the world of private banking
the world of private banking
the world of private banking
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PRIVAtE BANKS AND tHE ONSEt OF tHE CORpORAtE EcONOmy 59<br />
Concluding Remarks<br />
Private banks were not wiped out by <strong>the</strong> advent <strong>of</strong> <strong>the</strong> ‘new bank’ in <strong>the</strong> second<br />
quarter <strong>of</strong> <strong>the</strong> nineteenth century or by <strong>the</strong> wave <strong>of</strong> <strong>banking</strong> consolidation which<br />
took place across Europe in <strong>the</strong> two or three decades preceding <strong>the</strong> First World<br />
War. Their survival was uneven. In <strong>the</strong> realm <strong>of</strong> high finance, <strong>the</strong>y remained <strong>the</strong><br />
dominant force in <strong>the</strong> City <strong>of</strong> London, whereas <strong>the</strong>y increasingly played second<br />
fiddle in Paris or Berlin. Conversely, <strong>private</strong> country banks still flourished in<br />
France and Germany when <strong>the</strong>y had all but disappeared in Britain. Ra<strong>the</strong>r than<br />
survival, one should thus talk <strong>of</strong> <strong>the</strong> continued success <strong>of</strong> <strong>private</strong> banks in some<br />
specific <strong>banking</strong> and financial activities – a success reflected by <strong>the</strong> fact <strong>the</strong><br />
number <strong>of</strong> <strong>private</strong> banks engaged in <strong>the</strong>se fields actually rose; that <strong>the</strong>y retained<br />
and sometimes even increased market share; that several <strong>of</strong> <strong>the</strong>m grew in size and<br />
pr<strong>of</strong>itability, not only in <strong>the</strong> City <strong>of</strong> London, but also in <strong>the</strong> French provinces; and<br />
that <strong>the</strong> services <strong>the</strong>y <strong>of</strong>fered were, if not unique, at least not readily available from<br />
<strong>the</strong> big banks.<br />
The reason for <strong>the</strong>se successes are mostly to be found in <strong>the</strong> capacity <strong>of</strong> <strong>private</strong><br />
bankers to find niches where <strong>the</strong>y enjoyed a competitive advantage against <strong>the</strong><br />
big banks. Never<strong>the</strong>less, a degree <strong>of</strong> protection from market forces, deriving<br />
from economic, social, institutional and cultural factors, also played a part. The<br />
combination <strong>of</strong> <strong>the</strong>se two elements varied both in space and time. Success lasted<br />
longer for <strong>the</strong> haute banque than for <strong>the</strong> country banks. The latter were eventually<br />
sidelined during <strong>the</strong> depression <strong>of</strong> <strong>the</strong> 1930s whereas <strong>the</strong> former retained both <strong>the</strong>ir<br />
influence and <strong>the</strong>ir status as <strong>private</strong> banks well until <strong>the</strong> 1960s before increasingly<br />
turning <strong>the</strong>mselves into public companies. There is no doubt that City merchant<br />
banks were in a strong position on <strong>the</strong> eve <strong>of</strong> <strong>the</strong> First World War. In London, but<br />
also New York, investment <strong>banking</strong>, in <strong>the</strong> broad sense <strong>of</strong> <strong>the</strong> word, remained<br />
<strong>the</strong> preserve <strong>of</strong> <strong>private</strong> firms. This has much to do with <strong>the</strong> <strong>banking</strong> architecture<br />
prevailing in Britain and <strong>the</strong> United States. It might be anachronistic to talk <strong>of</strong><br />
market-oriented financial systems before 1914, but <strong>the</strong>re is no doubt that <strong>the</strong><br />
capital markets played a greater role in London and New York than in Paris or<br />
Berlin. Such an orientation left greater room for <strong>the</strong> development <strong>of</strong> <strong>private</strong> and<br />
individual initiatives, as witnessed by <strong>the</strong> development <strong>of</strong> <strong>the</strong> City and Wall Street<br />
in <strong>the</strong> last thirty years.