The World of Private Banking
This is a full and authoritative account of the history of private banking, beginning with its development in conjunction with the world markets served by and centred on a few European cities, notably Amsterdam and London. These banks were usually partnerships, a form of organization which persisted as the role of private banking changed in response to the political and economic transformations of the late 18th and early 19th centuries. It was in this period, and the succeeding Golden Age of private banking from 1815 to the 1870s, that many of the great names this book treats rose to fame: Baring, Rothschild, Mallet and Hottinger became synonymous with wealth and economic power, as German, French and the remarkably long-lasting Geneva banks flourished and expanded. The last parts of this study detail the way in which private banking adapted to the age of the corporate economy from the 1870s to the 1930s, the decline during and after the Great Depression and the post-war renaissance. It concludes with an appraisal of the causes and consequences of the modern expansion of private banking: no longer the exclusive preserve of partnerships, the management of investment portfolios of wealthy individuals and institutions is now a major concern of international joint-stock banks.
... Private banking services have typically been the ABS backbone, offering wealth services for the super-rich, brokering across global financial centers such as London, Hong Kong, Switzerland, the Cayman Islands, and the British Virgin Islands (Cassis & Cottrell 2009;Beaverstock et al. 2013). Given the normalization of these services professional work is largely incidental, building on established practices created through prior professional jurisdictional expansion. ...
This article provides a framework for explaining professional action in multi‐jurisdictional tax and finance environments, focusing on how relationships between clients, professionals, and regulators shape market structures. Given the complexity of tax and financial regulations within and across national systems, professionals experienced in accounting, financial, legal, and policy systems have opportunities to engage to increase information asymmetries rather than lower them. This article draws on the recent literature on Global Wealth Chains to theorize how professionals develop action profiles to exploit opportunity structures through information gaps. We develop a theoretical framework for understanding how professionals may intentionally, and as a matter of strategy, exploit information gaps in different socio‐economic contexts. We provide case vignettes of client‐professional‐regulator relationships in multi‐jurisdictional tax and finance management, highlighting how professional action shapes wealth chains and attempts at regulatory intervention. Our theoretical contribution is to link micro‐level interactions to macro‐level structures of wealth creation and protection in the transnational economic and legal order.
... In this paper, the term "private banking" is used interchangeably with "merchant" or "investment banking", and in opposition to "deposit" or "commercial banking". For a discussion, see DeRoover (1974) andCassis and Pohle-Fraser (2009). ...
Geneva is host to the most ancient and venerable private banks of Switzerland, but not much is known about the circumstances in which the city allegedly developed an early competitive advantage in wealth management. Using an extraordinary qualitative source (Jacques Mirabaud's papers, and especially his memoirs), this article outlines the microstructure of Genevan private banking at the time of its emergence in the early nineteenth century. It finds that in those years, wealth managers’ ‘raw material’ did not consist of foreign capital, but of a remarkably abundant stock of domestic capital. Financial and social factors were intertwined in producing a very hierarchical division of labour in the origination and distribution of international sovereign loans.
... Uprkos tome, vekovima, deonice u centralnim bankama širom sveta, a posledično i uticaj na emitovanje novca i mogućnost stvaranja vrednosti ni iz čega, imala je grupa porodica, zaklonjena iza privatnih banaka u svom vlasništvu. 6 Tek nakon II svetskog rata usledio je zamah nacionalizacije emisionih institucija. (Hadžić, 2009, str Danas, zajmove državama nude i dve univerzalne međunarodne organizacije, Svetska banka i Međunarodni monetarni fond. ...
... In the case of Jewish private bankers, financial success was partly attributable to the nature of their networks -rather than a question of religiosity, loyalty to Judaism was more a 'clannish attitude'. 9 For the Rothschilds, Judaism certainly formed an important part of an extended family identity and the business environment. At the same time, it is also claimed that research on ethnically based influences on the business behaviour of a family dynasty is still in its infancy; as applying existing models of behaviour is problematic, the impact of such cultural differences may be overlooked. ...
In focusing on the business conducted by N.M. Rothschild & Sons in central and eastern Europe, this article analyses how the same family-specific characteristics, which had facilitated competitive advantages before 1914, exposed the house to dangerous pressures after 1918. The interwar years were critical as the family struggled to endure economic and financial turmoil and, especially, the ideological challenges of the 1930s. Nevertheless, the bank continued to support succession states such as Hungary – though the government became authoritarian and the economy subservient to the interests of Nazi Germany. The article examines how familial connections that spanned generations, humanitarian concerns and path dependency combined to influence business decisions and structure assessments of political risk.
This article undertakes a critical comparison of two books¬–Private Banking in Europe: Rise, Retreat, and Resurgence by Youssef Cassis and Philip Cottrell, and Financial Elites and European Banking: Historical Perspectives, edited by Youssef Cassis and Giuseppe Telesca–to explore how different genres of financial history and banking history have been written, and how the nature of financial history appears to be changing in relation to the rise of research on financialization and the social studies or finance / critical financial studies. The article argues that these genre differences are reflective of different methodological practices, theoretical and ethical concerns, and aesthetic preferences. The article concludes by arguing for greater engagement between financial history (especially that which intersects with business history) and the emerging research that embraces the social studies of finance.
News of the insolvency of Overend, Gurney, & Company on 10 May 1866 generated a scramble for funds in the City of London and urgent appeals to the Bank of England. The banking panic triggered by the collapse of the prominent British discount house became one of the Bank's most tumultuous modern crises. This article investigates the politics of the Bank's liquidity provision during the 1866 crisis, and in the ensuing months of financial stringency. By assessing the correspondence, speeches, and publications of Governors, City figures, and financial journalists, the article finds that the Bank's evolving approach to crisis lending was decisively shaped by its commercial objectives and a prolonged struggle to preserve its autonomy. When confronted with the 1866 crisis, the Bank adopted a pragmatic stance towards the market, which accommodated the credit needs of the City without sacrificing either its privileged legal status or its shareholders’ interests. Its Governors’ rhetorical pursuit of ‘constructive ambiguity’ during the post‐crisis months succeeded in both limiting moral hazard and consolidating the Bank's discretionary powers.
At a time when formal (impersonal) markets for credit were at an embryonic stage, the role of social relationships in raising funds for new ventures was crucial. ‘Investment tended to be a cumulative social process’ where trust and reputation played a role. Strong kinship and business ties linking partnership members were therefore critical in facilitating the flow of capital into new ventures. The way the diversified and broad-ranging businesses (railways, mines and public utilities) undertaken by the Paris-based partnership Parent Schaken et C.ie (P&S) were funded illustrates an important point about this topic. By making use of the basic tools of the Social Network Analysis, the authors show the P&S network of interpersonal relationships evolved and just how it mattered in facing the changing European financial scenarios, when long-term investment developed and impersonal money markets took shape.
This chapter analyzes the development of the Torlonia Bank’s activities and results in the central decades of the nineteenth century (1830–1850). The joint management of Roman loans brought a significant increase in profits, while the reputation Torlonia had acquired strengthened his political influence with the papal government, giving him the opportunity for other lucrative operations. Building on these important assets, he developed strategies of diversification and internationalization in order to overcome the constraints of the Roman financial market, here explored in depth. Torlonia extended the Bank’s network of partners at a European level and enjoyed business relationships with leading members of the Haute Banque. Moreover, he became one of the most active Italian investors in the booming infrastructure initiatives in Europe. The chapter concludes with a delineation of his banking model.
In the seventeenth century, Amsterdam and London developed distinctive innovations in finance through both banks and markets that facilitated the growth of trade in each city. In the eighteenth century, a symbiotic relation developed that led to bank-oriented finance in Amsterdam cooperating with market-oriented finance in London. The relationship that emerged allowed each to rise to unprecedented dominance in Europe, while the respective financial innovations in each city provided the means for the continued expansion of European trade, both within Europe and with the rest of the world. The increasing strains of war finance for the competing European powers over the course of the eighteenth century stimulated fresh financial innovations in each city that initially reinforced the symbiosis of the two centers. The external shocks arising from revolutionary movements in America and France, however, interrupted the relationship long enough to leave London as the supreme financial center.
For more than a hundred years from the middle of the nineteenth century, merchant banking families constituted one of the wealthiest and most powerful groups within the English bourgeoisie. Their authority over the social organization and normative order of the City of London was profound and pervasive. At the same time, individually and collectively they acquired status honour dispensed through the institutions of the landed class, and together with other capitalist groups, joined the landed class in the cultural uniformity of an exclusive upper stratum. This article examines the interests, forms of association and processes of cultural assimilation on which the merchant bankers' status claims and solidarity were founded. It questions the common wisdom that a tradition of intermarriage created a banking community, while confirming the existence of a densely bonded, intermarried network of families and interests around the extensive Baring clan.
Bankers and financiers have rarely been included in the discussions on entrepreneurs, or on the relationship between banking and economic development. This article compares London, Paris and Berlin as financial centres between the 1880s and the 1930s. It then considers the socio-professional position of bankers and financiers in these three centres, and shows that London offered greater opportunities than Berlin for the operations of individual financiers, as well as for the survival of a banking aristocracy, Paris being somewhat in between. On the other hand, German professional bankers were integrated earlier into the financial elite than their English and French counterparts. However, these differences appear to have had a limited impact on the shaping of the banking systems of the three countries.
This paper stresses the severity of the impact of the monetary crisis of 1878 on the British banking sector as a whole. It is shown that the widely accepted liquidity pressures experienced by Scottish banks also hit the banks of England and Wales-as late as the 1870s banks in general were still vulnerable to liquidity 'runs'. The crisis provoked a very sharp contraction of notes and deposits and obliged the banks to build up cash reserves. Indeed, it is argued that the liquidity pressure of 1878 was among the worst of the nineteenth century. Even so, in the event the banking system as a whole was able to satisfy its liquidity requirements by drawing on the Bank of England as a lender of last resort which, in turn, managed to attract sufficient reserves from overseas.