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Foreign Financial Institutions & National Financial Systems Studies in Banking and Financial History Foreign Financial Institutions & National Financial Systems 2013 EABH Annual Conference 7–8 June 2013 Warsaw, Poland Publisher The European Association for Banking and Financial History (EABH) e.V. Geleitsstrasse 14 60599 Frankfurt a.M. www.eabh.info Printing The National Bank of Poland 11/21 Świętokrzyska St. 00-919 Warsaw, Poland www.nbp.pl ISSN 2303-9450 ISBN 978-3-9808050-4-9 Editors: Melanie Aspey, Peter Hertner, Krzysztof Kaczmar, Jakub Skiba, Dieter Stiefel, Nuno Valério Assistant Editor: Carmen Hofmann Language Editor: Jonathan Ercanbrack Copy Editor: André Laude DTP Consultant: Piotr Kotela Book Design: Radosław Sosiński Production & Print: National Bank of Poland © Copyright EABH, 2013 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, electronic, mechanical, photocopying, recording or otherwise without the prior permisson of the publisher. Table of Contents Preface 7 Experiences of European Banking in the Context of the Development of International Trade in the 19th and 20th Century French Bankers and Economic Patriotism in the Chinese Port 15 Cities (1880s–1930s) Hubert Bonin (GRETHA Research Centre at Bordeaux University) Making Money: Cotton, Slavery and Finance across the Atlantic 55 1815–1837 Kathryn Boodry (Harvard University) Rothschild Investments in Spain 1856–1930 81 Miguel A. López-Morell (University of Murcia) The Presence of Foreign Capital in the Banking System of Poland in the Interwar Period (1918–1939) Foreign Capital in Polish Banking 1918-1939 137 Wojciech Morawski (Warsaw School of Economics) The Determinants of Foreign Banking Activity in Poland during 163 the Interwar Period Cecylia Leszczyńska (University of Warsaw) A Banker from Poland: Exploring Józef Toeplitz’s International 203 Connections through his Correspondence Guido Montanari (Intesa Sanpaolo) Control and Regulation of Capital Flows between Poland and 223 Palestine in the Interwar Period Jerzy Łazor (Warsaw School of Economics) Cross-Border Activities of Banking Institutions – Present Day and History Dutch Banking in Overseas Territories: Different Ways of Entry and 251 Exit Piet Geljon & Ton de Graaf (ABN Amro) Ecological Succession in Foreign Ownership in National Banking 287 Systems Adrian E. Tschoegl (Wharton School of the University of Pennsyl- vania) Foreign Banks in India: Establishment, Operations and Challenges 311 as Reflected from the Records of the Reserve Bank of India Ashok Kapoor (Bank of India) Reasons of Cross-Border Activities of Financial Institutions and their Influence on National Banking Systems Reasons for Financial Institutions to Cross Borders: Drawing on 355 Polish Experience Witold Koziński (National Bank of Poland) History Compared: Austrian Banks’ Internationalisation during the 371 Monarchy and after the Fall of the Iron Curtain Peter R. Haiss & Reinhard Schwaiger (WU Vienna University of Economics and Business) Border Effects on Local Banking Systems. The Swiss Italian Frontier 403 between the two World Wars (1914-1945) Enrico Berbenni (Catholic University of the Sacred Heart Milan) The Regulation of Foreign Banks in Switzerland (1959–1972) 449 Thibaud Giddey (University of Lausanne) International Experiences of Insurance Institutions Insurance Abroad and Communication with the Home Front: 489 1850–1940 Ingrid Elferink (Nationale Niederlanden) Opportunities in the Asia-Pacific Region for Canadian Life Insurance 517 Companies in the Early 1990s Joseph E. Martin (University of Toronto) Authors 553 Preface Foreign Financial Institutions & National Financial Systems An Introduction to the Conference Proceedings Manfred Pohl Founder and Deputy Chairman of EABH e.V. The interconnectedness of the world economy is the outcome of a long economic process in which commerce, trade, financial services and tech- nology have interacted in mutually dependant relationships specific to a particular time and space. Globalisation, alas, is often defined as the shrinking of time and space made possible by modern technologies, which increasingly connect the world, particularly the global economy. The role of multinational financial institutions in the process of globalisation is an important aspect of this interconnection and yet it is often examined in such broad brush strokes that the detailed histories of individual actors, in- stitutions, and complex relationships associated with particular times and places are marginalised or even overseen. Viewing financial history in this detailed manner reveals the real life challenges and complexities associated with cross-border banking, including the reasons and motivations under- lying financial institutions’ investment in foreign jurisdictions, as well as their failures and successes along the way. This edited volume provides an insightful contribution to this aspect of the history of financial globalisation by focusing, in general, on: the reasons, motivations and roles that financial institutions’ have played as cross-border agents; their reception in foreign jurisdictions including 7 Foreign Financial Institutions & National Financial Systems regulatory responses and domestic banking developments; and the com- plexity of their evolving relationships with other institutional actors over time and space. Scholarly contributions to these topics cover a wide range of modern financial history and jurisdictions, stretching from early nine- teenth century to the interwar period (1918–1939) until the fall of Berlin Wall (1989). Each scholarly contribution is concerned with understanding the interrelation of financial actors, trends and other variables associated with the activities of financial institutions at a particular time in a foreign jurisdiction on the basis of archival and other historical records. The volume originates from the proceedings of an international con- ference entitled ‘Foreign Financial Institutions and National Financial Systems’, which took place in Warsaw, Poland from 7–8 June, 2013. The conference as well as the 15 chapter contributions contained herein were organised by the European Association for Banking and Financial History (EABH) e.V. in cooperation with the National Bank of Poland, the Kronenberg Foundation and the National Bank of Poland Foundation. The volume aptly begins with several contributions which examine the complex relationship between European trade and finance, sometimes focusing on multinational institutions in foreign jurisdictions, and at other times concerned with domestic financial activities and commercial de- velopments that shaped the behaviour and activities of foreign financial institutions. The first contribution by Hubert Bonin, entitled ‘French Bankers and Economic Patriotism in the Chinese Port Cities’, examines French financial participation in Far Eastern trade and commerce as a bridgehead for other French state, industrial and business interests in several Chinese concessions (Tianjin, Shanghai, Canton, Wuhan, etc. and colonies (Hong Kong). Although French financial institutions were meant to serve as ‘conduits of outflows and inflows’ to the French homeland, French banks active in these regions became embedded in local business life over time, altering their initial commercial strategies to take advantage of their hard earned networks of business interests. Chapter two addresses 8 Preface a topic no less interesting and yet is relatively unexamined, namely the role of finance in the transatlantic slave trade. In a piece entitled ‘Making Money: Cotton, Slavery and Finance Across the Atlantic 1815–1837’, Kathryn Boodry is concerned with the way in which finance played an essential role in developing America’s most important export commodity at the time, cotton, and how it helped to fuel the Atlantic slave trade and thus support the industrialising economies of the United States and Britain in the nineteenth century. Another contribution by Miguel A. López- Morell addresses the interrelationship of European trade and finance in the nineteenth century on the basis of investment activity of the Rothschild House in Spain. The article shows the importance of this family’s invest- ments to the Spanish economy including its principal industrial sectors as well as its contribution to economic development at large. The next group of contributions all involve Poland, Polish bankers and Polish financial institutions and yet each work highlights the connections between finance, macro-economy and the histories of individuals who steered financial institutions through the tumultuous interwar period. The first contribution from Wojciech Morawski entitled ‘Foreign Capital in Polish Banking 1918–1939’ deals with foreign direct investment in Polish banking until the end of the Second World War. Detailing the macro- economic conditions of that period in Poland, the contribution examines the ways in which these influenced the influx and withdrawal of foreign capital, with the final liquidation of foreign investment in privately owned banks taking place in the spring of 1946. The second related contribu- tion from this group, ‘The Determinants of Foreign Banking Activity in Poland During the Interwar Period’ by Cecylia Leszczyńska, examines factors that compelled foreign financial institutions to invest in interwar Poland by considering the role of risk conditions (capital controls, host country conditions), political connections and foreign direct investment. Similar to the preceding contribution Leszczyńska’s
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