the world of private banking

CHAPTER 3
Private Banks and the Onset of the
Corporate Economy
Youssef Cassis
The emergence of a ‘new bank’ in the second third of the nineteenth century
represented a decisive turning point in the long-term development of banking,
whether seen from an institutional or an economic perspective. This bank was
new in three respects: first, it was a joint-stock bank; second, it was a deposit bank
– more precisely, a bank that collected its deposits through a network of branches;
and third, it was an investment bank.
Admittedly, these characteristics were not entirely new – private bankers had been
collecting deposits and dealing in securities while forerunners of joint-stock banks had
appeared in Scotland in the eighteenth century. Yet the change was momentous. From
an institutional perspective, private banks progressively gave way to large joint banks.
And from an economic perspective, this change corresponded to a massive surge in
banking and financial affairs, with bank deposits increasing by a factor of seven to ten
in the major European countries in the half century preceding the First World War.
Banking concentration intensified likewise, while the big banks became giant firms,
ranking among Europe’s largest companies by the turn of the twentieth century.
The causes and, especially, the consequences of this ‘banking revolution’ have
raised major issues revolving around the many facets of the contribution of banking
to economic growth and industrial development. What was the role of private
banks in this age of concentration of capital, which gathered pace in the last quarter
of the nineteenth century? As early as 1864, the Daily Telegraph commented that
the sale of the famous English private bank Loyd, Jones & Co. to the London and
These three characteristics did not always coincide in these new institutions. While
the first was common to all of them, a degree of specialization in the second (especially in
Britain, to a lesser extent France) or the third (especially in Germany and Central Europe)
can usually be observed.
See, for example, F. Capie and A. Webber, A Monetary History of the United Kingdom,
1870–1982 (London, 1985); J. Bouvier, Un siècle de banque française (Paris, 1973); R.
Tilly, ‘An Overview of the Role of the Large German Banks up to 1914’, in Y. Cassis (ed.),
Finance and Financiers in European History, 1880–1960 (Cambridge, 1992).
See M. Pohl, T. Tortella and H. Van der Wee (eds), A Century of Banking
Consolidation in Europe (Aldershot, 2001).
See Y. Cassis, Big Business: the European Experience in the Twentieth Century
(Oxford, 1997).