Public Policy and British Multinational Banks, 1914-1982

Until the 1960s, when the advent of the Eurodollar market transformed the banking industry, British-owned banks were the predominant form of multinational bank. From the 1830s, British banks had established overseas branches, first in British colonial settlements in Australia and Canada, later in Asia, Latin America, Africa, and even California. By 1914 a group of around 30 banks owned and operated almost 1,400 branches outside Britain [24]. By contrast American multinational banking was minimal at that time, and was to remain so for the following half century [37]. Public policy had helped to shape the distinctive corporate structure of British-style multinational banking in the nineteenth century. The first banks had been regulated by the Treasury which, concerned in particular about the safety of private note issues, had opposed multi-regional banks and the mixture of domestic and overseas banking [14, chapter 2]. The British multinational (or overseas) banks developed as specialists on a single region or even country, and this was made explicit in such corporate names as the London and River Plate Bank, Standard Bank of South Africa, and the National Bank of India. Some banks specialised in the finance of single commodities there was the "sugar bank," the "cotton bank," and even the "currant bank." They had no domestic UK banking business and usually only a single UK office, which served as the seat of the Board [24]. Britain's domestic or clearing banks abstained from foreign direct investment, as did her merchant banks, which conducted trade f'mance and foreign loan issues through family partnerships and correspondent links. From the time of the First World War British multinational banks experienced competitive pressures. They had flourished when Britain was the world's leading capital exporter, when British foreign trade represented a significant share of world trade, when Sterling was used to f'mance two-thirds of world trade, and when the British Empire covered alarge part of the globe. As these conditions changed over the twentieth century, so the British banks had to struggle to maintain their positions. Within this context, after 1914 the highly speclalised structure of British multinational banking began to be perceived as a competitive disadvantage. This story was related to, and part