the world of private banking
the world of private banking
the world of private banking
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PRIVAtE BANKS AND INtERNAtIONAL FINANcE 153<br />
relationship with <strong>the</strong> government <strong>of</strong> <strong>the</strong> Province <strong>of</strong> Upper Canada. A hundred<br />
years later it was present in Barings’ connection with <strong>the</strong> government <strong>of</strong> <strong>the</strong> newly<br />
formed State <strong>of</strong> Czechoslovakia. This also touches on <strong>the</strong> resolution <strong>of</strong> differences<br />
between customer and bank and <strong>the</strong> fiscal and economic policies required <strong>of</strong> <strong>the</strong><br />
sovereign customer in order to maintain its standing in <strong>the</strong> markets.<br />
There is also much in Barings’ archives about default and debt reconstruction.<br />
While a merchant bank sought to protect its reputation by issuing securities that<br />
would maintain <strong>the</strong>ir market value, misjudgements occurred and losses were<br />
sustained by investors through default soon after issue. Barings was certainly no<br />
exception, and several groups <strong>of</strong> papers deal with debt reconstruction. The earliest<br />
cover <strong>the</strong> 1824 Government <strong>of</strong> Buenos Aires loan, its default in <strong>the</strong> late 1820s and<br />
its conversion in <strong>the</strong> 1850s. Here Barings’ archives cover Argentine government<br />
finance generally, negotiations with bondholders and negotiations undertaken by a<br />
succession <strong>of</strong> emissaries dispatched to Buenos Aires to treat with <strong>the</strong> government.<br />
O<strong>the</strong>r early papers were accumulated by, for example, George White, a Barings’<br />
clerk and trouble-shooter sent to Mexico on behalf <strong>of</strong> <strong>the</strong> Mexican bondholders<br />
for two years in <strong>the</strong> 1860s to deal with <strong>the</strong> Mexican government. Although he was<br />
unsuccessful in his negotiations to reschedule <strong>the</strong> government’s debt, his extensive<br />
papers provide extraordinary insight into Mexican economy and politics at that<br />
time. Later examples, in <strong>the</strong> late 1920s and 1930s, are extensive files covering debt<br />
rescheduling by Argentina, Brazil and Germany.<br />
The role <strong>of</strong> <strong>the</strong> merchant bank as a formal and informal agent <strong>of</strong> government<br />
is ano<strong>the</strong>r area <strong>of</strong> interest. Co-operation and competition between merchant banks,<br />
supported by <strong>the</strong>ir national governments, for control over bond issues for <strong>the</strong><br />
Chinese government is well known, but Barings’ archives also shed light on similar<br />
developments elsewhere, not least <strong>the</strong> extension <strong>of</strong> British economic power in <strong>the</strong><br />
eastern Mediterranean before 1914. For this <strong>the</strong>re are papers touching on Turkey<br />
and Egypt, and especially on <strong>the</strong> proposed Baghdad Railway promoted to link <strong>the</strong><br />
railway networks <strong>of</strong> Asia and Europe. O<strong>the</strong>r areas where strong political undertones<br />
are present include <strong>the</strong> Russo-Japanese War, in which Barings managed to assist<br />
both sides, finance <strong>of</strong> <strong>the</strong> Imperial Russian government between 1914 and 1917, and<br />
issues for European governments, especially Czechoslovakia, between <strong>the</strong> wars.<br />
Corporate Finance Advice<br />
In <strong>the</strong> twentieth century, especially after 1945, corporate-finance advisory services<br />
for British and overseas businesses became a mainstay <strong>of</strong> London’s merchant banks,<br />
its origins being in mid nineteenth-century bond issues for railway companies<br />
outside Britain. It was a short step from this to issuing equity and debt for Britishbased<br />
businesses, but this work soon became more complex and wide ranging.<br />
Early on, in <strong>the</strong> 1880s, for example, it included <strong>the</strong> conversion <strong>of</strong> old-established<br />
but very large <strong>private</strong> partnerships, such as Guinness and Whitbread, into publicly<br />
owned limited companies through flotation on <strong>the</strong> London Stock Exchange. Such