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