypal <strong>private</strong><br />
bankers because <strong>of</strong> this immediate association between <strong>the</strong>ir name and <strong>the</strong>ir trade,<br />
yet in almost every o<strong>the</strong>r respect <strong>the</strong>y were truly exceptional. In terms <strong>of</strong> size,<br />
<strong>the</strong>y were not only <strong>the</strong> largest <strong>private</strong> bank; <strong>the</strong> group’s resources (with banks<br />
in Frankfurt, London, Paris, Vienna and Naples) remained larger than those <strong>of</strong><br />
any joint stock bank well until <strong>the</strong> 1880s, even though <strong>the</strong> latter included clients’<br />
deposits. In terms <strong>of</strong> wealth, <strong>the</strong>y were collectively <strong>the</strong> <strong>world</strong>’s richest family. The<br />
links keeping <strong>the</strong> family toge<strong>the</strong>r were tighter than for o<strong>the</strong>r international <strong>banking</strong><br />
dynasties, such as <strong>the</strong> Bisch<strong>of</strong>fsheim, <strong>the</strong> Speyers, <strong>the</strong> Seligmans and o<strong>the</strong>rs, with<br />
an exceptionally high rate <strong>of</strong> intermarriage within <strong>the</strong> Rothschild family (14 out <strong>of</strong><br />
18 at <strong>the</strong> second generation, and still 13 out <strong>of</strong> 30 at <strong>the</strong> third generation).<br />
Most importantly, <strong>the</strong> Rothschilds were dominant in government finance,<br />
<strong>the</strong> most prestigious preserve <strong>of</strong> <strong>the</strong> haute banque – an activity bestowing both<br />
economic and political influence, at home and abroad. Between 1865 and 1914,<br />
<strong>the</strong>y handled, solely or in partnership, nearly three quarters <strong>of</strong> <strong>the</strong> foreign public<br />
sector issues floated in London, <strong>the</strong> <strong>world</strong>’s leading international financial centre.<br />
The Rothschilds faced increasing competition from <strong>the</strong> 1870s, from both joint<br />
stock and <strong>private</strong> banks. They maintained <strong>the</strong>ir supremacy amongst <strong>the</strong> latter until<br />
<strong>the</strong> First World War, when <strong>the</strong>y eventually returned to normal without, however,<br />
losing <strong>the</strong>ir legendary status.<br />
<br />
W. Bagehot, Lombard Street: A Description <strong>of</strong> <strong>the</strong> Money Market (London, 1873),<br />
p. 214.