1

250th Anniversary Synposium

Barings History and Archives

The Baring Archive is one of the greatest financial archives in the world. As a record of the development of the international capital markets, it has no rival in the old or new financial centres of New York and Boston, Paris and Berlin, Tokyo and south east Asia. The Archive is only matched by the archives of Rothschilds in London and by those of Hopes in Amsterdam.

It explains the development of international finance from the rudimentary practices of the 1760s, based essentially on bearer bonds and bills of exchange, through to the exotic products and their associated electronic wizardry of the late twentieth century.

The Archive transcends every generation of information technology – passing from traditional leather bound ledgers and letter-books to innovative telegrams and machine generated accounts and ending up with databases and computer tapes. On the way it encountered and dealt with the paperwork explosion and saw off the paperless office.

The fact that the archive has survived is in some senses extraordinary but in others entirely predictable. Accumulated in a seemingly unfillable basement that stretched far under Bishopsgate, it survived the likelihood of flood, fire and theft, of storage space shortages, of over exuberant space creators, of neglect linked to disinterest and, not least, of wastepaper drives and bombing in wartime. It also benefitted from good record keeping practices down the ages. But much more than this, it has survived on account of Barings’ deeply etched and enduring sense of itself, based for so long on the ownership and influence of its founding family. The Baring partners traditionally saw themselves as custodians of the business, passing on the firm’s treasure and traditions to the next generation in the way they had inherited them from the previous. Tom Baring said in the mid nineteenth century that Barings was ‘a house which we intend to be perpetual’ and the preservation of its archives even then would have been part his strategy [1].

The most notable feature of the archive is its completeness. A record of virtually every book transaction, whether for client or house account, survives from the firm’s foundation in 1763. Elsewhere there are some gaps. For example, Alexander Ashburton’s early nineteenth century files and Sir Edward Peacock’s private files for the inter war years have not survived. Forty years’ worth of mid-nineteenth century North American correspondence ended up in the National Archives of Canada in the 1920s. But that said, most of what might be termed the ‘strategic’ papers – that is what is left after the chaff has been sorted from the wheat – survive more or less in their entirety.

Virtually all The Archive is catalogued. The Archives’s active management began in 1960 when John Ashburton hired the late Tom Ingram to start the job. A quick piece of reckoning told Tom that the job would be finished in a couple of years; he was still at work – and making a splendid job of it – some twenty years later but still far from the finishing post!

2

But it is the story embedded in The Archive that is the source of its true greatness. It tells the history of a business that began in 1717 at Exeter when John Baring arrived there from Bremen to set up as a merchant. He did well and the Baring family emerged as important people in the West Country; they went on, amongst other things, to establish a local retail banking business. John died tragically young when his wife, Elizabeth, took up the reigns. On Christmas Day 1762 she put the firm on a new footing by establishing John & Francis Baring & Co in London to act as agents for the family’s Devon businesses. In a quiet way, the doors opened for business on New Year’s Day, 1763.

Under Francis Baring – an engaging, ambitious, extraordinarily bright man – the London business soon decoupled from Exeter and thrived. Francis was a networker with something to say, an active participant in and certainly a beneficiary of the Enlightenment, and a liberal Whig who loathed war and destruction; not for nothing was he reckoned the most able financier of his generation. Introduced to Prime Minister, Lord Shelburne, in the 1780s, Sir Francis – as he was to become – saw his chance, wining government business but, far more important, gaining access to men of influence. The prestige this brought promoted his business to an extent his capital would otherwise not have allowed. Both he and Barings were on their way.

His house was a merchanting house, buying commodities in one international market, selling them in another and making a turn in the process. His firm earned a reputation for being good at this; it allowed diversification into the provision of trade finance for other merchants by guaranteeing payment of their bills of exchange. This quickly became Barings’ engine of growth, overhauling merchanting and earning the firm its enduring title of merchant bankers.

And its reputation stood it in good stead when it came to bond issuance from the Napoleonic Wars onwards. The Baring name behind an issue of bonds for an exotic sounding borrower in a far off land persuaded even the most cautious investors to take their chance, more especially as, early on, these would have been trading partners of Barings or beneficiaries of its credits. Barings’ nineteenth century history is essentially a history of bond issuing.

As the century progressed so the firm passed from one generation of Baring partners to the next with important outsiders such as S C Holland and Joshua Bates being recruited when injection of new management seemed prudent. Alexander Ashburton succeeded his father shortly after 1800 and was in due course succeeded by Thomas Baring and, in 1873, by another cousin, Ned Revelstoke.

Crisis overwhelmed the firm in 1890 when poor decision making by the then senior partner, Ned Revelstoke, brought the firm to its knees. ‘There is really no excuse for Ned’, Tom Baring told his cousin, Lord Cromer, in a memorable letter. ‘He has been reckless in business as in his own private money matters, losing his head from success, departing from all the old rules and traditions of the firm and doing things inconceivably foolish. A great Nemesis overtook Croesus’. [2]

But Croesus withstood his Nemesis. Barings’ importance in the bill market was such that its collapse, it was widely reckoned, would have precipitated a devastating financial panic. The Bank of England launched its first ever life boat operation, 3

supporting Barings with a loan guaranteed by the City’s financial community. Barings’ business was reconstructed as a limited company ultimately to be owned by a partnership of Baring family members. Young John Revelstoke, Ned’s son, heroically steered the firm through all of this and had more or less restored its prestige by the turn of the century. He was to lead the firm with total dedication until 1929.

The interwar years were not easy ones for London’s merchant banks with the domestic economy in deep trouble and the all powerful pre war sterling bond market spent. But in these years Barings’ post 1945 future began to take shape. The firm emerged as a leader in advising on the rescue and reconstruction of large swaths of Britain’s manufacturing industry. It also led reconstructions in the sterling funded debt of countries in Europe and South America. Post 1945 it maintained its corporate finance and bond issuing activities, adding to them asset management via Baring Asset Management and, later still, broking activities via Baring Securities. Throughout this period the firm remained family owned and, latterly, family influenced, most especially under John Ashburton and Peter Baring.

Some areas of Barings’ history are worth a closer look. Barings’ century was the nineteenth century. Then the international capital markets expanded massively in terms of volumes, market participants and borrowers. Throughout London was the leading market and Barings was one of the two leading players. It had the best of the business as the following role call of transactions suggests.

The century kicked off with the firm’s arrangement of finance for the US government’s acquisition of the Territory of Louisiana from France, a transaction that doubled the size of the USA. It was closely followed by the issue of the so-called reparation loans after 1815 to enable a defeated France to make payments to the victorious allies. The Argentine government’s first issue of the external bonds followed in the 1820s and from the ‘30s the firm, acting with Glyns, had a virtual monopoly in external finance for what became the Dominion of Canada. Mid century bonds were issued to finance the construction of some of the earliest railways in the USA, Canada, Russia and France. Arthur Guinness – then the largest brewery in the world – was floated in the 1880s. Japan was financed in its war with Russia and Russia was financed in its war with Germany. I could go on; the list is as broad as its long.

These transactions reveal the economic power of Barings – not just in helping governments to balance their books and to finance warlike activities but also to finance the construction of the transport and urban infrastructure vital for the emergence of a modern industrial state. When a grateful French Finance Minister in 1818 described Barings as one of the sixth great powers in Europe he undoubtedly over-egged his pudding but in these decades there were moments when it seemed to have more than a ring of truth.

These transactions also have political overtones and more than hint at extraordinary conflicts of interest. When rumours spread of Russia’s removal of its bullion from Barings’ vaults on the eve of the Crimean War, a ferocious House of Commons was minded to label poor Tom Baring the ‘private agent of the government of Russia’. Prime Minister Henry Addington insisted on Barings’ withdrawal from the Louisiana Purchase transaction when to continue would mean Barings’ finance of France’s 4

invasion of Britain. Not least, during the Russo Japanese War the firm in a series of operations supported both sides in a confusion of loyalties that cannot in retrospect be described as the firm’s greatest hour. In all of this you will note the value of Barings’ archives for political as well as economic history although it has to be said political historians are rare visitors to bank archives.

The firm’s provision of banking services, such as current accounts and foreign exchange facilities, to governments and to individuals associated with them often comes as a surprise to people. For the historian these accounts offer substantial value. Individual account holders included the Emperor of the French, President Monroe through to President Roosevelt, the King of the Belgians and not least the fictional Count of Monte Christo. A very different type of private client received travellers’credits to facilitate their journeys outside Britain, a service which recognised the firm’s comprehensive network of international correspondents which well exceeded those of retail banks. These clients were a very mixed bag for example including the American writers Nathaniel Hawthorne and Washington Irvine and, more predictably, Phileas Fogg during his Journey Around the World in Eighty Days.

Another aspect of Barings’ history worthy of comment is risk management. Historically it was at the very core of the firm’s success, both in the management of its own balance sheet and in the management of its credit and loan business. But the precise processes by which risk was managed remain obscure until well into the twentieth century.

This is partly because partnerships such as Barings were not good at creating records of policy. In a partnership there is nothing unusual in this. The Baring partners worked together in a partners’ room where matters were dealt with in open discussion as they arose. Minutes were not thought to be necessary; minute keeping of partners’ meetings did not start at Barings until deep into the post war period.

But at the heart of good risk management is the possession and proper interpretation of good quality information. Without it the banker was challenged as young Alexander Ashburton found to his disadvantage in the United States in the 1790s. ‘Merchants in this country are generally speaking a low class of man ….’, in wrote to his father, ‘The Northern states are always some degrees above their neighbours … and the scale sinks lower as you go south … to the south of Baltimore, I understand, there is nobody worth trusting’ [3].

The value placed by Barings on information gathering is obviously evident in its archives A very substantial part of the nineteenth century archive comprises letters, merchant circulars and character reports on individuals and businesses all of which was received from merchants around the world. Some were solicited, some were not.

At their centre are letters from that tiny group of Barings’ most trusted correspondents – the firm’s eyes and ears – located in the key financial centres. They included most notably, but certainly not exclusively, Hopes of Amsterdam, Hottinguer of Paris and Kidders of New York. Their letters, often sent daily, are quite extraordinary for the range of matters covered – political events and rumours; commodity price movements; outlook for crops; business failures; character assessments; stock price 5

movements; forthcoming issues; rejected applications for business; anything that might be useful in taking a view on an individual, business, government, commodity.

However interpretation was all and here the skill of the banker was paramount. This huge post bag was sifted through, read, analysed, discussed and action taken or more information sought. Much of it was done at partner level. And all in all they made a very decent job of it. It is a remarkable thing to say, and somewhat self indulgent on my part to say it, that Barings either predicted or were otherwise able to skirt round, every major financial crisis from the 1820s onwards.

A vital asset of Barings was, of course, its people. The archives have much to say about the partners and staff – their achievements, frustrations, joy, anguish, worry, good temper and bad, decency and integrity and, on the odd occasion, their lack of it. For most of the firm’s existence, numbers rarely exceeded six partners and one hundred staff.

They could be a brainy lot – look at the dispatches of Barings’ senior confidential clerk, George White, from Mexico in the 1860s; these are the work of a highly informed macroeconomist. They could also be an eccentric lot. Look at the contents of the desk drawers of Gerald Tottie – which for some reason he failed to take away on his retirement in c1920. They reveal a sublimely happy man pedalling across the Surrey countryside at weekends and by night practicing spiritualism. And they could be a loyal bunch. Well done the long serving William Hazel when in 1868 he petitioned the partners for retirement: ‘after 63 years application to work and now at the age of 77, I find that rest is needed’ [4].

The outside world was always curious about Barings and its people. The mere sight of the firm’s façade at 8 Bishopsgate sent shivers down spines. ‘You look up the long passage into the serene and mystic interior’, reported the Daily News, where gentlemanly clerks deal with heaps of gold as children deal with a handful of hazelnuts’ [5]. The Barings’ man – and later woman – at a dinner party was always a source of fascination as many here will surely recollect. At dinner in the 1850s Thackerays’s daughter turned to her neighbour, the man from Barings, and asked about his profession. ‘A merchant’ was his response. ‘A merchant!’, Miss Thackeray responded. ‘I picture you to myself sitting at your desk by an open window overlooking the broad estuary of The Thames. You glance from time to time at the distant reaches …. Presently you see a noble ship taking advantage of the incoming tide. She is yours and she is laden with precious tributes from foreign countries …’ [6].

Well Barings’ ships came home and home. More often than not they did so noble and shipshape, well laden and travelling fast. Occasionally they appeared with their sails torn and superstructure missing, having passed through some terrible storm. And, it has to be said, sometimes they simply did not come back at all.

There are no files in Barings’ archives marked Baring Crisis. Crises are not planned and their solutions are too diffuse to be so neatly packaged. However there are plenty of papers in the archives relating to Barings’ two crises and those relating to the latter one will in due course tell their story. But this anniversary evening is not an occasion for dwelling on 1995. No business has a God given right to survive forever; that 6

Barings survived for so long was due of course in part to ‘accidental chances’ and ‘lucky hits’ [7]. But it was far more due to good husbandry over the generations and, I wager, that deeply etched sense of itself which the firm always seems to have possessed in such abundance. References

1. The Baring Archive [TBA] HC1.20.4. Thomas Baring to Joshua Bates, 10 Nov 1849 2. TBA DEP84. Tom Baring to Lord Cromer, 14 Nov 1890 3. TBA DEP3.II.43. Alexander Baring to Henry Hope, 9 Jan 1797 4. TBA HC1.14.3.52 5. The Daily News, 27 Oct 1886. Quoted from Philip Ziegler, The Sixth Great Power, 1988, p204 6. Quoted from David Kynaston, The City of London. Vol 1. A World of its Own, 1815-1890, pp184-5 7. Referred to from Joshua Bates’s diary by Philip Ziegler, op cit, chapter 5