the world of private banking

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