the world of private banking

46
THE WORLD OF PRIVAtE BANKING
that London was the leading centre for the issue of foreign loans and equity. The
development of the acceptance and issuing activities, which were the two pillars
of merchant banking, offered tremendous opportunities, both to existing firms and
to newcomers.
Consider first acceptances, the ‘bread and butter’ of merchant bankers’ income.
Estimates of their total volume show an increase from between £50 to £60 million
in 1875–6 to about £140 million in 1913 – though they recorded a sharp fall in the
early 1890s (from £90 to £50 million) following the Baring Crisis. The merchant
bankers were probably responsible for some 70 per cent of this total – that is,
around £100 million. Foreign issues also increased dramatically in the second half
of the nineteenth century. British portfolio foreign investment has been estimated
at about £195 to £230 million in 1854. 10 By 1913, it had jumped to some £3.5
to 4 billion, with major booms of capital export taking place in the early 1870s,
the 1880s and the decade preceding the First World War. Private banking houses,
above all merchant banks, were able to maintain their hold on the huge London
issuing business, being responsible for 37.2 per cent of all new issues between
1870 and 1914. Admittedly, they lost market share – from 53 per cent between
1870 and 1874 to 35 per cent in the years 1910–1914 – mostly to the joint-stock
banks, whether British or overseas. 11 Nevertheless, they remained by a significant
margin the largest single intermediary in the London market.
As a result, the number of merchant banks and other private banks involved
in international financial operations increased substantially during this period.
Estimates vary, as such banks were engaged in a great variety of activities,
including trade, brokerage, foreign exchange, arbitrage, company promotion and
others. Their total number increased from 45 in 1885 to 105 in 1914 according to
some estimates, 12 from 39 in 1990 to 63 in 1910 according to more conservative
ones. 13 As for the select group of top-ranking accepting houses – those invited to
the first meeting of the Accepting House Committee in August 1914 – it comprised
a mere 21 names. 14
See R. Michie, The City of London: Continuity and Change, 1850–1990 (Basingstoke
and London, 1992); D. Kynaston, The City of London, vol. 2: Golden Age, 1890–1914
(London, 1995); Y. Cassis, Capitals of Capital: A History of International Financial
Centres, 1780–2005 (Cambridge, 2006).
S. Chapman, The Rise of Merchant Banking (London, 1984), pp. 105–7, 209.
10
P.L. Cottrell, British Overseas Investment in the Nineteenth Century, 1870–1914
(London, 1975), p. 13.
11
A.R. Hall, The London Capital Market and Australia, 1870–1914 (Canberra, 1963),
p. 72.
12
Chapman, Merchant Banking, p.58.
13
R. Roberts, ‘What’s in a Name? Merchants, Merchant bankers, Accepting Houses,
Issuing Houses, Industrial Bankers and Investment Bankers’, in Business History, vol. 35,
3, 1993.
14
See Cassis, City Bankers, pp. 30–31.