the world of private banking
the world of private banking
the world of private banking
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154<br />
THE WORLD OF PRIVAtE BANKING<br />
transactions came to involve more broadly based advisory work, dealing with<br />
such matters as shareholder rights, valuation and stock-exchange regulations, in<br />
addition to relatively straightforward issuing work. This activity came gradually<br />
to be labelled corporate finance advice.<br />
Although largely Britain-focused until <strong>the</strong> first wave <strong>of</strong> cross-border<br />
transactions in <strong>the</strong> 1980s, <strong>the</strong>re were important exceptions. When <strong>the</strong> Atchison,<br />
Topeka & Santa Fe Railroad <strong>of</strong> <strong>the</strong> USA, a business for which Barings had already<br />
made debt issues, encountered difficulties in <strong>the</strong> 1880s, <strong>the</strong> firm worked closely<br />
with Kidder Peabody <strong>of</strong> New York in its reconstruction. Similarly <strong>the</strong> firm, via<br />
its New York house, was active in financing <strong>the</strong> wave <strong>of</strong> mergers which swept<br />
across United States industry in <strong>the</strong> decade or so before 1914. In <strong>the</strong> same period,<br />
Barings was drawn into o<strong>the</strong>r corporate and anti-trust issues thrown up by issuing<br />
work for <strong>the</strong> aggressively competitive North American transcontinental railways.<br />
Later on, in <strong>the</strong> 1920s and 30s, links existed with United States businesses such as<br />
Goodyear Tire & Rubber and Pressed Steel in <strong>the</strong>ir establishment <strong>of</strong> British-based<br />
operations for <strong>the</strong> first time. Also notable is <strong>the</strong> firm’s work in injecting North<br />
American management practice into moribund British manufacturing businesses<br />
such as Armstrong Whitworth and <strong>the</strong> Lancashire cotton textile industry in <strong>the</strong><br />
1920s through <strong>the</strong> work <strong>of</strong> Barings’ Canadian-born senior partner, Sir Edward<br />
Peacock, and <strong>the</strong> company doctor, James Frater Taylor.<br />
Paying Agencies<br />
O<strong>the</strong>r functions grew out <strong>of</strong> <strong>the</strong> issuance <strong>of</strong> securities for sovereign and occasionally<br />
business customers. One was paying-agency work whereby <strong>the</strong> merchant bank<br />
made interest payments to holders <strong>of</strong> a government’s (or business’s) securities and<br />
operated sinking funds for <strong>the</strong>ir gradual redemption. This generated a commission<br />
income, a lucrative spin-<strong>of</strong>f from issuing. Sinking-fund registers survive, giving<br />
details <strong>of</strong> bonds redeemed, but this function was essentially routine and only <strong>of</strong><br />
note when <strong>the</strong> customer experienced difficulty in funding interest and redemption<br />
payments. In such cases, Barings was likely to advance funds to enable payments<br />
to be made.<br />
Financial Agencies<br />
An especially sensitive role <strong>of</strong> London’s merchant banks was that <strong>of</strong> general<br />
financial agent; for much <strong>of</strong> <strong>the</strong> nineteenth century Barings acted as London<br />
agents for <strong>the</strong> governments <strong>of</strong> <strong>the</strong> United States, Russia and Canada, plus o<strong>the</strong>rs<br />
from time to time. At its most routine, this involved managing <strong>the</strong> government’s<br />
bank accounts in London, making payments and collections for <strong>the</strong> government’s<br />
account, not just in Britain but in countries where Barings had correspondent<br />
banks. As an extension to this, <strong>the</strong> accounts <strong>of</strong> <strong>the</strong> government’s <strong>of</strong>ficials and