the world of private banking
the world of private banking
the world of private banking
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156<br />
THE WORLD OF PRIVAtE BANKING<br />
to <strong>the</strong> firm’s prestige, as customers included statesmen such as Napoleon III, <strong>the</strong><br />
King <strong>of</strong> <strong>the</strong> Belgians, many US Presidents including James Monroe, and <strong>the</strong> Prince<br />
de Talleyrand, as well as numerous ambassadors, o<strong>the</strong>r diplomats and leading<br />
businessmen.<br />
Ano<strong>the</strong>r group comprises <strong>the</strong> <strong>private</strong> customers <strong>of</strong> Barings’ agents and<br />
correspondent banks in Europe and in North America who wished to have <strong>banking</strong><br />
facilities in London, and in particular to hold part <strong>of</strong> <strong>the</strong>ir capital assets <strong>the</strong>re in<br />
<strong>the</strong> form <strong>of</strong> securities. O<strong>the</strong>rs, travelling or living temporarily in Europe, required<br />
travel facilities which <strong>the</strong>ir home banks were unable to provide as <strong>the</strong>y lacked<br />
<strong>the</strong> well-developed correspondent network already established by Barings. This<br />
applied especially to American travellers in <strong>the</strong> early and mid-nineteenth century<br />
and accounts for <strong>the</strong> existence in Barings’ ledgers <strong>of</strong> unexpected names ranging<br />
from <strong>the</strong> writer Nathaniel Hawthorne to <strong>the</strong> sculptor John Gibson. Accounts <strong>of</strong> <strong>the</strong><br />
Count <strong>of</strong> Monte Cristo and Phileas Fogg, who went around <strong>the</strong> <strong>world</strong> in eighty<br />
days, are also supposedly included.<br />
Security Management<br />
An overlooked aspect <strong>of</strong> merchant <strong>banking</strong> is security management, whereby<br />
portfolios were administered for customers, especially those in mainland Europe.<br />
Securities were purchased and sold and held in safe custody, while dividends and<br />
interest were collected, credited to current accounts or paid away. At Barings this<br />
activity resulted in <strong>the</strong> creation <strong>of</strong> security registers arranged both by name <strong>of</strong><br />
customer and name <strong>of</strong> security; <strong>the</strong>y date back to <strong>the</strong> 1830s, although early volumes,<br />
<strong>of</strong> which <strong>the</strong>re are only a few, appear to have been somewhat haphazardly kept<br />
and are difficult to interpret. From 1891, however, <strong>the</strong>y provide a clear statement<br />
<strong>of</strong> sales and purchases per customer and per security and provide an excellent<br />
resource for <strong>the</strong> study <strong>of</strong> investor behaviour.<br />
Investment <strong>of</strong> Resources<br />
The focus <strong>of</strong> published work on merchant-<strong>banking</strong> history has been on activities<br />
most in <strong>the</strong> public eye, such as trade finance and security issuance. An altoge<strong>the</strong>r<br />
more discreet side existed, reflecting <strong>the</strong> deeply etched sense <strong>of</strong> entrepreneurship<br />
at <strong>the</strong> heart <strong>of</strong> merchant <strong>banking</strong>; it was <strong>the</strong> partners’ management <strong>of</strong> <strong>the</strong> bank’s<br />
<strong>private</strong> treasury and <strong>of</strong> <strong>the</strong>ir personal capital kept outside <strong>the</strong> bank’s balance sheet.<br />
Allocation was across a wide range <strong>of</strong> instruments and o<strong>the</strong>r assets including bills,<br />
short-term loans made via <strong>the</strong> money market and in particular to brokers, equities,<br />
gilts, corporate and government debt, medium-term customer loans, property and<br />
so on. Such balance-sheet analysis is well possible for Barings, given its detailed<br />
and comprehensive accounting archives.