the world of private banking
the world of private banking
the world of private banking
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xviii<br />
THE WORLD OF PRIVAtE BANKING<br />
Like that <strong>of</strong> <strong>the</strong> <strong>banking</strong> house that has produced <strong>the</strong>m, <strong>the</strong> wealth <strong>of</strong> <strong>the</strong><br />
Rothschild archives is truly exceptional. As Victor Gray and Melanie Aspey show<br />
in chapter 2, despite unavoidable loss and destruction, <strong>the</strong>y are <strong>of</strong> unrivalled<br />
interest not only to <strong>banking</strong> and financial historians, but also to those concerned<br />
with political, social, cultural, art and even natural history. The richest material<br />
consists <strong>of</strong> <strong>the</strong> letters (some 20,000 in total) that <strong>the</strong> five bro<strong>the</strong>rs wrote to each<br />
o<strong>the</strong>r between 1814 and 1868; written in Judendeutsch, and thus extremely<br />
difficult to understand, <strong>the</strong>y have recently been translated and transcribed. But<br />
<strong>the</strong>re also <strong>the</strong> letters from <strong>the</strong> Rothschilds’ correspondents and agents (hundreds<br />
<strong>of</strong> thousands) as well as a huge non-<strong>banking</strong> material, related to <strong>the</strong> very wide<br />
range <strong>of</strong> activities in which <strong>the</strong> family has been involved. In <strong>the</strong> last twenty<br />
years or so, <strong>the</strong> collections <strong>of</strong> <strong>the</strong> Rothschild Archives have been promoted to<br />
a wide audience, not least through <strong>the</strong> publication <strong>of</strong> a guide, available on <strong>the</strong><br />
Archive’s website. They are now <strong>the</strong> responsibility <strong>of</strong> <strong>the</strong> Rothschild Archive<br />
Trust, a charitable trust created in 1999 to ensure <strong>the</strong> future <strong>of</strong> <strong>the</strong> collection and<br />
encourage international research.<br />
Patterns <strong>of</strong> Business Development<br />
The role <strong>of</strong> <strong>private</strong> banks in <strong>the</strong> new financial and corporate environment<br />
created, from <strong>the</strong> mid-nineteenth century, by <strong>the</strong> growth <strong>of</strong> <strong>the</strong> joint stock banks<br />
is <strong>of</strong> particular interest to <strong>the</strong>ir long-term historical development. The question<br />
is examined in chapter 3 by Youssef Cassis, who rejects a ‘decline and fall’<br />
framework <strong>of</strong> analysis and shows, on <strong>the</strong> contrary, that <strong>the</strong> fate <strong>of</strong> <strong>private</strong> banks<br />
varied considerably depending on <strong>the</strong> country, region, or <strong>banking</strong> activity. Private<br />
bankers engaged in international finance were far more successful in <strong>the</strong> City<br />
<strong>of</strong> London, where merchant banks were able to maintain <strong>the</strong>ir hold on <strong>the</strong> huge<br />
accepting and issuing businesses, than in Paris and Berlin, where <strong>the</strong> competition<br />
from <strong>the</strong> joint stock banks was much stiffer. Conversely, <strong>private</strong> deposit <strong>banking</strong><br />
declined sharply in Britain, but survived in France and Germany, where hundreds<br />
<strong>of</strong> <strong>private</strong> country banks provided agricultural credit and industrial finance to small<br />
and medium-sized enterprises in <strong>the</strong> provinces, from which <strong>the</strong> joint stock banks<br />
were mostly absent. In both cases, <strong>private</strong> banks were able to find a niche where<br />
<strong>the</strong>y enjoyed a competitive advantage against <strong>the</strong> big banks. Private bankers, above<br />
all members <strong>of</strong> <strong>the</strong> haute banque in continental Europe, also played a decisive role<br />
in <strong>the</strong> creation <strong>of</strong> <strong>the</strong> new joint stock banks, usually to seize <strong>the</strong> opportunity to<br />
raise vast amounts <strong>of</strong> capital in order to finance large-scale investment. They were<br />
<strong>of</strong>ten able to keep a strategic control over <strong>the</strong>se new institutions, at any rate until<br />
<strong>the</strong> First World War – a success primarily attributable to <strong>the</strong>ir socio-pr<strong>of</strong>essional<br />
status and <strong>the</strong>ir network <strong>of</strong> relationships. Not surprisingly, international bankers<br />
proved more successful than country bankers over <strong>the</strong> longer term, whe<strong>the</strong>r as<br />
<strong>private</strong> bankers or as directors <strong>of</strong> joint stock banks. While <strong>the</strong> latter were all but<br />
wiped out by <strong>the</strong> depression <strong>of</strong> <strong>the</strong> 1930s, <strong>the</strong> latter survived well into <strong>the</strong> 1960s.