The Long Historical Lure of Banking in Britain; London Has Been a Key International Money Center for 300 Years, but Much of the Lending Is Now in Dollars

By Mendelsohn, M. S. | American Banker, July 30, 1986 | Go to article overview

The Long Historical Lure of Banking in Britain; London Has Been a Key International Money Center for 300 Years, but Much of the Lending Is Now in Dollars


Mendelsohn, M. S., American Banker


The Long Historical Lure Of Banking in Britain

London has been a key international money center for 300 years, but much of the lending now in dollars.

WHEN THIS NEWSPAPER first appeared 150 years ago, London was by far the world's biggest financial center. It still is, but in a different way.

In the 19th and early 20th centuries, London was dominated by British banks, which lent sterling to the world, America included. Today, it houses the world's biggest concentration of international banks from more than 70 countries. Those banks still lend worldwide, but more than 90% of their lending is in currencies other than sterling, and mostly in dollars.

The foundations of London's emergence as a world financial center were laid during England's industrial revolution in the 17th century, but London did not overtake Amsterdam until Britain emerged victorious from the Napoleonic wars at the battle of Waterloo in 1815.

Before that, during the American War of Independence, the fledgling American government had raised $15 million in the money of that time on the markets of Amsterdam and Paris. It did so partly because those countries were sympathetic to the American cause, but also because they were the biggest international markets of that time, especially Amsterdam, where the 13 colonies floated most of the bonds they needed to finance their struggle. Even so, they had to pay dearly, at 4% to 6% when domestic yields in England and Europe were running at about half those levels.

Amsterdam preceded London as a world center by one of those historical oddities that are more clearly visible in retrospect than they were at the time. Dutch fortunes were built during the Middle Ages from the herring shoals gathered off the shores of Holland and shipped down the Rhine for the Friday diet of Catholic Europe. The rich proceeds of that humble trade enabled the Dutch to win their independence from Spain in the 17th century.

Thereafter the Dutch built an empire in what is now Indonesia, but with outposts at the Cape of Good Hope and New Amsterdam, where Wall Street remains as one memento of their presence. By the 18th century, Dutch colonization and international trade had established Amsterdam as the undisputed financial capital of Europe, which then meant the world. So it remained until overtaken by London from the early 1800s.

In Britain's case, the economy was transformed by the industrial revolution as well as trade. The changes started as early as the 17th century when British adventurers began to open up the Americas and India, but it gathered real momentum only from about 1700. In the subsequent century, British national income is estimated to have increased almost five times and the volume of trade almost three times.

Butchers, Bakers, Bankers

Then, in the first half of the 19th century, British national income doubled again and the number of banks in England rose from about 300 in the year 1800 to about 900 in the mid-1830s and peaked at about 1,100 in 1850. But most of them were small, local ventures, which were operated, according to one history, by "butchers, bakers, and candlestick makers.'

Not surprisingly, there were numerous defaults. British law was then changed from 1844, first, to break the Bank of England's near-monopoly on large-scale banking and next, to permit the creation of joint-stock banks as limited liability enterprises operating nationwide.

That led to a consolidation of banking in England, centered in London, which contrasted with the proliferation of new banks that accompanied the opening of the American land mass during the 19th century.

Throughout the 19th and early 20th centuries, British banks in London mobilized sterling finance to help fund development in the new worlds of America, Canada, South America, Australasia, and South Africa. Investments went largely into infrastructure like railroads, harbors, steamships, and inner city transportation like tramways. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Long Historical Lure of Banking in Britain; London Has Been a Key International Money Center for 300 Years, but Much of the Lending Is Now in Dollars
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.