the world of private banking
the world of private banking
the world of private banking
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208<br />
THE WORLD OF PRIVAtE BANKING<br />
When <strong>the</strong> Ruhr area developed into <strong>the</strong> industrial heart <strong>of</strong> Germany, from<br />
<strong>the</strong> 1850s onwards, <strong>the</strong> Oppenheim Bank was also present, taking part in <strong>the</strong><br />
establishment <strong>of</strong> several coalmining and heavy industry companies like <strong>the</strong><br />
Bochumer Verein, <strong>the</strong> Gelsenkirchener Bergwerksverein or <strong>the</strong> Dortmunder Union.<br />
In <strong>the</strong> immediate vicinity <strong>of</strong> Cologne, <strong>the</strong> Oppenheims became owners <strong>of</strong> major<br />
lignite mining concessions in 1870 and introduced opencast mining in this area.<br />
It seems, however, that <strong>the</strong> bank’s commitments in mining and heavy industry<br />
soon overstretched its financial resources and did not meet with its expectations<br />
<strong>of</strong> pr<strong>of</strong>it; nor did <strong>the</strong> bankers feel <strong>the</strong>y could sufficiently control risks. This is why<br />
Simon Oppenheim beseeched his sons in his testament <strong>of</strong> 1863 ‘never after my<br />
death [to] participate in any industrial enterprise, whatever its name, and especially<br />
avoid like <strong>the</strong> plague any dealings in mining’. Even if <strong>the</strong> sons did not completely<br />
follow <strong>the</strong>ir fa<strong>the</strong>r’s advice, it is clearly noticeable that activities in mining and<br />
heavy industry played a less important role <strong>the</strong>reafter in <strong>the</strong> bank’s investment<br />
policy than those in o<strong>the</strong>r branches <strong>of</strong> industry.<br />
The insurance business<br />
This line <strong>of</strong> commitment was opened up in 1818 when <strong>the</strong> Prussian customs tariff<br />
made <strong>the</strong> monarchy a large economic area without internal frontiers. Salomon<br />
Oppenheim participated significantly in <strong>the</strong> establishment <strong>of</strong> <strong>the</strong> Rheinschiffahrt-<br />
Assekuranz-Gesellschaft (Rhine Shipping Insurance Company), a Rhine navigation<br />
insurance company which, in fact, marked <strong>the</strong> beginning <strong>of</strong> <strong>the</strong> investment business<br />
for <strong>the</strong> bank.<br />
In 1839, Salomon Oppenheim’s sons Simon and Abraham founded Colonia,<br />
<strong>the</strong> first <strong>private</strong> fire insurance in Prussia, cooperating closely with o<strong>the</strong>r Cologne<br />
<strong>private</strong> bankers as well as Rothschild from Frankfurt and <strong>the</strong> Paris firm <strong>of</strong> Fould,<br />
owned by <strong>the</strong>ir sister and bro<strong>the</strong>r-in-law. A few years later, <strong>the</strong> Oppenheim Bank<br />
initiated <strong>the</strong> Kölnische Rückversicherung, <strong>the</strong> <strong>world</strong>’s first reinsurer, set up with<br />
<strong>the</strong> backing <strong>of</strong> <strong>the</strong> Frankfurt, Paris and London Rothschilds. O<strong>the</strong>r companies<br />
insuring special risks followed, until <strong>the</strong> 1880s. The establishment <strong>of</strong> insurance<br />
companies was a logical answer to <strong>the</strong> expansion <strong>of</strong> industrial credit, ins<strong>of</strong>ar as<br />
<strong>the</strong>y could serve as a means <strong>of</strong> security against <strong>the</strong> risks <strong>of</strong> investment credit.<br />
Banking<br />
This also holds true for <strong>the</strong> Oppenheim Bank’s commitments in <strong>the</strong> <strong>banking</strong> business.<br />
The necessity to look for fur<strong>the</strong>r means <strong>of</strong> controlling risks became ultimately clear<br />
to <strong>the</strong> Oppenheims during <strong>the</strong> 1848 revolution, when A. Schaaffhausen, ano<strong>the</strong>r<br />
powerful Cologne <strong>private</strong> banker, had to suspend payments. In order to avoid a<br />
complete crash, Schaaffhausen was restructured as <strong>the</strong> first joint-stock bank in<br />
Prussia, with <strong>the</strong> active participation <strong>of</strong> <strong>the</strong> Oppenheim Bank.<br />
Four years later, in 1852, <strong>the</strong> Oppenheim Bank was one <strong>of</strong> three foreign<br />
institutions to take part in founding <strong>the</strong> Crédit Mobilier in Paris, <strong>the</strong> first joint-