Introduction From Asian Imperial Banking History

8/10/2019 Introduction From Asian Imperial Banking History

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INTRODUCTION: ISSUES REGARDING ASIAN

IMPERIAL BANKING

Hubert Bonin

Tis book is the result o a workshop conducted as part o the World EconomicHistory Association (WEHA) Congress held at the University o Stellenbosch,South A rica, in August 2012. Chaired jointly by Pro essor Hubert Bonin,Sciences Po Bordeaux and GRE HA-Bordeaux University, France; Pro essorNuno Valério,Universidade écnica de Lisboa, Portugal; and Pro essor KazuhikoYago, Waseda University, the theme o the workshop was: Imperial Banking: Imperial Strategies o Exporting Finance Modernisation (19th–20th Centuries). Te multi-disciplinary programme gathered colleagues specializing in imperialand banking histories. Tis volume not only contains most o the papers pre-sented at the workshop but also includes other (mostly Asian) contributions,adding to its variety and richness. All in all, the book will add a ew stones tothe ever extending building o our knowledge about ‘global history’ and, in thiscase, global banking history. We admit, o course, that the globalization o banksmight be con ned to the turn o the 1970s onwards, rom the City, with theEuromarket, to Wall Street, the revolution o ‘Asian dollars’ and ‘petro-dollars’,and big rms xing bridgeheads all around ‘the capitals o capital’.1 Yet it can beargued that colonial and imperial times ostered varieties o ‘proto-globalised’

ows o money, bills o exchange, markets and trade nance, and, assuch, can serve as leverage in the ollowing discussions about imperial bankingthroughout Asia.

By the time European powers had imposed political control over most oA rica, the Paci c islands and a signi cant part o Asia, banking systems were

already well established and ormed a relevant part o the economic li e o thesecolonizing powers.2 Along with the somewhat raw orms o imperialism andcolonialism (army, police, customs, tax collection, mining exploitation and econ-omy o plantation), the imperial banking system was also connected with sofer

orms o imperialism and colonialism, what may be called ‘gentlemanly capital-ism’.3 It was only natural that banks became important instruments o economicexploration in the colonized territories. Tis volume examines the origins and

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2 Asian Imperial Banking History

development o such ‘imperial’ banking systems, and, where it occurred, theircontinuation afer decolonization. It provides signi cant insights into seven verydifferent imperial banking systems, based on new research into hitherto not yetaccessed primary sources in the French, English, Russian, Chinese, and Japaneselanguages. It draws lessons rom the recent breakthroughs in the knowledge othe imperial economic systems and provides odder or comparative ways ograppling with issues that contribute to the main theme o the WEHA Con-gress: Exploring the Roots o Development .4 It is obvious that more research isneeded on the ‘men on the spot’ – both Europeans and Asians – in order tobetter understand the complex interrelations between political and economicinterests and economic penetration into Asia in the 19th and 20th centuries.Overall, there is still an absence o general works as well as case studies o theactors and their organizations in the oreign settlements in China and other partso Asia; the imperial business history o Asia has clearly been under-worked andunder-valued. Tis monograph thus tries to provide valuable insights into newaspects o these topics, thereby making an important contribution to the clos-ing o a major research gap in this eld. Tough unique in its speci c ocus, it isobviously very much in accord with current broader historiographical trends inthe study o imperialism, and intends to illuminate how these apply to an area,namely, business banking, which has to date attracted less attention than othermore culturally-oriented topics.

Recent developments in methodology, archive retrieval and approaching

problems have opened new ways o tackling the history o business banking.Tis book applies these methods to the specialized eld o colonial and overseasterritories, draws lessons rom the recent breakthroughs in the knowledge o theimperial economic systems and uels comparative ways o grappling with suchissues, as well as the wider issues o ‘international banking’.5 It then draws pointso differentiation between them as they both belong, in a ashion, to multina-tional or transnational rms.6

At the same time, the ‘varieties’ o overseas capitalism demand speci capproaches depending on area and territory; the various models o overseasbanking differ according to political and economic background and the statuso the institutions themselves, or example, the extent to which they are basedoverseas or in the metropolis, or connected with the State or more independent.

Each participant in the WEHA workshop thus produced their own de nitionand overview o what constituted ‘overseas banks’. Some o the key points will bescrutinized in the ollowing sections.

Te geographical span o this enquiry covers several continents. Te tradi-tional approach deals with the bilateral links between West Europe and A rica(and the Caribbean islands) and the contribution o the banking sector to impe-rialism in this unequal relationship. But the complexity o ‘imperial banking’




Introduction 3

in Asia has given rise to renewed arguments regarding trans-territorial nanceand banking: the balance between British and Indian banking in India; the spe-ci cities o the Japanese imperial structures; the role o the ‘port cities’ in Chinabetween ‘imperial’ dependency (in the concession settlements) and the insertioninto global Asian exchanges; the competition between Japanese and Russian

nancial in uence in Manchuria, between imperial and commercial mind-sets;and the deployment o imperial banking in Latin America, amongst others.

Tus, colonial territories as well as imperial areas were involved, that is, theeconomies o port-cities and trading hubs within independent countries (China,

ollowed by India and South A rica afer WWII). ‘Colonial’ or ‘imperial’ over-seas strategies, practices and skills clubbed all these countries, where port-cities

ormed key hubs or the deployment o banking institutions, together.

Institutional Business History and Overseas Banking StrategiesExtensive studies on the imperial deployment o European banks have appearedin several collective works, especially Banks as Multinationals.7 Te interactionbetween European and Asian trading hubs goes back to imperial and colonialtimes,8 with banking power given as much importance as overseas politics andcommerce,9 to the extent that one talked o ‘paradise lost’.10 Major banking insti-tutions sprang up as part o this imperial deployment, whether in the territoriescontrolled by the Ottoman Empire11 or within Japan’s commercial hegemony.12 Asia saw the emergence o big imperial banks rom Western Europe,13 Russia and Japan, which positioned themselves at the heart o the in ormation, commercial paper and currency networks.14 Tough Asia had both offi cial and ‘in ormal’15 empires, the ‘imperial’ bank was a very real entity, whatever the status o the ter-ritory it was active in.

Tis collection will study the institutional history o central, issuing andrediscounting banks as the cornerstone o the local banking sub-systems over-seas, and will asses, with the help o monographs and archives, the ounding,maturing and per ormance o local banking systems overseas. We will outlinethe strategies adopted by metropolitan private and public institutions or speci ccolonial bodies. We will also highlight and compare the variety o connectionsbetween ‘metropolitan’ or ‘mainland’ territories and their overseas outlets. Cases

rom Japan (with its ormal and in ormal empire all across Asia) and Russia (withits port cities uelled by continental railway lines but also opened to the Asianmaritime areas) are compared to the more classical ‘imperial’ deployments, suchas the British, French and Dutch.

Skills port olios constitute the centrepiece o the ollowing chapters. Tedifferentiation and convergence between the overseas banking services and themetropolitan banking and nancial sectors will be outlined. Te speci cities





o oreign banking practices will be determined: risk management, assessmento creditworthiness, collateralizing and pledges, etc. We will identi y the tech-niques used to preserve the durability o business as well as their corporateculture. Finally, we shall trace the building o human resources rom teams oexpatriates, the diaspora and local elites.

Corporate banking was the catalyst or enhancing the convergence betweenmetropolitan business orces active abroad and the banking sector, within a‘consolidated’ economic system in each imperial area. Banking in colonial ‘portcities’ is to be seen as an original ‘variety o capitalism’ – it integrated connectionsbetween the colony and the metropolis on one hand and between the colonyand the rest o world on the other. Te connections between the metropolitan

nancial market and overseas banking have been analysed regarding investmentbanking and underwriting. Te integration o banking into the development o‘modernised’ areas and overseas economic pockets and its contribution to theemergence o local orms o capitalist business and social groups will be outlined.Te collapse o the several markets or metropolitan and oreign companiesactive overseas, along the geo-economic rebuilding o the world rames or pro-duction and exchanges, and the evolution o relations with native entrepreneursand customers could also be a centre-piece o imperial banking: no stability atall predominated, either under the impulse o competition, or because o thechanges o the local productive systems – not to speak about the disappearanceor the resurgence o market economy in the countries choosing the path o cen-

tralized economy ( or instance in China or in Vietnam, and somewhat in India).

Colonial Bankers and Imperial Business CommunitiesTere must be a debate regarding these re ections and around the relationsbetween local, international and global. We must deliberate over the imperialbanks’ ‘embeddedness’ and their insertion into the li e o the business com-munity oriented towards the colonial territories. In the majority o cases, thesebanks and their branches were ‘parachuted’ rom their Metropolitan headquar-ters as commercial tools. But there are also those which emerged rom the localcommunity itsel , especially in the settlements (such as South A rica and Algeria)and those colonies where the number o enterprises and expatriates constituteda signi cant actor or stimulating the banking industry (like Hong Kong). Still,in the majority o cases, these colonial and imperial banks owed their origin andsupport to the Mainland, the port-cities, the trading houses, the shipping companies, the banks and the groups o expert civil servants within the Ministriesinvolved in the li e o the empire. Such was the case or Banque de l’Indochine16 in 1875 and Deutsch-Asiatische Bank.




Introduction 5

Imperial Banking and TalassocracyIt was the growth o capitalism in the mainland, as part o a ‘mercantile’ men-tality, which drove the concerned communities to promote these overseas‘toolboxes’ to help develop trade with the colonies. Obviously, economic patri-otism played its part in consolidating banking power in support o the economic(industrial) power, not to speak o insurance companies or shipping and ware-house insurance. Te act that every country set up its own overseas bank orendowed its colonies with speci c banking institutions (especially Antilles, theMaghreb, Egypt, Sub-Saharan A rica and India) clearly shows that they wantedto have the whole gamut o economic tools which would allow them to have a

rm grip on the development o commodity production and prospecting outletsor capital and other goods.

Although they originated rom either overseas or mainland port-cities andbanking hubs, these banks ollowed converging paths which, irrespective o their points o origin, led them to serve the immediate interests o mainland compa-nies that were active overseas, the wealthy community and overseas enterprises. Inkeeping with the overseas mentality and the requirements o each o the coloniz-ing countries, these imperial banks embedded themselves more and more rmly intheir territories. Tus, Banque de l’Indochine became as much the bank or expatri-ates and the companies present in French South-East Asia as or those mainlandcompanies with commercial ties with this sub-region. Tese banking tools servedto consolidate overseas and thalassocratic power along the lines set by the UnitedKingdom, but or the most part with a view to undermine British hegemony.

Several banks came to shake HSBC’s monopoly in China, especially theYokohama Specie Bank, Banque de l’Indochine and, at the turn o the 20th cen-tury, Citibank. Tough Hong Kong and the other big Chinese port-cities areexceptional due to the sheer volume o business, competition played a big partin numerous colonies, whether it be Egypt (with banks rom every nation, espe-cially France,17 with Crédit lyonnais and Comptoir national d’escompte de Paris or CNEP18), or Algeria (with at least hal a dozen banks). Even India saw somecompetition when CNEP opened its branches there.19

Even at the heart o the community o national interests, implicit or explicitunderstandings lef the eld open or these colonial and imperial banks, withthe best examples being the HSBC, the City’s lever o in uence in China, and Banque de l’Indochine, which did the same or France. Similarly, Barclays DCOspread all across sub-Saharan and southern A rica and the Antilles – leavingLatin America to Lloyds and its subsidiary BOLSA (Bank o London & SouthAmerica, ounded in the 1920s by a group o banks)20 – with enough repowerto turn it into the City’s main arm in A rica.21 Meanwhile India and Australia22 had several big establishments rubbing shoulders with each other such as





Chartered Bank,23 established in 1853 and Mercantile Bank o India.24 BarclaysDCO was tickled by British Bank o West Afica, established in 1893 by ship-owners (Elder Dempster), and other establishments here and there.25

Meanwhile, the entities that were active in China and India, such as theYokohama Specie Bank, the Chartered, HSBC and Banque de l’Indochine,quickly spread over the rest o Asia, as did the American Citibank. One can-not realistically speak o ‘hunting preserves’ or national monopolies. Tese wereoligopolies, sometimes even rom the same country but more ofen interna-tional, which ought against each other even though the competition was notthat intense due to the competitors’ lack o the required nancial, human andrelational resources.26 Tere is no doubt that economic upswings and the growthin the production o commodities and below-ground resources stimulated thisscramble or overseas territories and a loosening o hegemonies.

Diversi cation or SpecialisationAs a result, the strategy adopted was the ‘principle o specialisation’. Te major-ity o European banks pre erred not to ‘internalize’ their overseas activities,except in some market segments, especially in the Maghreb (Société marseillaisede crédit , Crédit lyonnais, Société générale, CNEP). Each o them carried out a‘strategic diagnosis’, weighing the pros and the cons o the growth opportuni-ties presented by the colonial and imperial markets.Société générale, especially, was tempted to set up an offi ce in Indochina when onkin was colonized. But

it abandoned the idea to enter Banque de l’Indochine along with other Parisianbanks. On the other hand, Paribas unded or a while Banque industrielle deChine which shook Banque de l’Indochine in the beginning o the 1920s, be orecollapsing and re-structuring itsel into a modest commercial bank ( Banque

fanco-chinoise). It was tempting to mobilize the skill and knowledge port oliosand combine the experience in order to draw up a strategy o geographic diver-si cation and establish large ’international nancial services rms’.27 Barclays setits eyes on A rica in the beginning o the 1920s: between 1917 and 1925, its sub-sidiary DCO gradually grew with the aggregation o Colonial Bank (establishedin 1836 and active in West Indies, it retained its name till 1952, when it nallybecame Barclays DCO), National Bank o South A rica (established in Natal in1888) and Anglo-Egyptian Bank (active in Egypt and Sudan).28 ‘Te prospects

or increased imports and exports between the overseas areas in which we arerepresented and Great Britain are most encouraging, and the part which theBank will take in promoting an increase o trade should prove to be o great pub-lic service’, said Barclays Chairman Frederick Goodenough at DCO’s generalassembly on 7 June 1926. ‘In these three sentences, the philosophy underlying his‘colonial bank scheme’ was concisely set out’,29 which ledTe imes to talk o ‘the

rst Empire bank’! Ipso acto, Barclays DCO (on 42 Lombard Street, close to the




Introduction 7

mother house, on 54 Lombard Street) rose to the level o HSBC andChartered inthe eld o imperial banking, with activities in West India, Mauritius, Eastern andSouthern A rica, and 6,500 employees in 1939 (3,552 in Southern A rica). Tenumber o DCO branch offi ces grew rom 500 in 1945 to 1,400 in 1962, whichshowcases its Chairman, Goodenough’s oresight when he decided to deploy over-seas. On the French side, the new protectorate o Morocco quickly attracted theattention o Paribas in the years 1910–50.30 French deposit banks swarmed all oversub-Saharan A rica in the years 1940–50, when the region saw a spurt in economicdevelopment, commercial agriculture and underground resources.31

Te majority o bankers were aware o the dangers o ‘internalizing’32 theirinternational deployment, the diversi cation o the eld o action in the regionand the vertical integration o the colonial or imperial bank’s work, especiallyregarding the risks o in ormation asymmetry which can arise when entering port-cities or markets which need solid local business networks in order to coun-ter business and accounting ‘bad practices’. Te lure o big pro ts was balancedby the risk o heavy losses caused by turnarounds in commodity trade or the col-lapse o so many colonial companies which had become victims o speculation.Leaving the known devil o the mainland market or the unknown one overseas was well and truly an ‘adventure’!

Imperial Business HubsMeanwhile, overseas banks could not unction without their ‘home markets’ as

they worked at the heart o major ‘clearing’ operations: there was a steady andstrong ow o currencies (even bullion), bills o exchange, documentary cred-its, etc. between the branches o imperial banks and their mainland hubs andcommercial outlets. Banque de l’Indochine’s branches in China worked in Paris(the cornerstone o their mini banking system), London (the world’s compensa-tion hub) and, more and more afer the years 1910–20, New York. Te coreactivity was what we call today ‘correspondence banking’, in close and constanttouch with their sister concerns, be they commercial, investment or merchant(London) banks, or bills o exchange, trans er o means o payment or or trade

nance. Tis also explains why the big Japanese bank which was active in South-East Asia and the Far East had satellites in the City.33 While Barclays naturallybecame its subsidiary’s correspondent, the B was obliged to set up branchesin Manchester, Liverpool and London in conjunction with its own birth in 1893– be ore orging some relations with Lloyds in 1919.

Te ow o commercial paper and bank money resulted in a signi cantincome or the imperial banks: service charges or trans erring remittances romabroad to the mainland, charges or sending liquidity in the other direction andthe opportunity o using in Europe the stock o unused liquidity – all added tothe pro tability. o top it all, operations also garnered much business.





Colonial and Imperial Bankers as a Business Community We have analysed the sociability, business connections and communities with aspecial ocus on the connections o overseas banks (abroad or in the metropolis)and their insertion into business communities (chambers o commerce, clubs), lob-bies and pressure groups. Te co-operation between the state, military institutions, public circuits, and colonial banks are to be seen as a leverage orce or treasuryliquidity, captive markets, and in uence. Te design o the competitive eld wasat stake: market share, cartelisation, rules o competition,hunting preserves, etc.

Despite their status, colonial territories were rarely ‘closed-shop’ areas, andstill less imperial port-cities. Te market’s day-to-day li e was run by open-mindedbankers and businessmen. Te communities were a mixture o expatriates withmainly overseas careers, who shared in ormation and enriched the social li e orelatively small Europeanized groups which nevertheless were strongly rooted inthe land in which they were active. Tey shuffl ed between the main hubs and back-end branches which were sometimes lost in the countryside – like it happened inA rica as described by the history o Barclays. Despite the competition, bankershad to maintain the balance o liquidity and trust at their place, which demandedsome osmosis among rms – their overall ate depending on each one’s resistance.

Te most tricky part was reconstituting the ‘imperial’ or ‘colonial’ communi-ties o interest in the mainland itsel , at the heart o this overseas deployment. We can identi y some ‘heroes’ such as the great Charles Addis, the ‘god ather’o British nancial and banking deployment in Asia.34 We also have FrederickGoodenough, chairman o Barclays (1917–34) and Barclays DCO (1925–34), John Caulcutt, director and general manager o Barclays DCO (1925–37) andits deputy chairman in 1935–43, and Julian Crossley, Goodenough’s step-son, who was the general manager o Barclays DCO in 1935–44 and its deputychairman. Tese individuals epitomized Barclays’ role as an imperial bank, justas did Georges Botton or Lloyds-BOLSA be ore the outbreak o World WarII. H. Bonin’s chapter analyses the crystallisation o the networks o in uencein Paris and how they in uenced the authorities by involving certain Ministries(Finance, Foreign Affairs, Colonies) to take decisions avouring colonial devel-opment. Here too, within the community o imperial bankers, we saw the rise oeminent personalities such Stanislas Simon o Banque de l’Indochine. He startedas early as 1878 to be manager o its Saigon branch (keystone o its presencein Indochina), then, back in Paris, he raised as high offi cier (1888–1920), andmore importantly, general manager-CEO (1920–7), then chairman (1927–31.In Asia he could reliy on Paul Gannay, as the head o the Saigon branch andmoreover as the head o the General Inspectorate in Asia in 1926–47, thus a cor-nerstone o the processes o controls and compliance all over the Asian networko branches, be ore joining Paris as deputy CEO (1947–52).




Introduction 9

Te Imperial Bank’s Business Port olioTough these imperial banks obviously carried on with the usual commercialbanking operations such as intermediation, operating costs, cash- ow manage-ment, commissions, interest and securities gains, they also specialized in ,documentary credit, stock nancing in the port-cities o the mainland or over-seas, nancing shipping cargo, etc. At the very trough o these commercialterritories, these banks nanced ‘the draf’, as it was called in sub-Saharan A rica,that is to say, the collection o commodities and material through various levelso local or expatriate intermediaries and the resale o ‘goods’ and material andcapital goods through these same or other intermediaries.

Money Flows and DocumentsTe management o money ows was a cornerstone o imperial banking. Wecan ollow the organization o the ows o money (treasury, currencies, nationalcurrency, etc.) either through the banks or the central banking institutions. Prac-ticing business at colonial banks was essential. Clearing operations bycolonial banks in the metropolis and international (London, Paris, Berlin, NewYork, etc.) or quasi-international ( okyo/Yokohama, Shanghai, Hong Kong,35 etc.) nancial centres was a undamental competence. Barclays DCO itsel dis- posed o a branch in New York or leveraging its operations in dollars. A reviewo the re nancing operations in the metropolis (the capital or the main ‘port

cities’ through collateralizing operations) or in international centres would be ane complement to this inquiry. We there ore need to assess the emergence o ‘local’ overseas market-places

and determine whether and how the small ‘port cities’ in the colonies turnedinto ‘regional hubs’ or banking and clearing activities and the pre erred loca-tion or banking headquarters afer colonization. In every ‘sub-region’ o thisnew movement o globalization, colonial and imperial banks set themselves upas ‘masters’ o these hubs and underpinned the commercial abric. Tey sus-tained the regional commodity systems within the global web o commerceand commodity networks: in Asia, they nanced the inter-Asian ow o rice( rom Saigon and Haiphong to Shanton and Guangdong, or Hong Kong), tea,opium, raw cotton or cotton goods ( rom India to Shanghai to ianjin) rom

Shanghai, Hong Kong, Calcutta or Bombay/Mumbai, and mixed trade nancearound ‘native’ and ‘internationalised’ markets. For instance, in China, imperialbankers, who were later joined by local ones at the turn o the 1930s, osteredthe exchange o money and documents (documentary credit, bills o exchange)through the re-export machinery active in Shanghai (to ianjin or Zhewjan)and Hong Kong (to Guangdong, Qiongzhan and Fuzhou).





Imperial and Correspondent Banking While local and deposit banks in the mainland toiled through enormous quanti-ties o discount bills, one o the imperial bank’s originalities lay in the commerce olarge quantities o ‘paper’ in the orm o bills o exchange: the large ow o remit-tances rom one overseas market to another were accompanied by even larger

ows o bills towards European clearing centres – partly the national markets, port-cities and capitals, but mainly towards the keystone o the global economytill the 1920s: London.36 Every bank had a subsidiary or a permanent correspond-ent in the City as well as a avoured correspondent at its national market – arole played by C and Banque de l’union parisienne or many French colonialestablishments ( Banque de l’Afique occidentale, banks in the Antilles, Banque de Madagascar , etc. or the ormer andCompagnie algérienne or the latter).

Imperial Banking and Risk ManagementTe diversity and richness o the business port olio and their embeddednessin the overseas business communities had a double effect. One was undeniably positive: the more these imperial banks worked in close conjunction with their partners and ellow-travellers, the denser became their relational networks. Atthe same time, this intimacy also gave rise to a danger which we come acrossofen in banking history – the relative dependence on client rms: too muchintimacy shattered the glass wall required to separate the bank’s rom its client’s

interests – the result o a clear and strict risk analysis. Such osmosis is sometimesdangerous because it leads to some con usion because the bank carries in itsel a permanent ‘operational risk’.

Te Dependence on Commodities CyclesTis explains the recurrent crises that litter colonial economic history. A shadetoo many branch managers, departmental heads, even top managers let them-selves be carried away by the rising business opportunities. Raw material andcommodity prices (especially textile) along with shipping rates were extremely volatile. Seasonal credit, which characterized the imperial bank’s main busi-ness, loans guaranteed against stock and the mobilization o liquidity as a lever

or upstream (overseas or mainland) and downstream (mainland or overseas)nancing inevitably created tensions regarding the recovery o loans in case

o all in prices. Tis explains the setbacks that affl icted so many branches ocolonial banks and their Headquarters in mainland France when the crises accu-mulated, leading to rozen loans and liquidity crises and sometimes even criseso solvency regarding this or that bank.




Introduction 11

Te uctuations in the price o natural commodities and mining products played a central role in the li e o the imperial banks which depended heavily onthe colony’s commercial agriculture and the industrial demand or raw materialin an environment o ‘uneven development’.37 Tus, banks active in Egypt, Sudanand Uganda lived in rhythm with the cotton sector, whether it be the leadingAnglo-Egyptian Bank, present in Cairo since 1878 and in Alexandria since 1884,or French houses likeCrédit lyonnais and CNEP. Te cotton crisis ollowing theglobal recession o 1920/1 dealt them a severe blow. Loans were given to armers, producers and ‘export houses’. Anglo-Egyptian Bank , in keeping with its counter- parts in Chinese port-cities, maintained its own warehouses in order to use themas levers or loans on goods and warrants.38 Banks in South A rica lived in rhythm with the market o local products: wool grew in importance (to Europe, especiallyHamburg); diamond speculation in the 1880s and the crash o 1889 had dra-matic repercussions all across Southern A rica and Europe: ‘Financiers trans erreda great deal o the region’s wealth rom investors in the coastal areas to the emerg-ing diamond magnates, and hence subsequently to the mining houses, which so pro oundly shaped the development o the entire sub-continent. Tis was accompanied by concentration on the nancial sector itsel , as the big imperial banksshook out smaller competitors […]. Te supply o credit ballooned and then burstin 1889’.39 Te discovery o the ‘copper belt’ in North Rhodesia (Zambia) pre-sented an opportunity as well as a risk – due to the dependence on the demand orcopper in the industrialized nations (telephone lines, etc.).

In conjunction with the growth o commercial agriculture (which they linked with the settlers’ economy, the establishment o a society o plantation capitalistsas it happened in French Algeria, or the development o the indigenous peas-antry), colonial banks in South A rica and Algeria were ofen involved in rural,hypothecated loans, with the resulting exposure to its booms and recessions. Letus not orget the successive crises that these imperial and colonial banks livedthrough in almost every overseas territory. Even the banks in India aced suchtroubles in the beginning o the 1890s.

Finally, several o these banks also took part in the urban mortgage creditmarket to help real estate promoters build ‘the modern city’ in the Britishdominions and Chinese concessions. Here too there were some bad loans thatresulted rom reversals in growth, market and prices. Consequently, as in South

A rica in 1920–3, this led to the impounding and liquidation o a large numbero hypothecated properties.

RisksTe sheer size o operations could not but generate risks in keeping withthe scope o the involvement in currency markets at a time when imperial banksdid not have any real ‘covering’ techniques, despite resorting to ‘reporting’ oper-





ations. Te colonial system attained its peak when currencies turned unstable.Te all o the pound sterling in the early 1930s affected Barclays DCO in a big way. It needed all its skills to try to anticipate and navigate the stormy rates o the pound and the dollar. Ten, in the 1940–50, uctuations in the money marketand a drastic devaluation o the pound in 1949 created many more risks. Simi-larly, the French too had to clamp down on their operations due to the

uctuations in the Franc in 1922–8, 1936–8 and in the 1950s. All this requiredsome astute navigation between the ree s, and the experience thus gained didnot ail to serve as protection and lead to the development o preventive tools.

A Strong Culture o Risk Management We can now understand how important it was to have an effi cient General Inspec-torate, a system o monthly reporting on the activities, norms and monitoring procedures. Tese imperial banks presented even greater risks than internationalor regional corporate banks because all too ofen their clients lacked suffi cientaccounting rigor and worked in economies that were still unstructured – except-ing South A rica perhaps. One could say that risk management here needed tobe even more strict than on the mainland.

One could very well ask whether these imperial banks were ‘normal’, similarto their sister concerns in the mainland. It is true that Haute Banque houses,merchant banks and banks in metropolitan port-cities were also massivelyinvolved in overseas and international activities, as the collapse o Hentsch and

Baring in the crash o 1889–91 clearly shows. Still, these imperial banks hadthe lion’s share o their business in territories with signi cantly higher risks: theusual shipping risks, the risks linked to the price cycles o material, commoditiesand goods, risk o raud and the risk o various types o ‘speculations’. Te cor-respondence between bankers and the monographs on the histories o severalcolonial banks con rm this perception.

When Barclays bought over National Bank o South A ric a, it was alsobecause the latter was in grave diffi culties: too strongly embedded within thebusiness community, it gave them too many loans – an all too amiliar story inbanking history. It was its very own principals – members o its board, businesscircles and local authorities – who pushed it towards too quick a growth withthe result that it had to assume too high a risk o leverage. Tus, when it aceda nancial crisis in 1922–3, it had to reduce its capital to erase unhealthy assetsand ultimately look or a re- nancier and investor – Barclays.40

Consequently, imperial bankers’ knowledge port olio needed to include agood dose o ‘wisdom’ and prudence in risk management. Tey needed to ghtto collect the maximum amount o in ormal or explicit in ormation rom notonly the data available at the banking hubs, but also by increasing the numbero contacts within the local merchant community, whether oreign or native,




Introduction 13

based on a multilateral reputation mechanism to acilitate the exchange o data.Tis explains the creation o the ‘specialized’ banks which would play this roleo intermediation between the markets, the business communities and the com-munities o interest by assuming the unction o an ‘agency’, i we used the theoryo the agency dear to the institutional economy. Tough a number o Parisianbanks were tempted by an Asian deployment ollowing the model oComptoird’escompte de Paris, they ended up by contenting themselves with develop-ing Banque de l’Indochine into a local community bank. Te act was the riskmanagement in Indochina, China and various Asian port-cities required the pooling o data, o knowledge, a sharing o experience between branch manag-ers, inspectors and experts based at the Headquarters. When Barclays acquiredits subsidiary DCO ( Dominion, Colonial, Overseas41) in 1925, it chose to iso-late the experience gained by its three establishments ( De Nationale Bank der Zuid-Afikaoasche Republik, created in 1890, and known by its English name,National Bank o South A rica rom 1902, Anglo-Egyptian Bank and ColonialBank), develop the ‘wealth’ o knowledge accumulated by the management othese three houses and create a set o methods to better analyse overseas risks.Tese managers could also use this experience to enrich other managers workingin some other sub-regional territory or space.

Issues o ‘trust’42 were central. Despite the establishment o colonial govern-ments and regulations, many o these overseas economies still lacked properlegal, accounting and nancial rameworks. Tere were a shade too many ‘bad

practices’, especially in the orm o a lack o accounting transparency. Te tra-ditional clues regarding the reliability and accountability o customers werenot delivered. Moreover, business in these port-cities was susceptible to raudregarding the quality and quantity o the goods delivered or stored.43

One needed to be well embedded44 in every trade and banking centre inorder to ‘be like a sh in water’ and to get all the in ormation which could helpminimize risks by eliminating in ormation asymmetries.

Debates Regarding the Extent o AutonomyEnjoyed by Tese Overseas erritories

As in every other economic eld, the overseas banking economy was also dualistic

in nature with, on one hand, the hegemony o the mainland banks deployed in thecolonies and, on the other, the local establishments dedicated to this or that terri-tory or region (the Maghreb, Southern and sub-Saharan A rica, the Far East, theMiddle East, the Caribbean, etc.). We need to identi y the degree o autonomy,the manoeuvring room enjoyed by these expatriate managers and their capacity

or adapting to the speci cities o the local business and banking practices.





Decentralization or Centralization? We have seen here and there the emergence o a local overseas banking system.Some imperial territories had the advantage o having either a developing or evena developed trade and production system either because o a ‘settler colonisation’45 or because the local resources were particularly rich and diversi ed in the minesor cultures. Tis led to the ormation o a true banking system, with the requireddensity o establishments and the volume o balance sheets in the regions which were to orm South A rica: numerous imperial banks set up shop there.46

Te li e o Barclays DCO is very illustrative: ‘His aim [Chairman Goode-nough] has been to achieve or DCO a decentralized system o control, ollowingthe lines by banks in the UK, but subject always to the wide variations in practicenecessitated by differing conditions in the various overseas countries’.47 A repre-sentative board o directors sat in Cape own, a strong management team was setup in Pretoria and managerial responsibilities were con erred on the directors atCape own and Rhodesia. Te subsequent transition rom the imperial systemto an autonomous and nally independent economy was based on this imperialheritage. At the same time, Barclays DCO’s near ederal structure required some

exibility vis-a-vis the local realities and the constraints o distance (in spiteo the help provided by telegraph cables which sometimes led to talk o ‘cablebanking’) in adapting to the economies and trade. In the case o Anglo-EgyptianBank-DCO, a board o directors and a management team were set up in Alex-andria, but Nairobi was managed directly rom London (Kenya, anganyika,Uganda), just like Colonial Bank and its branches in Nigeria, Sierra Leone andGold Coast, because the top management elt that the business climate was tooharsh. ‘Te variations in the system o control resulted rom the character andcorruption o the countries themselves, which inevitably in uenced the struc-ture o the Bank’s organization’.48

A key question remains regarding the sociology o these imperial banks’ clien-tele. Obviously, it consisted mainly o expatriates, oreigners (mainly European)residents o the mainland in transit (military personnel, civil servants, corporateexecutives, intellectuals, etc.), religious groups (including Catholic and Protes-tant missions). Still, in numerous places, local ‘elites’ also joined this clientele.For example, CFA andCompagnie algérienne admitted traders and brokers oall sizes and owners o medium sized enterprises rom the textile and agri- oodindustries. Chinese clients too ound their way into HSBC’s bigger branches(also to a lesser extent, Banque de l’Indochine) as and when they developed trad-ing and consumer goods processing companies. Te extent o the imperial banks’involvement in the promotion o the local population re ects their contributionto the region’s economic take-off.




Introduction 15

A Capacity or Autonomy? Te legacy o overseas banking must be seen against the backdrop o the autono-mization o these overseas territories and their economies, taking into accountthe various orms o this process, rom colonial hegemony to autonomy and independence. rans er o skills need to be questioned. Tis also raises the issue othe training and promotion o local ‘elites’ within the colonial banks, be ore theactual move towards independence (and even aferwards, as part o the ‘a ricani-zation’ or ‘asianization’ processes and well beyond the ‘compradors’ o China orexample). Te building o ‘pockets’ o ‘modern business culture’ among the local‘middle classes’ active as customers o imperial banks has also to be discussed.

Tis development depended upon the strength o the local elite, entrepre-neurs and business community. We know – and Grietjie Verhoe has expoundedon this theme in his chapter – that certain territories in South A rica saw theemergence o a regional capitalism, endowed with its own nancial institu-tions.49 Te Canadian Dominion quickly acquired a relative banking autonomy which took the orm o establishments that affi rmed their own ‘imperialism’ andsometimes even posed a challenge to imperial banks in the Caribbean.50 Indiatoo began to gradually set up its own ‘native banks’ which began to compete with the ‘chartered banks’ as and when the local capitalism grew and gained

orce rom the turn o the 20th century. In act, National Bank o India (latercalled National & Grindlays) went all the way to anganyika due to the overseascommercial links across the Indian Ocean. Australia too saw the emergence olocal banks, even though some ‘imperial’ tentacles o European banks remainedactive, including through the subsidiaries o French CNEP.51

Over the next several years, every overseas trading centre saw a trans er o theskills port olio between the management o the colonial or imperial banks andthe rising ‘elites’, whether it be within the banks themselves (accounting, man-agement o commercial accounts) or within their community o interests. Tis‘spillover’ process had been more or less intense depending on the each territory’sdegree o development. But at the time o independence ( or the colonies) orthe rejection o imperialism (in communist or socialist countries mainly), this‘hybridisation’ really bore ruit when the management o the nationalized banks,or o those handed over to local interests, came directly rom the earlier teams, ina sort o modest but real passing o the relay baton.

Imperial Bankers and Imperialism?Bankers did not ail to participate in the growth o imperialism,52 in what a bookcalled ‘the offi cial mind o imperialism’.53 With close ties to colonial adminis-trations, whether in Paris, Lisbon or London, and working intimately with theexpansionist business communities in these two capitals, Japan and New York,





they participated indirectly in developing strategies o economic conquest orthe Mainland (including Japan, afer the conquest o Korea and aiwan) andthe United States, like the entire community o Powers in China. Te overseas‘growth block’ based itsel on a ‘block o interests’ and a ‘block o social networks’, with the whole underpinned by an imperialist or imperial ‘block o ideas’.Tis overseas push did not ail to result in the usual hegemonic relations, and thebanks were very much part o it.

Tis explains the balance between anti-imperialism and heritage when thetime came or the move towards independence. Te process o the trans er o power rom overseas banks and nancial institutions to local authorities providesan insight into the permanence or its lack. Te redeployment o companies, otheir equity, treasury, availabilities and management needs to be evaluated, andtheir uture as eventual autonomous institutions as opposed to an integrationinto metropolitan groups debated. Were they able to join the strategic poles oin uence and development in their country, or were they deprived o entrepre-neurship, human resources and nancial means?

Several chapters dwell on the anti-imperialist sentiments which prevailed inthe ormer colonies afer independence or the institution o socialist regimes.For example, Niv Horesh talks about the ‘boycott’ o Japanese interests in China,especially the branches o the Japanese Yokohama Specie Bank, just afer World War I. A little later, in 1923, it was the whole gamut o ‘imperialist’ interests that were denounced by nationalist movements in Hong Kong and Canton, which

also led to a generalized ‘boycott’. Ten, in the 1930s, the young and rail Guom-ingdang government in Nanjing set as a priority the creation and promotion o‘national’ banks: whether it be a central bank with a commercial bent or banksissued rom Chinese capitalism. Later still, the nationalization o oreign andcolonial banks served as the rst blow in loosening the oreign hegemony: this was obviously the case in communist China between 1945 and 1952, but also insocialist India o the Congress Party, as shown by Ashok Kapoor’s study in thisbook. Later still, this anti-imperialist movement also swept through a number oA rican countries such as Algeria in the mid-1960s, and Barclays DCO lost itsentities in anganyika (1967) and Sudan (1970).

Te process o nationalization took shape in a number o A rican countriesthat retained a market economy. In many others, it meant the creation o subsidi-

aries o entities which were active in the territory, or the bene t o mixed banks, with oreign and national shareholding, private and public. Tis happenedin Nigeria54 and Côte d’Ivoire among others. Te BBWA, which had become Bank o West Afica (BWA) in 1957, tried to rid itsel o its ‘colonial’ aspect. ButGhana replaced it with its Bank o Gold Coast in 1953 as its issuing and com-mercial bank. Finally reality sunk in: the BWA integrated itsel into the SouthA rican Standard Bank in 1965 and turned into its subsidiary under the name




Introduction 17

o Standard Bank o West A rica, which was retained afer the constitution oStandard Chartered Bank in 1969. Te process o creating subsidiaries in A ricaintensi ed, with Standard Bank o Ghana (with the Barclays Bank o Ghana in1971), Standard Bank Nigeria and Standard Bank o Sierra Leone, which livedsemi-independent lives by being open to both local capitalist groups and multi-national opportunities. Te A ricanization went to the extent o a complete losso control o Standard Bank Nigeria (which had become First Bank o Nigeriain 1979) in 1996, be ore the establishment o a new direct subsidiary, StandardChartered Bank Nigeria in 1999. Tis showed that afer independence, theseoutgrowths o imperial banks needed to use all their dexterity to meet the politi-cal, nationalist, capitalist and nancial expectations.

Te case o India, which has been dealt with in numerous books as well ashere, is emblematic o the post-colonial dilemma: at rst, there was an intertwin-ing and symbiosis between imperial and local banks at the turn o the twentiethcentury. But the young country’s nationalism and the in uence o socialist theo-ries on the Congress Party were so strong that the imperial bank, identi ed withimperialism, ound itsel condemned. Tis led to the progressive nationalizationand Indianization o these establishments and the victory o the State and (moremodestly) private bank which the majority thought were more suited to somereal, internal development, more oriented towards the national production sys-tem, with a better redistribution o the income derived rom international trade.In China, the abrupt nationalization o banks and enterprises put an end to

imperial banking, orcing HSBC to return to Hong Kong, while the subsidiar-ies o European, Japanese and American banks had either to redeploy towardsthe rest o Asia or close down.

Whatever might have been their ate, these ‘imperial banks’ have lef a last-ing legacy. In act, some institutions have even managed to withstand the shocksand setbacks o History by reinventing their strategy, rebuilding on multipleoccasions their port olio o strategic activities and developing their skills andknowledge port olio. HSBC is by ar the best example as it bene ted rom thecontinued existence o the colony o Hong Kong. It could prepare or an even-tual withdrawal by spreading out across Asia (later even into continental China)and by establishing itsel as a great commercial bank in Europe and the UnitedStates. Te old Chartered55 too managed to turn itsel into a major transnational

bank in Asia and A rica by becoming Standard Chartered. ‘ o change so thatnothing changes’ seems to have been the motto o these two banks, which man-aged to replicate the strategy used by several business houses which had beenactive in the colonial empires and which subsequently completely changed theirmethods and li estyle in order to continue well into the 21st century. Te examples o Vlasto56 and CFAO57 in A rica come to mind, be ore Unilever’s adventin the ex-empires, but by adopting an operational mode suited to the emerging





or under-developed countries, ar rom the imperial methods used earlier by itssubsidiary UAC.58 But the same thing had also been done by the exible Britishbusiness houses in Asia (hong) such as Swire and Jardine & Matheson.59

Barclays DCO too elt the ‘the winds o change’60 as the British Empirebegan to disintegrate (independence o Ghana in July 1957, Nigeria in Octo-ber 1960, Caribbean in 1962, etc.): ‘Inevitably, with the paring o the colonialera, we, at the DCO, have become more and more an international bank and itseems plain to us that our uture role must be seen in the context’.61 Tis explainsthe subsidiarization o its activities in South A rica (Barclays National Bank inOctober 1971) and its own metamorphosis: the subsidiary became the Barclays Bank International , with 1,584 branches o its mother company Barclays out-side the United Kingdom, or what is called the ‘retail bank’, oriented towardsindividuals and local enterprises and leaving ‘wholesale banking’ to its mothercompany ( Barclays Capital ).

Let us note here that almost all the ‘colonial’ or ‘imperial’ banks have beeneliminated by History. Te amous Banque de l’Indochinetrans ormed itsel intoa major commercial bank in France in the years 1940–70. It was then absorbedby theCompagnie nancière de Suez to become Indosuez. Ten, when this nan-cial group conducted a strategic redeployment in the 1990s, it was taken over bythe Crédit agricole group and integrated into its division o corporate & invest-ment banking.Compagnie algérienne and Crédit oncier d’Algérie et de unisie turned into retail banks in France be ore various mergers culminated into their

disappearance via an integration intoSociété générale. BOLSA returned to its parent company’s old (Lloyds), which re ocused its strategic activities towardsthe British commercial bank. By chance, two British-origin houses kept theimperial bank’s ag ying high: HSBC, which will celebrate its 150th anniver-sary in 2015, and Chartered, which merged with Standard to become StandardChartered – both straddling Europe and Asia. Te ormer got itsel a oothold inthe United States and the latter in Eastern and Southern A rica. In 2000, ‘Stan-Chart’ accounted or 59 per cent o its turnover, with 29 percent rom HongKong. It also made inroads into India and Pakistan. As the rst oreign bankin Bangladesh, it strengthened itsel with the purchase o A Grindlays’ Asia-Paci c and Middle East activities in 2000 – in act, it inherited rom the imperialbank,Grindlays. Afer all, History seems to have bequeathed at least some impe-

rial banking legacies to the present banking economy!

About a Few FoiblesA ew pieces o criticism might be expressed anyway. Te rich variety o case-studies is also a handicap since it does not allow to draw a comprehensive androunded-up picture o the history o oreign banking in Asia. However, in light




Introduction 19

o the actual state o research on the history o imperial banking systems, suchobvious weakness could hardly be overcome or the moment by any serious aca-demic research. Tere is, o course, always something to wish, e. g. chapters onthe colonial banking system o Germany in her leasehold-colony in China, oro other Western countries (Belgium, Italy, etc.) in the so-called ‘treaty ports’in China but also in major trading hubs in the Asiatic-Paci c region, or onChinese and Southeast Asian local and overseas banks and their links to the

oreign banking systems in Asia. I admit that we do not compare here American,British, Japanese and Russian banks in terms o their historical development,impact made, strength and weakness. However, since the proposed book buildson research already done there would always be gaps in the coverage: it lies inthe nature o a book based mainly on con erence papers that it can only offera variety o approaches to the general topic o the book. But the perception o variety can be balanced by the efforts which I developed when I tried in the pre- vious sections to de ne some ‘conceptual’ approaches o our topics; but the teamo this book had not intents at all to supply some kind o an ‘encyclopaedia’ oimperial and colonial banking in Asia: our objectives remained modest, and weremain well aware o the gaps to be lled… My major challenge was to providean altogether broad and deep introduction to the book which strongly bindstogether the different approaches and offers a comprehensive and rounded-up overall picture, to clearly work out certain patterns in strategies o marketaccesses and also in geographical and transnational interactions with similar and

different partners in the imperial banking systems, and to present the complexityo the entire story in a readable and comprehensible language.Further essays could insert the results o this book and o its chapters into the

broader scope o arguing about imperialism itsel . We must recognize that wemight have more consistently connected these research results with the overallhistory o economic imperialism in Asia at the time to demonstrate its relevance

or our understanding o this process. Strengths and weaknesses o the exist-ing literature on the topic ought to be discussed in order to explain which newinsights the book is going to offer to urther enhance knowledge on imperialism‘on the spot’, sof orms o imperialism, or ‘gentlemanly capitalism’ in imperialist/colonialist contexts. But our book will stay on the level o ‘empiricism’, withoutdreaming o asserting itsel as some kind o a ‘treaty’ o business imperialism.
