the world of private banking

PRIVAtE BANKS AND tHE ONSEt OF tHE CORpORAtE EcONOmy 59
Concluding Remarks
Private banks were not wiped out by the advent of the ‘new bank’ in the second
quarter of the nineteenth century or by the wave of banking consolidation which
took place across Europe in the two or three decades preceding the First World
War. Their survival was uneven. In the realm of high finance, they remained the
dominant force in the City of London, whereas they increasingly played second
fiddle in Paris or Berlin. Conversely, private country banks still flourished in
France and Germany when they had all but disappeared in Britain. Rather than
survival, one should thus talk of the continued success of private banks in some
specific banking and financial activities – a success reflected by the fact the
number of private banks engaged in these fields actually rose; that they retained
and sometimes even increased market share; that several of them grew in size and
profitability, not only in the City of London, but also in the French provinces; and
that the services they offered were, if not unique, at least not readily available from
the big banks.
The reason for these successes are mostly to be found in the capacity of private
bankers to find niches where they enjoyed a competitive advantage against the
big banks. Nevertheless, a degree of protection from market forces, deriving
from economic, social, institutional and cultural factors, also played a part. The
combination of these two elements varied both in space and time. Success lasted
longer for the haute banque than for the country banks. The latter were eventually
sidelined during the depression of the 1930s whereas the former retained both their
influence and their status as private banks well until the 1960s before increasingly
turning themselves into public companies. There is no doubt that City merchant
banks were in a strong position on the eve of the First World War. In London, but
also New York, investment banking, in the broad sense of the word, remained
the preserve of private firms. This has much to do with the banking architecture
prevailing in Britain and the United States. It might be anachronistic to talk of
market-oriented financial systems before 1914, but there is no doubt that the
capital markets played a greater role in London and New York than in Paris or
Berlin. Such an orientation left greater room for the development of private and
individual initiatives, as witnessed by the development of the City and Wall Street
in the last thirty years.