the world of private banking
the world of private banking
the world of private banking
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72<br />
THE WORLD OF PRIVAtE BANKING<br />
opening years <strong>of</strong> <strong>the</strong> 1880s. Consequently, if <strong>the</strong>re was a mid-century ‘Big Bang’,<br />
it took place during <strong>the</strong> mid-1860s boom.<br />
The arrival <strong>of</strong> corporate financial institutions had a range <strong>of</strong> significant effects.<br />
These included: activity in <strong>the</strong> new issues market, especially over <strong>the</strong> mid-1860s,<br />
arising from <strong>the</strong>ir very promotion; changing <strong>the</strong> organization <strong>of</strong> both <strong>the</strong> domestic<br />
<strong>banking</strong> system and <strong>the</strong> London money market; augmenting <strong>the</strong> domestic provision<br />
<strong>of</strong> <strong>banking</strong> facilities; giving a new basis to British overseas <strong>banking</strong>; and <strong>the</strong><br />
founding <strong>of</strong> corporate institutions that were to challenge briefly <strong>the</strong> position <strong>of</strong><br />
<strong>private</strong> merchant-<strong>banking</strong> houses. Their impact upon <strong>private</strong> enterprise in finance<br />
will be reviewed by examining each financial market in turn as <strong>the</strong> presence<br />
<strong>of</strong> corporate institutions came to bear. This gives some order to <strong>the</strong> following<br />
review, but it must be borne in mind that <strong>the</strong>re were also some interconnections.<br />
These arose particularly from <strong>the</strong> finance companies’ activities, as some promoted<br />
domestic and overseas banks while one – General Credit & Finance (Co. Ltd.)<br />
– was reconstituted as a corporate discount house during <strong>the</strong> aftermath <strong>of</strong> <strong>the</strong> 1866<br />
crisis. Fur<strong>the</strong>rmore, <strong>the</strong> International Financial Society (Co. Ltd.) had personal<br />
connections with some London merchant banks and Glyn, Mills, a London <strong>private</strong><br />
bank. Moreover, Albert Got<strong>the</strong>imer (subsequently Baron Albert Grant) used <strong>the</strong><br />
post-1856 permissive company law to enhance his notorious, two-decade career as<br />
a financier and promoter, beginning with establishing his own corporate discount<br />
house in 1860. 15<br />
III<br />
In his detailed studies <strong>of</strong> London registrations <strong>of</strong> limited companies, Shannon<br />
used <strong>the</strong> term ‘finance companies’ to assist classification, albeit that he fur<strong>the</strong>r<br />
distinguished among <strong>the</strong>se particular institutions depending on whe<strong>the</strong>r <strong>the</strong>y<br />
were designed to be colonial, or domestic or foreign concerns. However, ‘finance<br />
companies’ had a particular meaning for mid-Victorians, being <strong>the</strong> corporate<br />
City undertakings set up over <strong>the</strong> mid-1860s to operate in <strong>the</strong> money market and<br />
undertake new issues. What proved to be <strong>the</strong>ir brief impact will be examined later.<br />
The discussion here will begin by considering effects <strong>of</strong> <strong>the</strong> establishment <strong>of</strong><br />
corporate discount houses, <strong>the</strong> first sub-type <strong>of</strong> significant City ‘finance companies’<br />
to be founded.<br />
The forces that motivated <strong>the</strong> creation <strong>of</strong> corporate discount houses from 1856<br />
appear to have been <strong>the</strong> London money market’s rapid growth over <strong>the</strong> mid-1850s,<br />
cyclical upswing and <strong>the</strong> substantial pr<strong>of</strong>its generated by London joint-stock banks.<br />
The first were <strong>the</strong> National Discount and <strong>the</strong> London Discount, both <strong>of</strong> which<br />
survived <strong>the</strong> 1857 crisis, while <strong>the</strong> General Discount was established amidst that<br />
financial upheaval. The need for fur<strong>the</strong>r principals in <strong>the</strong> London money market<br />
15<br />
See P.L. Cottrell, ‘Albert Grant’, in D. Jeremy (ed.), Dictionary <strong>of</strong> Business<br />
Biography, vol. II (London, 1984).