the world of private banking
the world of private banking
the world of private banking
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THE WORLD OF PRIVAtE BANKING<br />
provides figures for <strong>the</strong> total nominal value <strong>of</strong> <strong>the</strong> loans issued by <strong>the</strong> London and<br />
Frankfurt houses in <strong>the</strong> period; unfortunately, no comprehensive lists <strong>of</strong> issues exist<br />
for <strong>the</strong> o<strong>the</strong>r houses, but <strong>the</strong> London figures include a substantial number <strong>of</strong> loans<br />
handled jointly with Paris, Frankfurt, Naples and Vienna. These figures confirm that<br />
<strong>the</strong> Rothschilds were, throughout <strong>the</strong> period, <strong>the</strong> dominant force in international<br />
bond issues. Between 1815 and 1859, <strong>the</strong> London House issued altoge<strong>the</strong>r 50 loans,<br />
primarily for governments, <strong>the</strong> nominal value <strong>of</strong> which was around £250 million. In<br />
comparison, Barings issued just 14 loans in <strong>the</strong> same period, to a nominal amount<br />
<strong>of</strong> £66 million. 17<br />
Table 1.4<br />
The nominal value <strong>of</strong> loans issued by <strong>the</strong> London and Frankfurt<br />
houses, 1820–1859 (by decade) (£)<br />
NMR MAR<br />
1820–29 58,715,366 4,892,947<br />
1830–39 43,194,150 3,599,512<br />
1840–49 35,169,611 2,930,800<br />
1850–59 88,485,900 7,373,825<br />
Source: Ayer, Century <strong>of</strong> Finance, pp. 16–81; Berghoeffer, Meyer Amschel, pp. 29–42, 206–28.<br />
Table 1.5 breaks down <strong>the</strong> London figures to show <strong>the</strong> regional distribution <strong>of</strong><br />
Rothschild loans (including a small number <strong>of</strong> quite large <strong>private</strong> sector issues).<br />
These figures show that <strong>the</strong> contemporary view <strong>of</strong> <strong>the</strong> Rothschilds as ‘bankers<br />
to <strong>the</strong> Holy Alliance’ was exaggerated; <strong>the</strong> London house’s biggest clients were<br />
France and Britain, with Prussia, Russia and Austria some way behind.<br />
It is relatively easy to show <strong>the</strong> importance <strong>of</strong> government bonds in <strong>the</strong><br />
balance sheets <strong>of</strong> <strong>the</strong> various houses. The earliest surviving balance sheet <strong>of</strong> <strong>the</strong><br />
London house (that <strong>of</strong> 1828) reveals that a very large proportion <strong>of</strong> <strong>the</strong> bank’s<br />
assets – more than a quarter – were invested in British government bonds. The<br />
proportion rises to 37 per cent if its holdings <strong>of</strong> Danish government stock are<br />
added. 18 In <strong>the</strong> same year, 35 per cent <strong>of</strong> <strong>the</strong> French house’s assets took <strong>the</strong> form<br />
<strong>of</strong> French 3 per cent rentes. 19 The ‘State securities account’ comprised exactly<br />
<strong>the</strong> same proportion <strong>of</strong> <strong>the</strong> Vienna house’s assets, suggesting some sort <strong>of</strong> general<br />
Rothschild policy. 20 However, it is much harder to compute <strong>the</strong> pr<strong>of</strong>its made from<br />
such issues. Commissions and o<strong>the</strong>r charges varied considerably, and some major<br />
issues actually lost large sums (<strong>the</strong> French loan <strong>of</strong> 1830, for example). If bonds<br />
were taken firm (‘à forfait’ in contemporary parlance, that is, bought outright by<br />
17<br />
Chapman, Merchant Banking, p. 16.<br />
18<br />
CPHDCM, 637/1/6/52–57, N.M. Rothschild, balance sheet, 31 July 1828.<br />
19<br />
CPHDCM, 637/1/6/34–42, Bilan de MM de Rothschild Frères, 30 June 1828.<br />
20<br />
CPHDCM, 637/1/6/22, 25, Abschluss des Wiener-Filial-Etablissements, 30 June<br />
1828; see also AN 132 AQ 3/2 No 5.