LONDON AND PARIS AS INTERNATIONAL FINANCIAL CENTRES IN THE TWENTIETH CENTURY pot

LONDON AND PARIS AS INTERNATIONAL FINANCIAL CENTRES IN THE TWENTIETH CENTURY This page intentionally left blank London and Paris as International Financial Centres in the Twentieth Century Edited by Youssef Cassis ´ ` E r i c B u s s i Er e Great Clarendon Street, Oxford ox2 6dp Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York ß Oxford University Press 2005 The moral rights of the author have been asserted Database right Oxford University Press (maker) First published 2005 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose this same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging in Publication Data London and Paris as international financial centres in the twentieth century / ´ ` edited by Eric Bussiere, Youssef Cassis p cm ISBN 0–19–926949–1 (alk paper) Financial institutions, International–England–London Financial institutions, International–France–Paris Banks and banking, International–England–London Banks and banking, International–France–Paris International finance ` ` I Bussiere, Eric, 1955- II Cassis, Youssef HG3944.L66 2005 332.1’5’094210904–dc22 2004024144 ISBN 0–19–926949–1 10 Typeset by Kolam Information Services Pvt Ltd, Pondicherry, India Printed in Great Britain on acid-free paper by Biddles Ltd., King’s Lynn, Norfolk Preface This volume originates from the third Anglo-French business history conference, organized by the Business History Unit at the London School of Economics, on 4– April 2001 A first conference, on ‘Management in the Age of the Corporate Economy, 1850–1990’, took place in September 1992 (the proceedings were published in Y Cassis, F Crouzet, and T Gourvish (eds.), Management and Business in Britain and France: The Age of the Corporate Economy (Oxford, 1995)), and a second, ´ on ‘Les Strategies de commercialisation et de marketing’, in Paris in October 1995 The need was felt by scholars in both countries to compare the financial sector in Britain and France from a business history perspective, and the theme of ‘London and Paris as international financial centres, 1890–2000’ was chosen for the third conference The editors would like to thank the many people who have helped them in their endeavours They are particularly grateful to Kathleen Burk, Forrest Capie, Francois Crouzet, Patrick Fridenson, and Terry Gourvish for chairing the conference’s ¸ ´ five sessions, as well as to Francois Caron, Maurice Levy-Leboyer, Piere de Long¸ uemar, Roger Nougaret, Geoffrey Owen, John Plender, Geoffrey Wood, and the others who attended the conference and enhanced the quality of the debates They are also grateful to Pascal Boris (BNP Paribas), David Green (Financial Services Authority), David Kynaston (London), David Lascelles (Centre for the Study of Financial Innovation), Philip Mallinckrodt (Schroder Salomon Smith Barney), and ´ ´ ´ Frederic Perier (Paris Europlace) for participating in the round table, chaired by Martin Dickson from the Financial Times, which provided a highly stimulating conclusion to the conference Dr Christophe Revillard, of the University of Paris IV, skilfully edited the final manuscript, Dr J C Whitehouse translated Chapters 3, 11, 13, and 15, and Mr Owen Leeming Chapter 5, from the French Sonia Copeland efficiently dealt with all organizational issues The editors would also like to express their gratitude to the funding organizations which generously supported the conference, namely the Bank of England, the Banque Vernes Artesia, ´ ˆ BNP Paribas, the Caisse des Depots et Consignations, the European Association for Banking History, Euronext, and N M Rothschild & Sons April 2004 Y.C E.B This page intentionally left blank Contents List of Figures List of Tables ix xi Notes on Contributors xiii Introduction: Comparative Perspectives on London and Paris as International Financial Centres in the Twentieth Century Youssef Cassis Pa r t I: Lo nd on a nd Pa r i s i n Lon g-Te r m Pe r s p e c t i v e, 1890–2000 A Financial Phoenix: The City of London in the Twentieth Century Ranald Michie 15 When Paris Dreamed of Competing with the City Alain Plessis 42 Pa r t II: ‘Go l d e n Ag e’, 1890–1914 The City of London and British Imperialism: New Light on an Old Question Niall Ferguson 57 Paris, London, and the International Money Market: Lessons from Paribas, 1885–1913 Marc Flandreau and Francois Gallice ¸ 78 London Banks and International Finance, 1890–1914 Youssef Cassis Banking Alliances and International Issues on the Paris Capital Market, 1890–1914 Samir Saul 107 119 Pa r t III: Fr o m Gl o b a l Re a c h t o Re g i o n a l Wi t h d r a w a l, 1914–1958 Established Connections and New Opportunities: London as an International Financial Centre, 1914–1958 P L Cottrell 153 viii Contents The Challenged Competitiveness of the Paris Banking and Finance Markets, 1914–1958 Hubert Bonin 183 Pa r t IV: Th e Roa d t o Gl o b a l i z a t i o n, 1958–1980 10 Crisis and Opportunity: The Policy Environment of International Banking in the City of London, 1958–1980 Catherine Schenk 207 11 The International Opening-up of the Paris Bourse: Overdraft-Economy Curbs and Market Dynamics Olivier Feiertag 229 12 London as an International Banking Centre, 1958–1980 Mae Baker and Michael Collins 247 13 French Banks and the Eurobonds Issue Market during the 1960s ´ ` Eric Bussiere 265 Pa r t V: In t e r n a t i o n a l i z a t i o n a n d Gl o b a l i z a t i o n, 1980–2000 14 London as an International Financial Centre, 1980–2000: Global Powerhouse or Wimbledon EC2? Richard Roberts 287 15 The Future of the Paris Market as an International Financial Centre from the Point of View of European Integration ´ Andre Straus 313 Index 326 List of Figures 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 5.1 5.2a 5.2b 5.3 5.4a 5.4b 5.5a 5.5b 5.6 5.7a 5.7b 5.8 10.1 10.2 10.3 11.1 11.2 12.1 12.2 12.3 British overseas investment earnings as a percentage of GDP, 1850–1913 Overseas investment as a percentage of British GNP, 1856–1913 Value of colonial and foreign government bonds quoted on the London Stock Exchange as a percentage of GDP, 1853–1913 Average bond yields, 1870–1914 Debt–revenue ratios for Egypt and Turkey, 1876–1913 Turkish–Egyptian yield spread, 1870–1914 Capital flows from Britain to Egypt and Turkey, 1865–1914 Anticipated and actual returns on eleven governments’ bonds, 1850–1914 Anticipated and actual returns on nine governments’ bonds, 1915–1945 Paribas portfolio, 1885–1913 Paribas ‘pure’ foreign portfolio, 1885–1913 Paribas ‘pure’ London bills Assets foreign correspondents nostri–lori Assets nostri by type Assets lori by type Assets nostri: geographical distribution Assets nostri: share of foreign and Anglo-foreign banks in Paribas nostri in London Assets lori: geographical distribution Liabilities lori: geographical distribution, 1885–1913 Liabilities lori by type Parisbas/Bank of France £ bills portfolio Annual growth rate of Eurocurrency market (Net of interbank holdings) Net new international lending, 1971–1979 Share of total Eurobond issues by type of borrower Average monthly transactions on foreign securities compared with those on French securities in the share market, 1963–1983 Admission of foreign securities to the official Bourse list, 1963–1983 Foreign banks in London, 1870–1980 (direct representation) Origins of foreign banks in London Percentage of deposits to total deposits, by origin 62 63 64 66 70 70 71 72 73 87 88 88 91 92 92 93 93 94 96 96 99 208 208 211 232 235 249 250 260 Index Lloyds Bank France 160 Loan Council 162 loans: bad 190 colonial 113 Egyptian Tribute (1871) 69 Eurodollar 213, 221 famous 185 federal 137 floating 112, 194, 248 foreign 23, 48, 109, 112, 162, 164, 194 franc gold 127 interbank 254 League 164 long–term 162, 184, 194 lucrative 127 marketable, to local authorities 254 medium–term 168 municipal 165 Ottoman (1854) 69 railway 135, 137 short–term 84, 130, 194 sovereign 164 state 128, 131, 134 syndicated 83, 209 Treasury 314 see also international loans local authorities 254, 255, 261 Lombard Street Research 310 London & Brazilian Bank 160 London City & Midland Bank 2, 108, 110, 115 London Clearing House 110 London Commodity Exchange 296 London Conferences (1931/1952) 168, 170, 174 London & County Bank 110, 116 London County & Westminster Bank 2, 108, 115–16 London Joint Stock Bank 108 London & Liverpool Bank of Commerce 157 London Metal Exchange 296 London & River Plate Bank 2, 109, 114, 160 London Stock Exchange 22, 43, 63, 237, 303 admission of Commerzbank 238 353 competition reflected on 112 foreign companies quoted geographical distribution of securities 2–3 high cost of transactions 236 members of 108 securities trading focused on 295 London & Westminster Bank 110, 115 position and prestige 113 Long Boom (1958–71) 207 Long–Term Capital Management 301 loopholes 209 lori accounts 84–5, 90, 91, 94, 95 Luxembourg 196, 213, 269, 275 Euromarket business 258 fiscal dumping 242 foreign assets 209 prohibition of interest on short–term foreign deposits 216 reserve requirements on Eurodollar deposits 216 Lysis (journalist, pseud.) 46 McFadden Act (US 1927) 251, 252 Macmillan Report (1931) 170 McRae, Hamish 287, 306 Madagascar 315 major banks 17, 46, 50, 52, 80, 165, 209, 220, 238–9 first merger between 110 importance of Forex departments 186 nationalized 314 world 315 MAM 304 Manchester 47 Mansion House 300 Manufacturers’ Hanover Trust 248 manufacturing industry 26 funding available for 33 northern 25 penetration by foreign firms 321 Margerie, Bernard de 198 Marjolin, Robert 215 market–makers 292, 303 market shares 114, 296, 322 economic zones for 317 helping businesses regain 195 loss of 259 significant 109 354 Index market value 47 markets: emerging 69 foreign 199 freer, general move toward 213 fully computerized 322 high–volume 322 imperial, overseas 195 interbank 175, 210, 211, 214 neutral 164 open 27 opening up 52 provincial 22 secondary 212, 213, 295, 322 short–term 42 switch 215 Marks and Spencer 236 marks, see Deutschmarks Marshall Plan (1947–48) 51, 186, 199 ´ Masse, Pierre 278 Masson & Cie (Ch.) 137 ´` MATIF (marche a terme des instruments financiers) 234, 317, 322–3 Matsushita 236 maturity 184, 223 May Report (1931) 170 measurement problems 79 Mediterranean countries 90, 94, 95, 192 Melbourne 47 Mendelssohn & Co 129, 130, 141 Mendoza 127, 128 Mercantile Bank of Americas 158 mercantilism 191 merchant banks 2, 17, 19, 44, 45, 46, 108, 115, 155, 162, 164, 258, 260, 277, 292 ahead in international issues 280 almost collapsed 23 amateurish management 305 assets of 253 competition fierce amongst 112 decline and disappearance of 302 dollars deposited with 256 elbowed into oblivion 307 expansion of acceptances 165 expertise in international transactions 279 formed by foreigners in Britain 247 growth of 107 integrated 304 lack of placing capacity 271 leading 110, 113 leading role in rebuilding international finance 154 liabilities of 254 major, encouraged to invest 48 post–war trinity of 162 private partnerships de facto 109 specialization 110, 112 split between nationalized banks and 278 squeezed 304 stock exchange firms purchased by 303 strategic dilemma 303 struggling 305 taken over by foreign banks see also Compagnie du Canal de Suez; Flemings; Hill Samuel; Kleinwort Benson; Lazards; Morgan Grenfell; Paribas; Schroders; Warburg mergers 110, 111, 127, 129, 160, 174, 212, 309 botched 304 growing activity in 29 worldwide slowdown in 321 Mexican Central Line bonds short–term 87 Mexican National Railways 140 Mexico 90, 140, 197, 267, 274 debt 66, 73 Michel, B 83, 84 Michelin 280 Michie, Ranald 9, 73, 288 Middle East 2, 199 Midland Bank 30, 110, 112, 114, 115, 212, 256, 303 acceptances 161 achievements 114 commission–cutting war 165 disastrous acquisition of Crocker Bank 304 dynamic management 113 expansionary minded management 115 merger with City Bank (1898) 115 Petrograd opening 160 Midland and International Bank Ltd 212 Midlothian 68 Milan 236 millionaires 303 Minaes Geraes 140 Index ´ ` Ministere de l’Economie et des Finances (France) 234, 235, 237, 238, 239, 275 Mirabaud 191 Mises, L von 78 modernization 198, 320 ´ ´ MONEP (marche des options negociables de Paris) 317 monetary crises 60–1 monetary policy 60, 238–9 credibility of 323 desire to retain sovereignty 215 prudent 60 reactivation of 173 time–consistent 66 monetary union 7, 43, 60, 241, 309 proposal for money: call 193, 194, 255 cheap 171, 172 fresh 314 hot 214 international balances statistics 82 movement of 23, 84–96, 217 printing 60, 61 sound 61 money markets 22, 26, 29, 42, 109, 172 brought under government supervision or closed 27 demand for traditional facilities of 22 direct bid for money in 258 government intervention in 25 government monopolized 20 government reluctance to grant freedom to 28 interbank 211 international 30, 78–106 large and active 18 large liquid 85 largest in the world 16 leading item on 83 major implications for 17 North American, London dominating 21 parallel 252, 253–5 segmented 30 short–term 261 sterling 255 very large and internationally important 18 355 wartime role 27 ´ˆ ´ Moniteur des interets materiels 122 Monitor 213 Monory 316 Montagu & Co (Samuel) 154 Montevideo 197 ´ Moreau–Neret, Olivier 237 Morgan, E V 288 Morgan, Jack 164 Morgan & Co (J P.) 108, 140, 267, 278 Morgan (J S.) 112, 115 Morgan Grenfell & Co 108, 110, 140, 159, 172, 303 losses 172 management discredited 303 Morgan Guarantee Trust Company 213 Morgan Guaranty Trust 315 Morgan Harjes 159 ‘Morgan loan’ (March 1924) 184 Morgan Stanley 275, 278, 304 Morgans 158, 184 transatlantic interlocking partnerships 159 Morocco 90, 141 Cuban sugar sales in 197 ´ see also Banque d’Etat du Maroc Mortgage Banks: Austria 138 Cities of Sweden 134 Hungary 138 Serbia 141 mortgage institutions 189 Morton Rose 112 Moscow 136 Moscow Narodny Bank 22 motor vehicles 19 Motorola 270 multinational banks 3, 109 supervisory responsibility for 222 multinational corporations 210, 297–8 financial flows channelled through 30 spread throughout Europe 211 subsidiaries in UK 252 US, forcing to raise new funds abroad 31 mutual isolation policy 83 Mynors, H B 220 356 Index Napoleon III, emperor of the French 7, 43 Nash, John E 217 Nasser, Gamal Abdel 195 Natanson (S.) 139 National Bank of Mexico 140 National Bank of South Africa 160 National City Bank 158 National Debt 20, 27, 73, 171 National Government 170 national interest 305, 306 National Investment Board 26 National Park Bank of New York 159 National Provincial Bank 3, 108, 110, 115, 158, 170, 174 acquisition of Grindlay & Co 161 National Provincial and Union Bank of London 158 national sovereignty 239 ă Nationalbank fur Deutschland 127, 135 nationalism 61, 242 nationalization 4, 26, 51, 187, 188–90, 195, 201, 201, 236, 252 credit 240 nationalized banks 4, 26, 51, 187, 196, 198, 238, 240, 314 merchant banks ahead on issue 279 split between merchant banks and 278 NATO (North Atlantic Treaty Organization) 242 NatWest 207, 303, 304 Nazi Germany 50 Aryanization policies 201 net asset value 304 Netherlands 3, 90, 213, 234 prohibition of interest on short–term foreign deposits 216 reserve requirements on Eurodollar deposits 216 see also Amsterdam; Dutch florins; guilders; ING Neuflizes 240 Neuflize, Schlumberger & Cie 234 neutrality 22, 156 new issues 17, 119–50 by British possessions 73–4 government control over 29 limited 174 new technology 22 New York 1, 4, 6, 8, 15, 16, 18, 19, 20, 48, 144, 155, 159, 184, 201, 231, 298, 307 brighter future prophesied for 33 business revived 304 capital more plentiful in challenges from 24, 154, 157, 158 City of London and 27, 34, 87, 107 cooperation with European banking associates 158 development as international financial centre 209 dominance of 28 greatly enhanced position as financial centre 21, 22 guaranteed direct access to the market 112 hampered ability to compete 30–1 importance of 35 increasing power, defensive reaction to 162 market closed to foreign long–term borrowers 251 Nixon’s effort to rehabilitate as an international financial centre 216 requisition of dollar securities 25 Swedish issue launched in 269 weakened dollar 193 wholesale financial services workforce 297 New York Reserve Bank 221 New Zealand 17, 30 Newfoundland 74 newly industrialized countries 317 Neymarck, Alfred 125 niches 188, 305 Nixon, Richard M 209, 216 ´ Noetzlin, Edouard 139 Norddeutsche Bank 134, 135 Nordic countries 80 Nordwolle 168 Norman, Montagu 154, 157, 161–2, 164, 165, 166, 167, 168, 169, 171, 172, 252 Norsk–Hydro 134 North America Northbrook, Thomas G., 2nd Baron 69 North–Donetz Railway Co 142 Norway 90, 133, 134 nostri accounts 84–5, 90, 91, 95 Notionnel 322, 323 Index Notting Hill 301 Nurkse–Von Haberler controversy 78 Nyasaland Railways 174 OAT (obligations assimilables du ´ Tresor) 322 Obstfeld, M 59 Oceania 45 Odessa 136 OECD countries 207, 215 Office National pour le Commerce ´ Exterieur 192 offshore centres/activities 8, 290, 293, 310 Euromarkets 295, 307 integration of domestic and 307 shift to 310 oil crises: first (1973) 207, 211, 316 second (1979) 223, 316 Olivetti 238 OPAs (offres publiques d’achat) 316 OPCVM (organisme de placement collectif en ` valeurs mobiliers) 322 OPEC countries 207, 210, 211 oil surpluses 220 open outcry trading 308 Oslo, see Christiania ă ă Osterreichische Landerbank 144, 157 Ottawa Agreement (1932) 170, 171 Ottoman Bank 187 Ottoman Empire 2, 45, 68, 90, 125, 127, 128 bank dominant in 143 collapse of loans to 47 debt 67 outsiders 32 overdraft economies 6, 230, 234, 239–42, 313, 315–16 overdrafts 85, 90, 169, 191 foreign currency 94, 95 higher than deposits 91 renewed 186 surge of 94 overseas banks 2, 24, 30, 109, 110, 113, 154, 160, 161, 176 adversely affected 174 asked to report to Bank of England 222 collective assets doubled 159 flotations 114 357 increasing investments 172 London offices 253, 254 severe repercussions upon 171 overseas investments 63, 64, 214 overvaluation 194 Pacific regional economy 159 Pallain (governor, Banque de France) 44 Panama Bank & Trust 197 PanHolding 201 Panindustria 197 Parentis 314 Paribas 48, 49, 78–106, 127, 128, 130, 131, 132, 142, 143, 144, 145, 191, 194, 277, 278, 280 activity on international market 266 Argentina attention 140 bid to enter the Scandinavian market 134 Bourse manager 242 Brazilian operations 140 Brussels branch 138 domination of Paris financial market 141 enhanced presence through hirings 307 Geneva branch 139, 268 growth of 189 interest in Mexican affairs 140 international activities 265–8, 269 loan guarantees 135 London branch 266 New York branch 266 pre–eminence 133 railway issues 136 reforming commissions 240 re–internationalization policy 198 rivalry between Rothschilds and 129, 135 strength increased 188 syndicates 137, 267, 272 Paribas Corporation 266 Paribas–Luxembourg 268 Paris Bourse 2–3, 50, 188, 313 closure 47 considerable prestige 46 foreign securities quoted on 5, 47, 52 high–powered promotional body backed by 308 importance of role 52 358 Index Paris Bourse (cont.) international opening–up 229–46 marginalization in the economy 315 non–internationalization of 200–1 regulation and specialization structures 189 role before First World War 319 role essentially reduced 51 stature 45 Paris Europlace 308 parities 3, 25, 49, 164, 290 Park Union Foreign Banking Corporation 159 Parr’s Bank 108, 110, 113 Patron, M 83 Pax Britannica 248 Peasants’ Land Bank of Russia 135 Pechiney 278 Pelli, G 217 Pennsylvania Co (US railway) 132 pension funds 324 ´ Pereire brothers (Emile and Isaac) 7, 43, 44, 129 ´ Perouse, Maurice 275 Persia 60 Peru 90, 197 petro–currency 302 petro–dollars 221 Petrograd 160 Philip Hill 271 Philips Petroleum 270 Phoenix 236 Pierre–Brossolette, Claude 242, 275 Pinay loan (1952) 185 Plessis, Alain 3, 9, 83 P & O Banking Corporation 160 Poidevin, R 83 ´ Poincare, Raymond 3, 47, 48, 49, 184 Poland 48, 157, 191, 194 French interests in 193 see also Lodz; Warsaw Port of London 44, 50 Port Said 48 Porte tribute 69 Portugal 60, 90, 170, 271, 272 bills 86 CL in 196 ‘Position du portefeuille’ 84, 85 pounds, see British pounds precious metals 42 see also gold; silver preferential agreements 23 pressure groups 33 Pretoria 174 priority investment zones 46 Privatbanken 134 private banks 80, 80–1, 90, 108, 127, 130, 131, 136, 139, 142, 188, 196, 234 easy credit from 222 exits 110 joint–stock banks created specifically to compete with and supersede 120 management of syndicates by 132 marginalized 125 most powerful 119, 128 overdrafts granted to 91 relatively obscure 126 simultaneous amalgamation of 110 small(er) 17, 133, 135 Private Commercial Bank of St Petersburg 137 privatization 291, 323 professional services 296–7 profitability 159 declining 160 low 22 short–term 237 profits 172, 191, 213, 234, 316 diminished 171 distribution of 239 downturn in 301 exclusively into private pockets 58 huge, from foreign exchange 184 large, French banks in Vienna 84 railway 128 record 304 speculators, proposal to eliminate 219 squeeze 304 taken 19, 234 pro–independence movements 58 property prices 258 property rights 61 Propper et Cie (S.) 126 Proppers 141 proprietary trading 295, 304 speculative 303 Index protectionism 170, 190, 216, 323 Protectorate of Annam 86 provincial banks 113, 115, 139, 188 Prudential Assurance 157 prudential supervision 209, 219–23 public relations consultants 291, 297 public sector borrowers 210 public works contracts 195 pulling powers 81 purchasing power 313 quality of life 302, 308 quasi–banks 17 Quebec Treasury bonds 86 Quillot law 317 Radcliffe Report (1959) 253 railways 18, 19, 112, 132, 136, 143 borrowing for construction 142 predilection for 128 Ramadier loan (1956) 185 rates of return 18, 121 rationalization 188, 189 raw materials 186 imports 191, 195 price increases for 316 RBFT (Russian Bank for Foreign Trade) 130, 131, 136, 137, 139 real estate 315, 317 rearmament 50, 194 rebuilding 184, 154, 191, 195–201, 314 recession (1990s) 304 reciprocity 120 reconstruction 158, 167, 185, 314–15 big loans that accompanied 193 completed 199 economic 186, 190 efforts to finance imports in times of 197 recovery and 153 recruitment consultancies 297 rediscounting 167, 169, 170, 184, 185, 194, 198, 199 centralization of 188 intense 189 redistribution 201 refinancing 69, 83, 188, 190, 192, 199 friendly banks 191 partial 192 359 regional banks 135, 142 specialized 143 Regulation Q 4, 219, 251, 256 regulations 6, 30, 154, 161–4 Reichsbank 168 reinsurance business 296 Rendu, G 242 rentals 258 reparations 48, 164, 165, 184 repos (repurchase orders) 84 resale 143, 144 best securities abroad 47 reserves 201 ample 186 accumulated 210 foreign exchange a common substitute for 80 liquid 261 sterling 184 see also gold reserves retail banks 187, 197 retailers 124, 126, 261, 288, 297 foremost 135 retirement 201 retrenchment 69 ´ retrocessions 121, 131, 133, 269 returns: anticipated and actual 71–4 shrinking investments 187 Reuters 297 Reuters Stockmaster 213 revaluation 218 revenues 192, 193 foreign currencies 195 Reyre, Jean 278 ˆ Rhone–Poulenc 239, 240, 323 Richards, Richard 198 risk 23, 59, 120, 220 allowing buyers and sellers to offset 29 considerable exposure to Central and Eastern Europe 165 credit, abroad 199 distribution of 239 division of 190 exchange 155 foreign 200 hedging 295 insurance 24 360 Index risk (cont ) lending 221 management 222 placing money abroad 23 protection to savers against 317 sharing 16, 200 spreading 133 systemic 189 Rivesbank 134 Roberts, Richard 5, 23, 212 Robinson, R 59 Rockefeller, David 221 Rockoff, H 60 Romania 48, 90, 95, 142, 144, 191 Treasury bills discounting 192 Rosebery, A P P., 5th Earl of 58 Rothschild, Alfred de 61 Rothschild, Nathan Mayer (Natty), 1st Baron 58, 61 Rothschild family/banks 7, 51, 69, 79, 112, 114, 119, 125, 127, 131, 158, 162, 237, 256, 279, 305 breakdown of Japanese syndicates 131 commitment to Credit–Anstalt 165–6 enormous resources of Paris branch 128 Habsburg Empire 138 importance 132 lost ground to Paribas and BUP 188 minority interest in Smith New Court 303 provincial deposit banks which often aided 131 renewed 189 rivalry between Paribas and 129, 135 serious competition for 129 waning of 136 ` Rothschild Freres 128, 130 force to be reckoned with 129 Rothschild & Sons (N M.) 108, 110, 114, 130, 267 early dominance over foreign government loan contracts 112 roubles 87 Roussel Uclaf 276 Royal Bank of Canada 158 royal commissions 74 Royal Dutch Co 132, 231, 232 Rozenraad, C 82 rule of law 61 Russia 2, 3, 4, 69, 87, 90, 95, 96, 114, 143, 158, 313 benefiting from French cash flows 187 bimetallic system 60 Bolsheviks 58 collapse of loans to 47 debt default 73, 301 Factories of Briansk shares 141 financial agent of communist government 22 franc conversion of government funds 125 French banks lost key interests in 187 German and French banks fierce competitors in 187 London banks 248 main destination for flow of capital exports 45 plan to acquire a bank in 160 post–war turmoil within 156 promising recently opened market 127 Rothschilds in 129, 131, 136 scout and facilitator for Paribas in 130 SG deeply involved in 142 South–East Railways Company 128 see also BVK; DBSP; Moscow; Odessa; RBFT; St Petersburg Ryrie, W S 218 Saar 196 St Petersburg 130, 131, 135, 136, 137, 142 see also Petrograd salaries 299–300, 300, 301 inflated 258 reduced 172 Salisbury, Robert Cecil, 3rd Marquis of 66, 68 Samuel Montagu 154, 217, 266 Samuels 266, 267, 274 San Sebastian 48 Santa Fe 127, 128, 140 ˜ Sao Paolo 86, 197 ˜ Sao Paolo State Railways Co 140 Satzger (Kleinworts manager) 157 Sautter, Charles 133 Savills (F P D.) 301 savings 46, 320 Index aim to discourage competing forms of 316 channelled overseas 108 discouraged 50 domestic, collapse of 22 fallen significantly 47 government monopolized 27 growth of 185 immense, apparently inexhaustible reservoir of 119 low level of 314 middle classes 184 mis–invested 25 mobilized for war effort 20 national 235 public, medium–sized firms to try to attract 317 relatively brutal shift in 316 trend not very favourable 324 vast supply of 35 very high rate of 45 savings banks 4, 73, 189 shortening of assets 186 SBC (Swiss Bank Corporation) 217, 304, 307 scandals 25 Scandinavia 81, 135, 170, 271 credits 174 see also Denmark; Finland; Iceland; Norway; Sweden Schiff, Jacob 140 Schiller, K 219 schillings 166, 167, 168, 193 Schlogel, Maurice 50, 51, 268–70, 273, 275 Schlumberger & Mallet 240 Schlumbergers 201 Schneider group 189, 191, 192 ă Schroder & Co (J Henry) 108, 110, 112, 115, 159 Schroders 159, 162, 168, 169, 174, 237, 271, 304 acceptances 174 Deutsche Bank close connection with 156 early entrant into the Eurodollar market 176 Foreign Exchange Department 155 growth in German business 165 361 Investment Department 172 issuing and underwriting 173 long–standing ties with Central Europe 164 losses 172 New York 174 payroll contracted 172 riskier paper–acceptances for industrial firms 165 sale of 304, 305 shares fell due to German banking crisis (1931) 172 sticking to traditional pattern of business 303 Schroeder, H 139 Schulbach Thiemer & Co 168 Schuster, Felix 83 Scott, I O 207 SEB (Stockholm Enskilda Bank) 133, 134, 135 Second Empire 42, 43, 44, 46, 130 Second Market (1982) 317 Second World War 15, 153, 172 changes in international economy wrought by 174 immediate consequence of 50 Italian and Japanese banks left London during 248 severe effects upon City 27 secrecy 80, 83 Securities Committee (Bourse) 237, 238 securities markets 26, 32 government reluctance to grant freedom to 28 international, slow to recover post–war 30 largest in the world 16 securitization 212, 322 security 322 seigniorage 60 Seligman Brothers 112, 154 Sellier (agents de changes representative) 237–8 Semiretchinsk Railway 136 Serbia 90, 141, 144 settlements 212, 291 ´´ SFAC (Societe Francaise pour Favoriser ¸ ´ l’Assurance–Credit) 192, 198 362 Index ´´ ´ ´ SG (Societe Generale) 2, 3, 29, 44, 46, 49, 80, 124, 132, 135, 136, 138, 139, 140, 143, 144, 145, 145, 278, 279 Belgium presence 196 Buenos Aires branch 195 concentrated efforts on few bank markets and on the City 191 confidence crisis (1933) 195 deeply involved in Russia 142 Egypt activity 141 enhanced presence through hirings 307 Latin America presence 197 London branch 23, 31, 82, 109, 186, 248 minor member of the group 126 nationalized 189 New York branch 51, 195, 197 percentages 137 reforming commissions 240 Spain, established in 196 strength increased 188 Switzerland presence 196 Shanghai 44 Shares Committee (Paris Bourse) 235 shipping 20, 22, 28, 114 world, depression in 24 shocks 153 sudden, avoidance of 16 short–term funds 18, 26, 29, 34 Siam 170 ´´ ` SICAV (societe d’investissements a capital variable) 275, 316 ´´ SICOVAM (societe interprofessionnelle pour la ` compensation des valeurs mobilieres) 314 silver 60, 61 single European market 304 Skandinaviska Kreditaktiebolaget 134 Skoda 191 slumps 155, 159, 173, 280, 289 world 50, 316 ´´ SM (Societe Marseillaise) 131, 135, 142, 143, 144 smaller– and medium–sized businesses 25, 26 Smith New Court 303, 304 Smithsonian Agreement (1971) 219 Smyrna–Cassaba Railway Co 128, 143 ´´ SNCF (Societe Nationale des Chemins de Fers) 277, 279 social security 201, 314, 324 ´´ Societe de l’Azote et des Forces ´ Hydro–Electriques 134 ´´ ´ Societe Belge de Credit Industriel et Commercial 138 ´´ Societe Centrale des Banques de Province 145 ´´ ´ Societe de Credit Suisse 137 ´´ ` Societe Financiere d’Orient 144 ´´ Societe Francaise de Banque & de ¸ ´ ˆ Depots 196 ´´ Societe Francaise d’Entreprises Industrielles ¸ Russes 142 ´´ ´ ´ Societe Generale, see SG ´´ ´ ´ Societe Generale de Banque en Espagne 196 ´´ ´ ´ Societe Generale de Belgique 142, 191 ´´ ´ ´ Societe Generale de Mines ´ d’Algerie–Tunisie 144 ´´ ´ ´ Societe Generale des Sucreries et de la ´ Raffinerie d’Egypte 141 ´´ ´ ˆ Societe Lyonnaise de Depots 131 ´´ Societe Marseillaise, see SM ´´ ´ Societe Metallurgique de l’Oural–Volga 135 ´´ Societe des Mines d’Or & d’Exportation 131 ´´ ´ Societe Nanceienne 135 ´´ Societe Nationale d’Investissement 201 ´´ Societe du Port de Rosario 127 ´´ ´ ˆ Societe Suisse de Banque et de Depots 139 Sofinco 190 Sogenal 196 ´ Sogenin 190 solidarity 185, 271, 323 solvency 221, 222 Sommariva, A 81 Sony 236 South Africa 17, 45, 171, 172, 174 exports and imports largely financed in London 18 supporters of British imperial expansion in 61 gold mines 231 South America, see Latin America Southern Austrian Railways 131 Southern Rhodesia 74 South–East Asia 187, 317 Index Spain 90, 95, 141, 158, 267 residents holding shares directly 324 SG established in 196 trend common to 198 specialist services 177, 291, 292, 296–7, 302 specialization 110, 112, 113, 115, 198 best way to avoid drift towards mixed banking 189 functional 17, 109 international 305 regional specialized institutions 142–5, 189 speculation 26, 47, 78, 185 controls to suppress 174 cosmopolitan 234 currency 209, 210, 214 eliminating 218 exchange rate 216 way of damping 217 Sperrmarks 172 Speyer Brothers 112 Spitzer, Arthur 139 Spitzers 142 stabilization 164, 186 monetary 162, 173 staff poaching 258 stagflation 207 Stamp Duty 164, 236 Standard Bank 171, 212 Standard Bank of South Africa 109 standards of living 317 standstill agreements 194 state intervention 4, 6, 189, 323 state–of–the–art technology 322 state–owned enterprises 210 sterling 7, 28, 33, 79, 155, 165 ‘American’ 173 assets 3, 92 attempt to give current account convertibility 173 becoming a floating currency 154 benefited 170 bills 82, 87–8, 89 blow to the importance of 23 completely over–shadowed by the dollar 174 controls on 164, 174, 214 conversion into and out of 23 363 crises (1957) 31, 216 curbs on overseas lending of 256 currencies convertible into 60 currencies pegged to 170 departure from gold 171 depreciation against 61 devaluation of 173, 218 drafts 86 floating 161, 171, 218 foreign–held claims on City institutions 83 growing weakness as an international currency 29 industrial firms with facilities to pay in 186 large share of world trade conducted in 248 measures to tighten up supply to switch market 215 outstanding currency for international settlements 45 parity to dollar 25 preparing for return to pre–war parity 164 prohibition on the use of 176 regained stability 170 reserves 184 return to gold standard 25 role of pound within security 215 short–term instruments 254 short–term loan to buy 194 soaring 302 surge in instruments 87 ‘switch’, demand for 215 tool to protect from speculative attack 214 transferable 173 weak 215 Stern Brothers 110 stock exchanges 112 crisis (1930s) 188 decrease in activity 233 deregulation (1986) 32 development of 18 foreign, turmoil in 24 marginal transactions 234 speculation 26 364 stock market crash (1987) 299, 303 stock market middlemen 236 stockbrokers 113, 132, 138, 139, 140, 302 end of separation of functions of market–making and 303 plan aimed at gradually eliminating the monopoly of 317 role reinforced 189 Stockholm Handelsbank 134 strategic choices 7, strategy 115–16 Atlantic 267 banking 160, 198, 240 collective 323 economic 217 export 198 investment 237 Strong, Benjamin 164 subsidiaries 191, 196, 201, 221 American multinational companies 252 commercial 197 foreign 222 merchant bank 254 specialized trade and finance 197 ‘Successor States’ 191 Sud Aviation 278 Sudan 31, 170, 195 Suez Canal 67, 201 Sumitomo 270 supply and demand 16, 26 support staff 298 supranational harmonization 223 sureties 197, 199 surplus 210, 218, 315, 317 balance of payments 45, 47 current account 48 imbalance between deficit and 213 invisible exports 44 oil 220 recycling of 211 trade 297 Svenska Handelsbank 271 Swanson, W W 16 swaps 210, 290 Sweden 90, 133, 134, 269 see also SEB; Svenska Handelsbank SWIFT 212–13 Swiss Bankverein 137 Index Swiss francs 35, 165, 185 Switzerland 27, 90, 137, 143, 158, 201, 276, 298, 307 Eurodollar markets 213, 215–16, 257 foreign banks 250 London banks 248 measures put in place 189 preventing capital inflows 213 recruitment of German–speaking staff by City 156 SG and CL present in 196 three big banks 272–3 wealthy individuals, investment requirements 298 see also Basle; Berne; Fribourg; Geneva; Lausanne; Zurich Sydney 47 Syndicat de Banques Bernoises 137 Syndicat des Banques de Province 142 syndicates 162, 90, 119–50, 267, 269, 270, 271, 277 syndicates 184, 185, 211 almost compulsory constitution to bear and share credits 190 importing 186 international 2, 125, 126, 129 joint 46 placing 268 Synowie of Warsaw 139 takeovers 110, 160, 191, 197, 301, 325 vulnerability to 303 worldwide slowdown in 321 Tangier 242 tariffs 173 tax benefits 315 tax burdens 324 tax credits 316 tax havens 310 taxation 22, 29, 52, 69 creeping 288 favourable modifications in the system 49 income 236, 309 interest equalization 242, 251 irritant 164 selective, proposal to eliminate profits of speculators through 219 status of non–residents 241 Index stocks and shares 236 transactions and payments 215 withdrawals of overseas deposits 216 Taylor, A M 59 technical insolvency 169 telecommunications 19, 155, 291 advances 290 quality of 308 telegraphy 16, 172 Telerate 213 terrorist attacks 310–11 Tewfiq Pasha, Mohammed, Khedive of Egypt 68 textiles 196 Thalmanns 142 Thatcher, Margaret 216 ´ Thery, Edmond 125 Tiarks, Frank 168 tight money 45 Times, The 270 Tokyo 1, 8, 15, 107, 236, 269 importance of 35 war destruction 27 wholesale financial services workforce 297 Tonkin drafts 86 Toronto Dominion 212 tourists 320 trade barriers 26, 30 trade deficit 186, 195, 297 traders 61, 192 foreign 233, 237 highly mobile, highly specialized 324 Trading with the Enemy Act (1916) 156 transactions costs 213 Transalpine pipeline affair 267 transparency 322 Treaty of Rome (1957) 51, 233, 315 Trente Glorieuses Triple Alliance 94 Truptil, R J 24 trust companies 2, 109 Trustee Savings Banks 73 Tucuman 127, 128 Tullio, G 81 Tunisia 127, 144 Turkey 48, 69 bankruptcy (1874) 67 365 debt 66–7, 73 important interests in 191 see also Ottoman Empire Turner, Charles 16 turnover 5, 32, 188 Twin Towers attacks (Sept 11, 2001) 310 UBS (Union Bank of Switzerland) 221, 307 ´ UCB (Union pour le Credit au ˆ Batiment) 190 UFB (Union Francaise des Banques) 190 ¸ uncertainties 155, 166, 193, 217 exchange 219 fate of the franc 194 underwriters 61, 112, 114, 115, 119–50, 267, 270 Unico 212 Union Bank of Australia 109 Union Bank of Canada 159 Union Bank of London 112 Union Bank of Scotland 157 ´ Union Europeenne Industrielle ` & Financiere 191, 192 ` ` Union Financiere de Geneve 137, 139 ´ ` Union Fonciere d’Egypt 142 ´ ´ Union Generale crash (1882) 126 Union of London & Smiths Bank 108 unit trusts 212, 316 United States 3, 5, 17, 90 balance of payments 209 banks in London 248, 249 bills 87 British investment to 59 capital controls relaxed 220 capital outflow constrained 215 challenge from 154 clearing systems 213 deficit of payments 317 economy 15, 21, 27, 30, 31 financial crisis (1907) 91 francs invested in 323 industrial power interest rate hikes 223 liberalization of capital outflows 216 measures put in place 189 minority interests in British banks 212 national banks 109 366 Index United States (cont.) overseas investment and banking regulation populists and Progressives 58 proposals to float government debt 210 reliance on City for trade credit 18 softening attitude to fluctuating exchange rates 219 trend common to 198 see also Federal Reserve; New York; US dollars unregulated trade 172 unwritten rules 120 Uruguay 90, 141, 197 US dollars 4, 7, 89, 159, 165, 185 attempt to support international value of 31 British government’s desperate need for 21 crisis (1933) 194 French threat to convert holdings into gold 81 general growth in holdings outside USA 256 global shortage 176 importance in international trade and investment 31 key currency status 87 loss of market confidence in 219 officially pegged to gold 218 placing short–term funds abroad 220 pound replaced as international currency by 35 pressure on 218 rapid depreciation of 220 requisition of securities 25 run on 223 sterling completely over–shadowed by 174 struggling 210 substantial loan for the Belgian state 210 surpluses, oil–producing countries 317 weakened 193 Van Lennep, E 219 Vanderlip, F 158 Varangot, Serge 242 Vernes 141 Vichy France 50, 186, 189, 234, 237 Victoria–Minas Railway 141 Vienna 22, 138, 167, 168, 169 anti–Semites 58 retreat of short–term capital from 170 Vienot, Marc 274, 276 volatility 81, 193, 212 potential, Eurodollar market 213 world economy 155 Volcker, P A 219 Von Ernst & Co 139 wages 59, 316 Wall Street 159, 298 Crash (1929) 23 investment banks in London 303–4 pay levels 301 selling foreign securities on 242 Wallenberg, Marcus 133 war 6, 20 centres crippled by 22 War Loans 22, 43, 74, 79 Warburg, Paul 158 Warburg, Sigmund 32 Warburg & Co (S G.) 132, 134, 135, 136, 266, 303 Warburgs 304, 237, 267, 271, 280 Ward, Dudley 21 Warsaw 139 Warschauer & Co (Robert) 130 Wawelberg of Warsaw 139 wealth 19 creation of 306 enormous 107, 108 abroad 62 Webb–Pomerene Act (US 1918) 157 Wertheim and Gompertz 138 West Ural Railway Co 136 Westdeutsche Landesbank 221 Western European committees 191 Westminster Bank 47, 112, 116, 161, 169 French subsidiary 160 Paris branch 115 White, Harry D 218, 253 White Weld 270 wholesale banks 220, 254 wholesale financial services 288, 289, 292–3, 296, 297, 298, 309 Index dynamism and efficiency 300 global 310 independent merchant bank and securities sector 305 parallel sector 307 Wiener Bankverein 135, 138–9, 168 Wiggin Committee (1931) 168 Wilgress, L D 16 Wilkins, Mira 20 Williams Deacons Bank 157 Williamson, J G 59 Wiriath 278 ă Wirtschaftsforderung Frankfurt 308 withdrawals 18, 167, 168, 221 cash to resist 194 Witteveen, H J 222 Wolters, J 81 working practices 291 Workman, R L 220 World Bank 218, 222 world trade 2, 44, 159 buoyancy of 289 367 collapse 172 fall in 171 large share conducted in sterling 248 sudden transformation of America in 154 Wyse, R C 21 xenophobia 156 Yassukovich, Stanislas 309 yen 35 Yokohama 44 Young Plan (1930) 48, 165 Young Turk revolution (1908) 69, 143 Yugoslavia 48, 170, 191, 194 French interests in 193 ‘yuppie boom’ 299 Zivnotenska Banka 30 Zurich 1, 22, 30, 137, 229, 236, 250 City’s role in Europe threatened by 34 foreign banks opening branches 29 major significance 27 .. .LONDON AND PARIS AS INTERNATIONAL FINANCIAL CENTRES IN THE TWENTIETH CENTURY This page intentionally left blank London and Paris as International Financial Centres in the Twentieth Century. .. International Financial Centres in the Twentieth Century Yo u s s e f Ca s s i s Throughout the ‘long nineteenth century? ??, London and Paris were the world’s two leading financial centres Whether an international. .. Youssef Cassis p cm ISBN 0–19–926949–1 (alk paper) Financial institutions, International? ??England? ?London Financial institutions, International? ??France? ?Paris Banks and banking, International? ??England–London