the world of private banking

48
THE WORLD OF PRIVAtE BANKING
discount or as security for a loan, unless endorsed by two English signatures. 22 As
for the issue of loans and equities on the London capital market, it was restricted
by custom and practice to British firms. Foreign banks were involved in those
issues simultaneously floated across several centres, but they did not compete with
British firms on their home turf. The leading clearing banks only timidly entered
the issuing business in the early twentieth century, a domain where the influence of
the overseas banks remained limited, despite their special links with the countries
that regularly called on the London capital market. Merchant banks were far better
placed, on account of their expertise and contacts, to see foreign issues through to
a successful conclusion. 23
Private international bankers were in a different position in continental Europe.
For one thing, the scope for international financial operations was far more restricted
than in Britain, and for another joint-stock banks were able to secure a larger share
of this business. However, conditions were far from being identical across Europe.
The haute banque remained stronger in France than in Germany and was also able
to prosper in smaller countries with old banking traditions, such as Switzerland.
The dominance of the Parisian haute banque over French international
finance reached its peak in 1871–2, with the issue of the two war indemnity
loans, amounting to 5.2 billion francs – the levy required by Bismarck to pay for
France’s defeat by Prussia in the 1870 war. The French haute banque, led by the
Rothschilds, was able to keep control over these issues, with the new joint-stock
banks very much in the position of junior partners, though their influence was
to increase in the process. Rothschild and the haute banque kept their hold over
the first loan, securing the bulk of the lucrative commissions. In order to play a
more active role and get a larger share of the second loan, the newly formed jointstock
banks decided to join forces and form a coalition, the so-called ‘syndicat des
établissements de crédit’. The move proved successful, though for the time being
the Rothschild group remained in control. However, with its 35.7 per cent share,
the syndicate, led by the Banque de Paris et des Pays-Bas, founded in 1872, had
gained a foothold. From then on, an ever-increasing share of the foreign loans
issued in Paris was handled by the ‘établissements de crédit’. 24
22
In 1913, three of the ten largest accepting houses were foreign banks – Dresdner
Bank, Disconto-Gesellschaft, and Crédit Lyonnais. Their acceptances were mostly used to
finance the trade of their home country through employing sterling-denominated bills and
the London discount market.
23
The exception here was the Hong Kong and Shanghai Banking Corporation, which
played a pioneering role in Chinese government loans between 1895 and 1914. The bank
had a unique competitive advantage thanks to its knowledge of Far Eastern business, the
support of the Foreign Office, owing to the political nature of a number of these loans, and
finally its relationships in the City, especially, and significantly, with the Rothschilds. See
G. Jones, British Multinational Banking 1830–1990 (Oxford, 1993), pp. 119–30.
24
See J. Bouvier, Les Rothschild (Paris, 1967); E. Bussière, Paribas 1872–1992:
L’Europe et le monde (Antwerp, 1992).