the world of private banking

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