International and multinational banking under Bretton Woods (1945-1971) : the experience of Italian banks

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INTERNATIONAL AND

MULTINATIONAL BANKING UNDER

BRETTON WOODS (1945-1971)

The experience of Italian banks

Ioan Achim Balaban

Thesis submitted for assessment with a view to

obtaining the degree of Doctor of History and Civilization of the European University Institute

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European University Institute

Department of History and Civilization

International and multinational banking under Bretton Woods (1945-1971)

The experience of Italian banks

Ioan Achim Balaban

Thesis submitted for assessment with a view to

obtaining the degree of Doctor of History and Civilization of the European University Institute

Examining Board

Prof Youssef Cassis, European University Institute (EUI Supervisor) Prof Federico Romero, European University Institute

Prof Catherine Schenk, Oxford University

Prof Stefano Battilossi, University of Carlo III, Madrid

No part of this thesis may be copied, reproduced or transmitted without prior permission of the author

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Researcher declaration to accompany the submission of written work Department of History and Civilization - Doctoral Programme

I, Ioan Achim Balaban certify that I am the author of the work “International and multinational banking under Bretton Woods (1945-1971): The experience of Italian banks” I have presented for examination for the Ph.D. at the European University Institute. I also certify that this is solely my own original work, other than where I have clearly indicated, in this declaration and in the thesis, that it is the work of others.

I warrant that I have obtained all the permissions required for using any material from other copyrighted publications.

I certify that this work complies with the Code of Ethics in Academic Research issued by the European University Institute (IUE 332/2/10 (CA 297).

The copyright of this work rests with its author. Quotation from it is permitted, provided that full acknowledgement is made. This work may not be reproduced without my prior written consent. This authorisation does not, to the best of my knowledge, infringe the rights of any third party.

I declare that this work consists of <126.664> words.

Statement of language correction:

This thesis has been corrected for linguistic and stylistic errors. I certify that I have checked and approved all language corrections, and that these have not affected the content of this work.

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Abstract

Business economists and financial historians distinguish between a first and a second wave of international and multinational banking. The Great Depression and the two World Wars interrupted the first wave which began in the mid 19th_{century. The second} wave began in the 1960s and was triggered by the advent of the Euromarkets under the international monetary regime of Bretton Woods (1944-1971).

The thesis investigates the determinants of the internationalization of European commercial banks under Bretton Woods by focusing on the experience of Italian banks. I argue that Italian banks re-entered international and multinational banking from the late 1940s onwards in order to contribute to establish Italy as a commercial power. Competition between the banks in the international arena led them to integrate Eurodollar deposits into their international and domestic banking strategies in the 1950s and the 1960s thus contributing to the globalization of finance. The big European continental commercial banks internationalized in parallel to Italian banks and for the same reasons. Nevertheless, in contrast to latter, the former became major actors in the Euromarkets as a result of the American challenge after 1965. The thesis argues that the growth of the Euromarkets in the second half of the 1960s was sponsored by the Federal Reserve of the United States. The Federal Reserve encouraged the growth of the Euromarkets, and the role of American banks in the market, in order to defend the US official gold stock and the US balance of payments. Sources are drawn from bank and central bank archives in Italy, France and the United States.

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List of Tables

Table 1. 1 American and European commercial banks that re-established/expanded their multinational

banking networks, 1945-1959 ... 30

Table 1. 2 The number of foreign units under different organisational forms established by American and European continental banks, 1945-1959 ... 31

Table 1. 3 The number of foreign units under different organisational forms established by the BCI, Banco di Roma and BNL, 1945-1971 ... 55

Table 2. 1 The multinational network of the BCI in the interwar years ... 67

Table 2. 2 The multinational network of the Banco di Roma before the Second World War, 1906-1939 ... 68

Table 2. 3 The structure of Italian banking under Bretton Woods, 1948-1974 (number and judicial type) ... 69

Table 2. 4 The organization of Exchange Controls in Italy, 1954-1959 ... 70

Table 2. 5 Italian foreign exchange accounts ... 71

Table 3. 1 Italian foreign trade, 1950-1959 (Lire. million) ... 123

Table 3. 2 Foreign banks in Iran in 1962 ... 133

Table 3.3 Private capital flows to South America excluding Venezuela, 1950-1958 ($ million) ... 140

Table 3.4 The multinational banking network of the Crédit Lyonnais and the Bancque National pour le Commerce et l'Industrie (BNCI) in South America, 1949-1956 ... 142

Table 3. 5 Capital and reserves of Sudameris in 1952 (Fr. million) ... 145

Table 3. 6 Deposits of Sudameris as a % of total bank deposits in each country in December 1952 ... 145

Table 3.7 Deposits of foreign banks as a % of total bank deposits in selected country in 1952 ... 146

Table 3.8 Approximate share of Sudameris share of deposits to total deposits of foreign banks in selected countries in 1952 ... 146

Table 3.9 Foreign currency deposits of Sudameris as a% of total bank deposits of Sudameris comparison between 1936 and 1952 ... 150

Table 3.10 Sample of Italian multinational manufacturing and insurance companies operating in South America under different organisational forms, 1945-1964 ... 161

Table 3. 11 Italian foreign trade with Africa in the 1930s and in the early 1950s, selected years (Lire. billion) ... 176

Table 3. 12 Italian foreign trade with Africa, 1953-1959 (Lire.billion) ... 180

Table 3. 13 The multinational network of the Banco di Roma (1945-1960) ... 182

Table 4. 1 External liabilities and claims of UK banks in foreign currency analysis by countries of US dollars (£. million) ... 221

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Table 4. 3 The net size of the Eurodollar market, 1963-1971, ($ billion) ... 249

Table 4. 4 The size of the Eurobond and Eurocredit market, 1963-1971 ($ billion) ... 251

Table 4. 5 British and foreign banks operating in the Eurodollar market in the City of London in 1960 ... 256

Table 4. 6 The most active banks in the Eurodollar market in the City of London in 1964 ... 257

Table 4. 7 Dollar-denominated external liabilities of UK banks, 1957-1972 ($ million) ... 258

Table 4. 8 The Eurocurrency deposits of the Banque Commerciale pour l'Europe de Nord (BCEN) as a % of total Eurocurrency deposits in Paris, 1959-1964 ($ million) ... 264

Table 4. 9 The Eurocurrency assets of the top 5 French banks, 1963-1964 ($ million) ... 265

Table 4. 10 Dollar-denominated liabilities of Belgian and Dutch banks, 1958-1971 ($ million) ... 267

Table 4. 11 Dollar-denominated liabilities of French banks, 1957-1972 ($ million) ... 269

Table 5.1 Foreign trade to GDP ratio in Italy, 1960-1970 ... 277

Table 5 2 The average yearly growth rate of Italian foreign trade, 1958-1971 ... 277

Table 5. 3 The size of the foreign currency swaps agreements ($ million) ... 280

Table 5. 4 The aggregate net Eurocurrency assets and liabilities of Italian banks, 1959-1971 ... 280

Table 5. 5 The foreign currency assets of the BCI as a percentage of total resident assets, 1960-1971 (Lire. million) ... 286

Table 5. 5 The foreign currency assets of the BCI as a percentage of total resident assets, 1960-1971 (Lire. million) ... 287

Table 5.7 The multinational network of the BCI in Africa ... 292

Table 5.8 US foreign direct investment in Latin America, 1950-1970 (book value in $ billion) ... 296

Table 5. 9 The dollar assets and liabilities of Western European banks with South America, 1964-1971 ($ million) ... 304

Table 5. 10 The BCI and the Eurobond market, 1963-1971 ($ million) ... 307

Table 5. 11 The percentage of foreign currency deposits of the Banco di Roma to total deposits (Lire. billion) ... 311

Table 5.12 The share of foreign profits to total profits of the Banco di Roma, 1963-1968, (lire.billion) ... 311

Table 5. 13 The multinational banking network of the Banco di Roma in 1971 ... 314

Table 5. 14 The ratio of third-party funds to total capital and reserves of the biggest banks in the world in 1964 ... 320

Table 5. 15 Percentage of the foreign currency deposists of the BNL to total deposits, 1964-1967 (Lire. billion) ... 325

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Figure 1.1 In grey the countries where European and American commercial banks established new

operational units under different organisational forms, 1945-1959 ... 32

Figure 1. 2 Foreign banks in London and New York, 1945-1959 ... 33

Figure 1. 3 Italian foreign trade, 1950-1971 (Lire. million) ... 50

Figure 1. 4 The evolution of Italian foreign trade under Bretton Woods, 1945-1971 (Lire. million) ... 51

Figure 1. 5 The geographical expansion of Italiann banks under Bretton Woods, 1945-1971 ... 52

Fig 2.1 Foreign credit lines granted to Italian banks by British and American banks, 1950-1951 ($ million) ... 114

Figure 3. 1 The geographical patterns of Italian trade, 1950-1959 (Lire. million) ... 124

Figure 3. 2 Italian exports to selected South American countries, 1950-1959 (Lire. billion) ... 159

Figure 3. 3 Non-resident foreign currency assets of Italian banks as measured by foreign currency deposits liabilites, excluding official foreign currency liabilities (UIC deposits), 1950-1959 ($ million) ... 199

Figure 3. 4 Non-resident foreign currency deposits of Italian banks, 1957-1959 ($million) ... 200

Figure 3. 5 The use of foreign credit lines by Italian banks, 1950-1959 ($ million) ... 201

Figure 4. 1 Eurodollar three months interest rates vs US Federal Reserve Funds rates, 1965-1973 ... 242

Figure 5. 1 Italian non-resident Eurodollar assets vis-à-vis non-resident Eurodollar assets of European international financial centres and other European commercial banks, 1960-1971 ... 283

Figure 5. 2 Italian foreign trade with South America, 1960-1971 (Lire. billion ... 303

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List of Abbreviations

ABA, American Bankers Association

ABECOR, Associated Banks of European Corporation AIOC, Anglo-Persian Oil Company

ANIC, Azienda Nazionale Idrocarburi Combustibili ASSS, Special Administration of the Holy See BAFT, Bankers Association for Foreign Trade BBIME British Bank of Iran and the Middle East BBME, British Bank of the Middle East

BCEN, Banque Commerciale pour l’Europe du Nord BCI, Banca Commerciale Italiana

BEC, Banque Euroènne de Credit

BFCE, Banque Française du Commerce Exterieur

BIS, Bank of International Settlements

BNCI, Banque National pour le Commerce et l’Industrie BNCI, Banque National pour le Commerce et L’Industrie BNL, Banca Nazionale del Lavoro

BNP, Banque Nationale de Paris

BOLAM, Bank of London and Montreal BOLSA, Bank of London and South America CASMEZ, Cassa per il Mezzogiorno

CDS, Centre de Documentation et de Synthès CFP, Compagnie française des pétroles

CIFMO, Compagnie Industrielle et financière pour le Moyen Orient COFACE, Compagnie Française d’Assurance pour le Commerce Extérieur COPE, Compagnie Orientale Pétroles d’Égypte

EAC, European Advisory Committee

EBIC, European Banks International Company EEC, European Economic Community

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EPU, European Payments Union

EURO-FINANCE, Union International analyse Economique et Financière, “Euro-Finance

EXIMBANK, Export-Import Bank of the United States

FRAB, Banque Franco-Arab d’Investissements Internationaux ICE, Istituto Nazionale per il commercio estero

IET, Interest Equalization Tax IMF, International Montary Fund IMI, Istituto Mobiliare Italiano IOR, Istituto per le opere religione

IRI, Istituto per la Ricostruzione Industriale ISPI, Instituto di Studi di Politica Internazionale

LDC, Least developed countries

MAIBLE, Midland and International Banks MCRP, Mandatory Credit Restrain Programme

MEDIOBANCA, Mediobanca Banca di Credito Finanziario NIOC, National Iranian Oil company

OEEC, Organization for European Economic Co-operation SFE, Société Financiére Européenne

SIFIDI, Société Franco-Italienne de Développement Industriel TIEC, The Italian Economic Corporation, New York

SUDAMERIS, Banque Francais et Italianne pour L’Amerique Latin TIEC, The Italian Economic Corporation, Switzerland

UBAF, Union de Banques Arabes et Françaises VCRP, Voluntary Credit Restraint Programme

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Acknowledgements

Writing a PhD is a long, solitary and life changing experience. I am particularly grateful to my supervisor Youssef Cassis for accepting me as a doctoral candidate and for the encouragement I received to pursue my research interests. I also want to thank my second reader, Federico Romero. I would like to thank the staff in the Department of History and Civilization for facilitating my research and, especially, Miriam Curci. I would also like to express my gratitude for the financial support of my research at the EUI by the Romanian Ministry of National Education.

Many scholars have contributed to my work by offering advice. Among them are Luciano Segreto, Giandomenico Piluso, Gianni Toniolo, Giuseppe Telesca, Simone Selva, Martin Daunton, Olivier Feiertag, Kazuhiko Yago, Laure Quennouëlle-Corre,

Eric Bussière, Francesco Petrini, Ruggero Ranieri and Karol Mazur. I would also like to thank Catherine Schenk and Stefano Battilossi for accepting the invitation to be a part of my examining board and for the very useful and detailed comments.

I want to thank, for the help I received through all the stages of the dissertation, Guido Montanari at the Archivo Storico Intesa Sanpaolo, Francesca Malvezzi at the Archivio Storico di UnCredit Banco di Roma and Anne Brunterc’h at the Crédit Agricole SA- Services des archives historiques. I also want to thank the staff at the Archives historiques – Banque de France, at the Archivio storico – Banca d’Italia and at the Archivio storico – BNL. I warmly thank Ana Maria Spariosu for proofreading my thesis in record time and for making many helpful suggestions.

I am particularly grateful to "Prietena Alexandra," Eugen, Emil and Titus. I also have a big debt of gratitude to Filippo for his friendship and trust and to Chima for his help during the last stages of the dissertation. Equally, I want to thank Maria, Annalisa, Aliosha, Agnieszka, Alberto, Cecilia, Chima, Karol, Takeshi, Trond, Oscar, Soheil, Veneta, Yunus, Sergiu, Ryan and the International Researchers’ Disco Division for having made my life in Florence much easier and to Martina for the time spent in Rome. Thank you all. A special thanks to my colleagues, Joona, Simon and Maria Stella. I learned a lot from them in tangible and intangible ways.

I would like to thank my family. Lastly, I want to thank Alice, for without her help, I would have probably never succeeded in completing a Ph.D. Thank you.

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Chapter 1 Introduction

The aim of the thesis

The Bretton Woods international monetary system (1944-1971) was established by the United States, the United Kingdom and 44 other countries in New Hampshire, United States, in July 1944. Bretton Woods aimed to restore the international economy at the end of the Second World War by restricting short-term international capital flows to avoid another Great Depression. The Articles of Agreements, the magna carta of Bretton Woods, reflected the Great Depression-era distrust of international banking and finance. Thus, alongside fixed exchange rates, the dollar-exchange standard, the International Monetary Fund (IMF) and the World Bank, capital controls were a key feature of Bretton Woods. The central role of capital controls in the post-war international economy was grounded in the desire of governments to take a leading role in economic growth without fear that low domestic interest rates or taxation led to capital flight as a result of economic openness. Openness to foreign trade required that this co-existed with the desire of governments to keep national savings within national borders in order to allocate them where they saw fit and at interest rates dovetailed to accompany the business cycle. To this end, most European countries, but also the United States, nationalized or heavily regulated their banking systems as well as the capital markets. Capital controls were just another tool, but of critical importance, in the panoply of controls and regulations of banking during Bretton Woods and beyond.

The Bretton Woods system oversaw two decades of the international economy each beset by its own specific set of problems. The international economy during the years of post-war reconstruction (1945-1952) was characterized by the so-called dollar gap and, after this was bridged during the Korean War (1950-1953), current account currency inconvertibility across Western Europe (except Switzerland). Western Europe’s lack of dollars at the end of the war was either underplayed at Bretton Woods or based on optimistic evaluations that, as the war was still ongoing, failed to assess the extent of the destruction Western Europe suffered during the war. Once the extent of the destruction was clear, and once the uneven distribution of official gold reserves

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and the collapse of exports became a fact of life, Bretton Woods’ aim to restore currency convertibility was put on hold. Western European countries managed to rebuild their official reserves finally achieving currency convertibility in December 1958 thanks to the Marshall Plan (1948-1952), to the European Payments Union (EPU) (1950-1958) and to the surge in exports within the EPU area and the world over. As noted, the Korean war also played a role in the redistribution of gold reserves from the United States to Western Europe. Against this backdrop, the European economies recovered the GDP lost during the war and entered a phase of stunning economic development. The literature has fittingly described the 1950s and 1960s as the Golden Age of capitalism.1_{Exports played a fundamental role in the transition from war-torn}

to bustling economies.2

Currency convertibility represented a major milestone in world economic relations. This achievement, however, was clouded by the problems confronting the international economy in the 1960s. By the late 1950s, the US balance of payments gradually worsened so that at the beginning of the 1960s a balance of payments deficit emerged. The dollar-gold link was suddenly questioned as the US official gold stock gradually thinned down: the US’ loss of gold was Western Europe’s gain as the official reserves of European banks increased substantially. Thus, in Western Europe the dollar-gap transformed into a dollar glut. Besides leading to tense discussions in international forums on how to address the US balance of payments deficit, the dollar glut enabled the emergence of the Eurodollar, Eurobond and Eurocredit markets (the Euromarkets).

European banks returned to international and multinational banking against the background of the international economy, succinctly describe in the previous paragraphs. Indeed, European banks took measures to re-establish their international banking networks and establish new multinational banking entities in order to return to the international banking business as soon as the Second World War ended in late 1945. Thus, if as Cristopher Kobrak has observed: “in the wake of the Second World

1_{Stephen A. Marglin and Juliet B. Schor, eds., The Golden Age of Capitalism: Reinterpreting the}

Postwar Experience (Oxford: Clarendon Press, 1990).

2_{Barry Eichengreen, The European Economy Since 1945: Coordinated Capitalism and Beyond (New}

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War, world finance, including multinational banking was in shatters”3_{, as the}

proverbial phoenix, by the end of Bretton Woods in August 1971, European banks were operating abroad for almost a quarter of a century in spite of the fact that in the 1950s and 1960s governments prioritized industry over banking.

The aim of this thesis is to explore the journey of internationalization of Italian banks under Bretton Woods investigating the determinants, the difficulties as well as the successes encountered along the way. The focus of the narrative is on the experiences of the Banca Commerciale Italiana (BCI), the Banco di Roma and the Banca Nazionale del Lavoro (BNL), Italy’s three leading commercial banks.

Literature review: the dynamics of multinational banking

under Bretton Woods

In the first chapter of his edited volume, Banks as Multinationals, the British business historian Geoffrey Jones identified two waves of multinational banking.4_{According to}

Jones, the first wave was triggered by the British overseas banks in the first half of the 19th_{century. With head-offices located in London, British overseas banks operated}

exclusively in foreign markets and particularly in the British colonies of Africa, (South Africa in particular) Australasia (Australia and New Zealand) and in South America. By the late 19th_{century, however, the field of multinational banking crowded as}

German and French, but also Belgian, banks expanded abroad thus taking away the monopoly from the British. Stefano Battilossi argued that European continental banks were encouraged in their endeavour by their governments as these wished to see the banks developed trade finance capacity and develop national acceptance markets.5

Stefano Battilossi also argued that during the first wave the “dominant organizational pattern of multinational expansion was based less on foreign branching than on greenfield investments undertaken by individual banks or small group of allied banks.”6

3_{Chris Kobrak, ‘From Multinational to Transnational Banking’, in The Oxford Handbook of Banking}

and Financial History, ed. Youssef Cassis, Catherine Schenk, and Richard Grossman (Oxford: Oxford University Press, 2016), 172.

4_{Geoffrey Jones ‘Banks as Multinationals’ in ed., Geoffrey Jones, Banks as Multinationals (London and}

New York: Routledge, 2012) Kindle Edition.

5_{Stefano Battilossi, ‘The determinants of multinational banking during the first globalisation}

1880-1914’, European Review of Economic History, 10, December 2006, 361-388.

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The Deutsche Bank was established in 1870 as an international bank by a group of German private bankers “with the specific aim of freeing German international trade from its dependence on British finance.”7_{However, Deutsche Bank developed}

also as the leading domestic bank.8_{As the other big German banks, also the Deutsche}

Bank expanded in South America and in the Far East in the decades before the First World War. German banks also focused on expanding close to home and especially in Central and South-Eastern Europe.9

The French banks turned down French diplomats’ requests to open branches in South America10_{, even if some of them entered Brazil and Chile through the Banque}

Française du Brazil (the Société Générale) and through an agency (the Banque de Paris et de Pays Bas (Paribas).11_{Rather than cross the Atlantic – which they did for a short}

while12_{– French banks expanded mainly in the European South-East, Russia, the}

Eastern Mediterranean and in the Far East.13_{While French banks expanded in}

continental Europe mostly through alliances with foreign banks - thus the establishment of the Banca Commerciale Italiana by Paribas and a consortium of French, German, Austrian and Swiss banks in 189414_{- they entered the Far East and}

the South-East Asian markets through autonomous initiatives. As Bonin observed, the Comptoire d’Escompte de Paris (CEP) “made a significant effort in the Far East” but its failure and reorganization weakened its presence in China.15_{Established in 1875,}

during the 1890s, the Banque de l’Indochine established agencies in Hong Kong,

7_{Youssef Cassis and Philip Cottrell, Private Banking in Europe, Rise, Retreat & Resurgence (Oxford:}

Oxford University Press: 2015), 191.

8_{The historiography on Deutsche Bank is rather larger, see for example: Werner Plumpe, Alexander}

Nützenadel & Catherine Schenk, Deutsche Bank: The Global Hausbank,

1870-2020 (London: Bloomsburry Publishing 2020); Christopher Kobrak, Banking on Global Markets: Deutsche Bank and the United States, 1870 to the present (Cambridge: Cambridge Unidersity Press, 2007); Lothar Gall, Gerald D. Feldman, Harold James, Carl-Ludwig Holtfrerich and Hans E. Büschgen, eds., The Deutsche Bank, 1870-1995 (London: Widenfeld & Nicolson, 1995.

9_{Peter Herter, ‘German banks abroad before 1914’ in ed., Geoffrey Jones, Banks and Multinationals}

(London and New York: Routledge, 2012) Kindle Edition; Richard Tilly, ‘International Aspects of the Development of German Banking’ in eds., Rondo Cameron and V. I. Bovkin, International Banking, 1870-1914 (New York, Oxford: Oxford University Press, 1991).

10_{Hurbert Bonin, ‘The case of French Banks’ in International Banking 1870-1914, eds., Rondo Cameron}

and V.I Bovykin (New York, Oxford: Oxford University Press, 1991), 81.

11_{Ibid., 77.} 12_Ibid. 13_Ibid.

14_{Peter Hertner, ‘Foreign Capital in the Italian Banking Sector’ in International Banking 1870-1914,}

eds., Rondo Cameron and V.I Bovykin (New York, Oxford: Oxford University Press, 1991), 347.

15_{Hurbert Bonin, ‘The case of French Banks’ in International Banking 1870-1914, eds., Rondo Cameron}

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Bangkok and Shanghai and entered Singapore in 1905 while it operated in French Indochina since the 1880s.16

As mentioned, Belgian banks also expanded abroad and especially in Russia.17

Initially, the Société Générale de Belgique participated in the capital of foreign manufacturing firms to whom the bank’s Belgian clients sold capital goods. However, by the late 1890s the Société Générale sponsored the establishment of foreign holding companies and financial institutions. In this way, “the Société Générale, in particular, became the center of a vast worldwide network of financial and industrial interests.”18

European banks clustered also in the world’s leading international financial centres, London in particular but also Paris. As Youssef Cassis observed:

“In 1913, London was also host to some thirty foreign banks from twelve different countries, including the four largest French banks (Crédit Lyonnais, Société Générale, Comptoir National d’Escompte de Paris, Banque Nationale pour le Commerce et l’Industrie), three of the four ‘D’ German banks (Deutsche Bank, Dresdner Bank, and Disconto-Gesellschaft), and major American trust companies (Equitable Trust Company of New York, Guaranty Trust Company of New York, Farmers’ Loan and Trust Company, International Banking Corporation). There were some fifteen foreign banks in Paris in 1913, from seven countries, including five British (Lloyds Bank, London County &Westminster Bank, as well as the Anglo-Egyptian Bank, the London & River Plate Bank, and the Hong Kong & Shanghai Banking Corporation), but (for political reasons) no German banks.”19

London’s role as the premier international financial centre reflected the dominant role played by the pound in the international economy as the main means of financing international trade. Therefore, it was crucial for foreign banks to be able to access the London money market.

16_{Marc Meuleau, Des Pionniers en Extrême-Orient. Histoire de la Banque de l’Indochine, 1875-1975}

(Paris : Fayard, 1990)

17_{André Mommen, The Belgian Economy in the Twentieth Century, (London and New York: Routledge,}

1994).

18_{Rondo Cameron, ‘Introduction’ in International Banking 1870-1914, eds., Rondo Cameron and V.I}

Bovykin (New York, Oxford: Oxford University Press, 1991), 18.

19_{Yossef Cassis, ‘Introduction: Comparative Perspectives on London and Paris as International}

Financial Centres in the Twentieth Century,’ in in eds., Youssef Cassis and Eric Bussière, London and Paris as International Financial Centres in the Twentieth Century (Oxford: Oxford University Press, 2005), 2.

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European banks also promoted and organized private capital exports the world over thus promoting economic growth from North to South America, Russia and elsewhere. In fact, between 1870 and 1914, Europe was the world’s banker.20_Leaders

in the field of international banking have historically been the British merchant banks and the haute banque of Continental Europe - the history of these banks, especially in the 19th _{century, has been investigated by a large historiography.} 21

The first wave of international and multinational banking produced important financial innovations.22_{European commercial banks’ entry into international and}

multinational banking coincided with the development of the telegraph and this led to a “structural change” in trade finance.23_{Thus, overdrafts and telegraphic transfers}

gradually took over the role of commercial bills. The development of foreign exchange markets and the emergence of global correspondent networks led to the practice of mutual overdrafts facilities that brought into existence an international system of “nostro accounts” which “allowed banks to access foreign-currency balances held with correspondents abroad, sometimes covered against risk.”24_{Finally, from the}

mid-1890s a finance bills market developed in London. International capital markets also witnessed innovations.25

The first wave of multinational and international banking was triggered by and contributed to accelerating the process of globalization already underway. Foreign trade and international capital flows benefited from the stability of the gold standard and the development of communication technologies. It lasted until the rivalry between European countries finally led to the First World War that teared apart the Belle Epoque. International and multinational banking briefly re-emerged in the interwar years only to be further hit by the Great Depression and finally by the onset

20_{Herbert Feis, Europe: The World’s Banker, 1870-1914, (Princenton: Yale University Press: 1930).} 21_{On the history of private banks see for example: Youssef Cassis and Philip L. Cottrell, Private Banking}

in Europe: Rise, Retreat, and Resurgence (Oxford: Oxford University Press, 2015); Stanley Chapman, The Rise of Merchant Banking (London; Boston: Allen & Unwin, 1984); Niall Ferguson, The World’s Banker: The History of the House of Rothschild (London: Widenfeld & Nicolson, 1998);Richard Roberts, Schroders: Merchant & Bankers (Basingstoke, Palgrave Macmillian, 1992); Phillip Ziegler, The Sixth Great Power: A History of One of the Greatest Banking Families, The House of Barings, 1762-1929 (New York: Alfred A. Knopf, 1988).

22_{Stefano Battilossi, ‘Financial Innovation and the Golden Ages of International Banking: 1890–1931}

and 195881’, Financial History Review 7 (1 October 2000).

23_Ibid. 24_Ibid. 25_Ibid.

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of the Second World War, which began in September 1939 with the Nazi Germany invasion of Poland.

European banks returned to international banking at the end of the Second World War as worldwide correspondent bank networks were re-established and foreign trade resumed following the establishment of the Bretton Woods and the gradual liberalization of regional and international trade. However, Aliber and Griffith-Jones in the 1980s and Patrick McGuire, more recently, argued that the

second wave of multinational banking began in the 1960s - thirty years after the

demise of the first wave. Indeed, Aliber noted that the “second major wave [of multinational banking] occurred since 1960;” 26_{Griffith-Jones stated that “since the}

1960s, most of the world’s major banks have emulated other corporations by going global,”27_{and McGurire argued that the second wave began in “the 1960s with the}

birth of the Eurodollar market.” 28

This view is also shared by banking historians. Jones wrote, in the already mentioned chapter in Banks as Multinationals, that the “the 1960s produced a second wave of multinational corporate banking” and that the “American banks led the second wave, through during the 1980s Japanese institutions became increasingly prominent.”29_{Huertas also pointed out at the role played by American banks in}

triggering the second wave. American banks established branch-based multinational banking networks, Huertas noted, to better fund domestic activities, to participate in the Euromarkets as well as in the local corporate and consumer markets.30

The Eurodollar market - an international off-shore money market denominated in dollars - holds a central place in explanations of the origins of the second wave. Huertas, for example, noted that “the surge of US bank MNEs [multinational enterprises] coincided with the birth and development of the Eurodollar market.”31

26_{Robert Z. Aliber ‘International banking: A survey’, Journal of Money, Credit and Banking, 16 (1984),}

661-78.

27_{Stephany Griffth-Jones, ‘The Growth of Multinational Banking, the Eurocurrency Market and tehir}

Effects on Developing Countries’ in The Journal of Development Studies, Volume 16, 1980 – Issue 2.

28_{Patrick McGuire, ‘Discussion’, in Stefano Battilossi, ‘The Determinants of Multinational Banking}

During the First Globalization, 1870-1914’, Working Party 114, Osterreichische NationalBank, 2006.

29_{Geoffrey Jones ‘Banks as Multinationals’ in ed., Geoffrey Jones, Banks as Multinationals (London}

and New York: Routledge, 2012 Kindle Edition, 10.

30_{Thomas F. Huertas, ‘US multinational banking: history and prospects’ in ed., Geoffrey Jones, Banks}

as Multinationals, (London and New York: Routledge, 2012) Kindle Edition, 254.

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The Eurodollar market linked by 1964 around 400 banks from all over the world.32_It

enabled the financing of foreign and international trade by European banks in competition with American banks and developed as an unregulated enclave in an otherwise strongly regulated international financial system. The Eurodollar market, however, managed to undermine this carefully planned system of international economic relations in the late 1960s.

International finance and banking were reshaped by the Eurodollar market from its natural home in the City of London, which, because it hosted the market, accommodated an ever-growing number of foreign banks, not least American. The origins of the Eurodollar market go back to the 1950s, when capital and exchange controls kept European banks under a tight straitjacket. Catherine Schenk dated the market’s establishment in 1955 by the Midland Bank.33_{Once established, Midland}

quickly lost its initial advantage as British overseas and merchant banks took the market into their own hands swelling its size following the capital controls enacted in September 1957. London merchant banks also innovated capital market practices by engineering the first Eurobond and Eurocredits products, which lay the ground for the development of the Eurobond and Eurocredit markets form 1963 onwards.34_As

Schenk noted elsewhere, the origins of the Eurodollar market:” lay in the innovative

approach of a single clearing bank responding to tight domestic liquidity within the

cosy cartel that restricted competitive bidding for domestic retail deposits.”35_Another

pioneer of the Eurodollar market in the City, Gary Burn showed, was the Bank of London and South America (BOLSA), one of the leading British overseas banks.36

Bolsa, however, added short-term dollar finance products to its banking products only in 1957. London managed to become the leading vector of change in international

32_{Kazuhiko Yago, The Financial History of the Bank of International Settlements (London and New}

York: Routledge, 2013),

33_{Catherine R. Schenk, ‘The Origins of the Eurodollar Market in London: 1955-1963’, Explorations in}

Economic History, no. 35 (1998): 221-238.

34_{Niall Ferguson, ‘Siegmund Warburg, the City of London and the Financial Roots of European}

Integration’, Business History 51, no. 3 (2009): 364–82; Kathleen Burk, ‘Witness Seminar on the Origins and Early Development of the Eurobond Market,’ Contemporary European History, volume 1, issue 1 March 1992, pp. 65-87; Gary Burn, The Re-Emergence of Global Finance; Gary Burn, ‘The State, the City and the Euro-Markets’, Review of International Political Economy 6:2 (Summer 1999): 225– 61.

35_{Catherine Schenk, The Decline of Sterling: Managing the Retreat of an International Currency,}

1945-1992, (Cambridge: Cambridge University Press, 210), 225.

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banking and finance in the 1960s also thanks to the endorsement of the Bank of England, which did not obstruct the bankers’ new market. 37_{Central banks in}

continental Europe also endorsed the Eurodollar market before they turned against it due to the role this played in the monetary turbulences of the late 1960s – central bankers’ regulatory efforts are comprehensively explored by Altamura, Toniolo and Yago.38

The Eurodollar market thrived in the 1960s as international demand for dollar finance surged in parallel to the growth of international trade and as exchange controls were removed once European countries managed to rebuild their official dollar reserves, thus restoring current account convertibility against the dollar area in December 1958. Against this background, European official dollar reserves and dollar holdings of rich individuals and firms swelled the size of the Eurodollar market as they were attracted to it by the higher interest rates it offered on dollar deposits. Enabling this development was regulation Q in the US, which, by capping short-term deposit interest rates, constrain American banks from competing. The demand of Eurodollar, Eurobond and Eurocredit products was boosted by the US government through capital controls in 1963, 1965 and 1968, and by pushing American banks to operate in these markets. Youssef Cassis observed that:

“Not only [American banks] invade the Euromarkets but they gave these markets a boost that they would never otherwise have had. While American banking legislation thus strengthened London’s international role to the detriment of New York’s, American banks took full advantage of the situation, dominating the Euromarkets and integrating them into their global strategy.”39

Eric Helleiner and Richard Sylla noted that American banks invaded the Euromarkets as they escaped the impact of US regulations on their international

37_{For an analysis of the vast historiography on the Eurodollar market and the Bank of England, see}

Stefano Battilossi, ‘International Money Markets: Eurocurrencies’ in Handbook of the History of Money and Currency, eds., Stefano Battilosi, Youssef Cassis, Kazuhiko Yago (Springer Nature Singapore: Singapore, 2020), 301-303.

38_{Carlo Edoardo Altamura, European Banks and the Rise of International Finance: The Post Bretton}

Woods Era (New York: Routledge, 2017); Gianni Toniolo, Central Bank Cooperation at the Bank for International Settlements, 1930-1973 (New York: Cambridge, 2005); Kazuhiko Yago, The Financial History of the Bank of International Settlements (London and New York: Routledge, 2013).

39_{Youssef Cassis, Capital of Capitals, A history of International Financial Centres, 1780-2005}

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business.40 _{Lending in offshore markets enabled American banks to comply with the}

controls but also to circumvent them. Helleiner also noted that “the bankers had considerable domestic political support for their move offshore” but he suggests that this was received ex-post.41_{In the same vein, Battilossi argued that American banks}

circumvented US capital controls by allocating their international bank business to the Euromarkets and that the US government encouraged the banks’ moved offshore as a

quid pro quo for regulating their home market.42_{Catherine Schenk characterized the}

US capital controls as having “marked a turning point for the foreign operations of New York banks.” Schenk argued convincedly that the capital controls led American banks to use their foreign branches in London and other international financial centres to expand their international banking operations.43

Edoardo Altamura seems to suggest that the development of the Eurodollar market also awaken European commercial banks from lethargy. Altamura wrote that:

“the reopening of international markets, thanks to the creation of the

Eurodollar market, represented an incredible opportunity to revive the business of

banking after several decades of hibernation and forced retreat inside local

boundaries [emphasis added].”44

Similarly, Stefano Battilossi noted that European banks expanded rapidly abroad since the Euromarkets developed and opened branches in the world’s major, but also regional, international financial centres in order to take advantage of the new wholesale banking opportunities. The regulatory and tax advantages in the offshore

40_{Richard Sylla, ‘United States Banks in Europe: Strategies and Attitudes’, in European Banks and the}

American Challenge, Competition and Cooperation in International Banking under Bretton Woods, eds. Youssef Cassis and Stefano Battilossi (Oxford: Oxford University Press, 2005); Eric Helleiner, States and the Re-emergence of Global Finance: From Bretton Woods to the 1990s (Ithaca, NY: Cornell University Press, 1996.

41_{Eric Helleiner, States and the Re-emergence of Global Finance: From Bretton Woods to the 1990s}

(Ithaca, NY: Cornell University Press, 1996), 88.

42_{Stefano Battilossi, ‘Introduction: Historical Perspective’ in European Banks and the American}

Challenge, Competition and Cooperation in International Banking under Bretton Woods, eds. Youssef Cassis and Stefano Battilossi (Oxford: Oxford University Press, 2005), 16.

43_{Catherine R. Schenk, ‘International Financial Centres, 1958-1971: Competitiveness and}

Complementarity’, in European Banks and the American Challenge: Competition and Cooperation in International Banking under Bretton Woods, eds. Youssef Cassis and Stefano Battilossi (Oxford: Oxford University Press, 2002), 91.

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financial centres were also strong incentive motivating banks’ foreign expansion.45

Battilossi also showed that Eurodollar market revolutionized international banking by transforming banking practices and by introducing new financial innovations.46

American banks’ assault on the Euromarkets shook the peaceful web of relations between European banks and opened up a new world of unbridled competition. This turning point in post-war international banking has been thoroughly explored by several historians in the volume edited by Stefano Battilossi and Youssef Cassis, European Banks and the American Challenge: Competition and

Cooperation in International Banking under Bretton Woods.47_{Besides assessing the}

profile of European banks in the 1950s, in the chapter written by Cassis, the volume investigates the tensions in the international economy that led to the exponential growth of the Euromarkets (Battilossi); the competitive dynamics of London, Paris and New York as international financial centres (Catherine Schenk); and the international strategies of European and American banks as these competed for corporate clients in the Euromarkets (Richard Sylla, Battilossi, Duncan Ross, Ulrich Ramm and Erich Bussière). Battilossi showed that British clearing banks responded significantly to American banks’ assault only in the early 1970s, and once competition-stifling institutional and regulatory constrains were removed. European continental banks, French and German, organized their counteroffensive to the American challenge by upgrading correspondent relations in an effort to establish strategic alliances based on banking clubs. Consortium banks were also established and some of them in cooperation with American banks.

As Duncan Ross, Ulirch Ramm and Eric Bussière, also Richard Roberts noted the end of the journey for the consortium banks and banking clubs in the 1970s. Roberts wrote the definitive account of the post-war consortium bank phenomenon. 48 _{Roberts meticulously reconstructed the consortium phenomenon since its}

45_{Stefano Battilossi, ‘Financial Innovation and the Golden Ages of International Banking: 1890–1931}

and 1958–81’, Financial History Review 7 (1 October 2000).

46_{Stefano Battilossi, “The Eurodollar revolution in financial technology. Deregulation, innovation and}

structural change in Western banking in the 1960s-70s,” IFCS – Working Papers in Economic History. WH wp09-10, Universidad Carlos III de Madrid. Instituto Figuerola.

47 _Stefano _Battilossi _and _Youssef _Cassis, _eds., _European _Banks _and _the

AmericanChallenge: Competition and Cooperation in International Banking under Bretton Woods, (Oxford; New York, 2002).

48_{Richard Roberts, with Christopher Arnander, Take Your Partners: Orion, the Consortium Banks and}

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beginnings in the second half of the 1960s and until its demised in the 1970s leaving no stone unturned. As the historians mentioned above, also Roberts also argued that the consortium banks were ill suited to promote banks’ international business because of conflicts of interest and divergent strategic views. Bussière also explored French banks’ contribution to the rise of the Eurobond market showing that while Paribas managed to become a leading player, the Crédit Lyonnais struggled as it could not use its domestic placing network.49

The second wave of multinational banking began in the second half of the 1960s but it really gained momentum in the 1970s. European and Japanese banks developed global multinational networks and competed with each other and with American banks in international lending, against the background of momentous change in world economic relations following the end of Bretton Woods in 1971, the explosion of the Euromarkets after the oil shock of 1973, stagflation and the economic uncertainties of that decade. By then, the Euromarkets became truly global providing short, medium and long-term finance to a private and sovereign borrower.

In collaboration with several economists, Adrian E. Tschoegl explored the multinational expansion of Spanish, Singaporean, Norwegian and American banks (Chase National Bank) before and after Bretton Woods and the interconnectedness of the world’s financial centre as a result of the multinational expansion of banks in the 1970s and 1980s.50

49_{Eric Bussière, “French Banks and the Eurobond Issue Market during the 1960s” in eds., Youssef}

Cassis and Eric Bussière, London and Paris as International Financial Centres in the Twentieth Century (Oxford: Oxford University Press, 2005).

50_{Mauro F. Guillén and Adrian E. Tschoegl, ‘At Last the Internationalization of Retail Banking? The}

case of Spanish Banks in Latin America’ The Wharton Financial Institutions Center Working Paper (September 1999); Adrian E. Tschoegl, ‘The International Expansion of Singapore’s largest banks.’ The Wharton Financial Institutions Center Working Paper (May 2000); Siv Fagerland Jacobsen and Adrian E. Tschoegl ‘The International Expansion of Norwegian Banks,’ The Wharton Financial Institutions Center Working Paper (August 1997); Gino Cattani and Adrian E. Tschoegl, ‘An Evolutionary View of Internationalization: Chase Manhattan Bank, 1917 to 1996’ The Wharton Institutions Center Working Paper (August 2002); Sang-Rim Choi, Adrian E. Tschoegl and Chwo-Ming Yu, ‘Banks and the World’s Major Financial Centres, 1970-1980,’ Weltwirtschaftliches Archiv, 1986, Bd. 122, H.1 (1986), pp.48-64.

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Table 1.1 American and European commercial banks that re-established/expanded their multinational banking networks, 1945-1959

American French Italian German Dutch

Chase

National Bank pour le Commerce et Banque Nationale l’Industrie (BNCI)

Banca Commerciale

Italiana

Deutsche Bank Hollandsche Bank-Unie First National

City Bank Banque de Paris et des Pays-Bas (Paribas)

Banco di

Roma Commerzbank Handel-Maatschappij Nederlandsche (NHM) Bank of

America Crédit Lyonnais

Banca Nazionale del

lavoro Société Générale

Sources: Thomas F. Huertas, ‘US multinational banking: history and prospects’ in Banks as Multinationals, ed. Geoffrey Jones (London and New York: Routledge, 2012) Kindle edition; Gino Cattani and Adrian E. Tschoegl, ‘An Evolutionary View of Internationalization: Chase Manhattan Bank, 1917 to 1996’, Center for Financial Institutions Working Papers, August 2002; Hubert Bonin, ‘The Challenged Competitiveness of the Paris Banking and Financial Markets, 1914- 1958’, in London and Paris as International Financial Centres in the Twentieth Century, eds. Youssef Cassis and Éric Bussière (Oxford; New York: Oxford University Press, 2005), Alain Lacroix, 'Conditions de la mise en valeur de l'Afrique Occidentale Francaise', These pour le Doctorat en Droit, Université de Paris, Faculte de Droit et des Sciences Economiques, 1958; Lothar Gall, Gerald D. Feldman, Harold James, Carl-Ludwig Holtfrerich and Hans E. BüschenThe Deutsche Bank, 1870-1995 (London: Weinfield & Nicolson, 1995) Commerzbank, Annual Report, 1959.

French and British international and multinational banking in the 1970s was explored by Edoardo Altamura. Altamura explained the exponential growth of the Euromarkets in that decade as resulting from the failure of European continental banks to regulate the Eurodollar market once this began to destabilize the tranquil world of Bretton Woods in the late 1960s and early 1970s and to the oil shock of 1973 that led to a sharp build up of official reserves of the oil exporting countries.51

51_{Carlo Edoardo Altamura, European Banks and the Rise of International Finance: The Post Bretton}

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Table 1.2 The number of foreign units under different organisational forms established by American and European continental banks, 1945-1959

Banks

Organizational form American Frence1 _Italian _German _Dutch _Total Representative office 17 - 14 13 1 45 Agency 3 - 1 - - 4 Branches 50 43 11 - 12 116 Subsidiaries 4 11 3 3 1 22 Joint ventures 1 1 4 - - 6 Affiliates - - 4 5 - 9 Total 49 55 37 21 14 176

1 _{most of the branches were opened the colonies of Western Africa}

Sources: Thomas F. Huertas, ‘US multinational banking: history and prospects’ in Banks as Multinationals, ed. Geoffrey Jones (London and New York: Routledge, 2012) Kindle edition; Gino Cattani and Adrian E. Tschoegl, ‘An Evolutionary View of Internationalization: Chase Manhattan Bank, 1917 to 1996’, Center for Financial Institutions Working Papers, August 2002; Hubert Bonin, ‘The Challenged Competitiveness of the Paris Banking and Financial Markets, 1914- 1958’, in London and Paris as International Financial Centres in the Twentieth Century, eds. Youssef Cassis and Éric Bussière (Oxford; New York: Oxford University Press, 2005), Alain Lacroix, 'Conditions de la mise en valeur de l'Afrique Occidentale Francaise', These pour le Doctorat en Droit, Université de Paris, Faculte de Droit et des Sciences Economiques, 1958; Lothar Gall, Gerald D. Feldman, Harold James, Carl-Ludwig Holtfrerich and Hans E. Büschen, The Deutsche Bank, 1870-1995 (London: Weinfield & Nicolson, 1995) Commerzbank, Annual Report, 1959 Frank M. Tamagna “New York as an international money market” in Banca Nazionale del Lavoro Quarterly Review (June 1959): 201-234 Banca Commerciale Italiana internationalhistory.intesasanpaolo.com/world-map/mappa; Banco di Roma, Verbali Consiglio di Amministrazione (VCA), 1945-1960; AS BdR, VCA, 1945-1971; CLA, 270AH001, Situation de nos Representatitions conjointes, 7 December 1971; Marcello De Cecco and Maria Rosaria Ostuni, eds., ‘Riunione Del Comitato Esecutivo 4 August 1949’, in La BNL Dal Dopoguerra Agli Anni Sessanta, 1946-1963 (Firenze: Giunti, 2002); Valerio Castronovo and Maria Rosaria Ostuni, La BNL: Una Banca a Dimensione Internazionale, 1964-1980 (Firenze: Giunti, 2002). .

Flooded with new and impressive dollars reserves, the oil producing countries of the Middle East surged at to the center stage of international economic relations. With limited investment opportunities in their home countries, the Arab governments placed the petrodollars earned by increasing the price of oil in the hands of European and American banks, which recyled them by lending the world over and especially to Latin American countries that hitherto had limited access to the Euromarkets.

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Altamura meticulously explored these developments and showed that European banks exploited these opportunities by developing autonmous international banking strategies once they abandoned their allegiance to the cooperative ventures established in the late 1960s. Altamura convincedly argued that the 1970s represented a watershed in European international banking.

The link between the rise of the offshore Euromarkets markets and the second wave of multinational banking since the late 1960s is undisputable. Nevertheless, some European banks returned to multinational banking during the late 1940s while others in the 1950s. Evidence that British overseas and American, French, German, Dutch and Italian commercial banks returned to multinational banking before the 1960s is provided by Adrian Toeschel, Cleveland and Huertas, Geoffrey Jones, Hubert Bonin, Alexander Nützenadel,De Rosa, Brambilla and Castronovo.53

52_{The countries in grey represent takes into account only newly open representative offices and}

branches.

53 _{Gino Cattani and Adrian E. Tschoegl, ‘An Evolutionary View of Internationalization:}

ChaseManhattan Bank, 1917 to 1996’ The Wharton Institutions Center Working Paper (August 2002); Harold van B. Cleveland and Thomas F. Huertas, Citibank, 1812-1970 (Cambridge, Mass: Harvard University Press, 1985); Geoffrey Jones, British Multinational Banking, 1830-1990 (Oxford; New York: Clarendon Press, 1993); Hubert Bonin, ‘The Challenged Competitiveness of the Paris Banking and

Figure 1.1 In grey the countries where European and American commercial banks established new operational units under different organisational forms, 1945-1959

52

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Figure 1.1 illustrates in grey the countries where European and American banks established new operational units under all forms available in the late 1940s and 1950s – these geographical patterns will be discussed further below. Instead, Table 1.2 shows the organizational forms established. As Table 1.2 illustrates, the total number of representative offices and branches established in those years is significant even if capital and exchange controls were at their apex.

Figure 1.2 illustrates the geographical expansion of European and American commercial banks between 1945 and 1959. As the figure illustrates, European and American commercial banks expanded the world over but especially in South America, Africa and the Middle East. French banks were especially active in the French West

Financial Markets, 1914-1958’, in London and Paris as International Financial Centres in the Twentieth Century, eds. Youssef Cassis and Éric Bussière (Oxford; New York: Oxford University Press, 2005); Werner Plumpe, Alexander Nützenadel & Catherine Schenk, Deutsche Bank: The Global Hausbank, 1870-2020 (London, Oxford, New York, New Delhi, Sidney: Bloomsburry Publishing 2020); Gabriele De Rosa, Storia Del Banco Di Roma , vol. III (Roma: Banco di Roma,1982); Carlo Brambilla et al., La Sfida Internazionale Della Comit. La Banca Commerciale Italiana Agli Albori Della Globalizzazione (Bologna: Il Mulino, 2013); Valerio Castronovo, Storia Di Una Banca. La Banca Nazionale Del Lavoro Nell’Economia Italiana 1913-2005 (Roma : Laterza, 2013).

Figure 1. 2 Foreign banks in London and New York, 1945-1959

Source: Mae Baker and Michael Collins, ‘London as an International Banking Centre, 1950-1980’, in London and Paris as International Financial Centres in the Twentieth Century, eds., Youssef Cassis and Eric

Bussière (Oxford: Oxford University Press, 2005); Andrew F. Brimmer, ‘Foreign Bank Institutions in the United States Money Market’, The Review of Economics and Statistics, Vol. 44, No.1 (Feb. 1962), pp.76-81.

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African colonies where they began to expand during the war. 54_{American banks also}

entered India, Japan and Indonesia. German banks returned to South America, operated in some African countries and entered the Middle East, like the Dutch banks.

It is well known that European banks also returned to the world’s leading international financial centres. 55_{European banks were the leading foreign banks in}

London and in New York in the 1950s. As figure 1.2 illustrates, European banks were the dominant foreign banks in New York but not in London, where 28 out of 77 foreign banks were European. 56

Altamura asserted that in the 1950s “international banking played only a minor role in the strategies of the major British and French banks” and that “overall the 1950s were years of conservatism in international banking.” 57_{Furthermore, Altamura}

argued that:

“in France and the UK, just few commercial banks and overseas banks were active on international markets mainly as providers of retail services in the colonial territories or intermediaries in trade finance operations, essentially the same kind of business that they had done since the late nineteenth century.”58

Clearly, this stands in sharp contrast to the late 1960s and especially the 1970s, when the explosive growth of the Euromarkets and of international lending transformed European international and multinational banking. As already shown, Altamura’s view is that European banks were mostly inward-looking until the late 1960s and early 1970s when the Euromarkets boomed. However, what is relevant from the standpoint of early post-war European multinational banking is not only the marginality of international banking, but also that European banks actively sought to expand abroad.

Further evidence that European banks returned to multinational banking at the end of the Second World War is offered by Italian banks. Italian banks’ pre-and

54_{Alain Lacroix, 'Conditions de la mise en valeur de l'Afrique Occidentale Francaise', These pour le}

Doctorat en Droit, Université de Paris, Faculte de Droit et des Sciences Economiques, 1958.

55_{Andrew F. Brimmer, ‘Banking Institutions in the United States Money Market’, The Review of}

Economics and Statistics, Vol. 44. No.1 (Feb. 1959), pp76-81.

56_{Mae Baker and Michael Collins, ‘London as an International Banking Centre, 1950-1980’, in London}

and Paris as International Financial Centres in the Twentieth Century, eds., Youssef Cassis and Eric Bussière (Oxford: Oxford University Press, 2005), Table 12.1, p. 250.

57_{Carlo Edoardo Altamura, European Banks and the Rise of International Finance, 40.} 58_Ibid.

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post-Second World War internalization history has been explored by several historians. However, the banks’ international banking dimension before the Second World War is far more researched than the post-war history.

The banks’ pre-Second World War history aboard has been explored by Di Quirico, Iacopini, Stanciu, Piluso, Di Vittorio and De Rosa.59_{Iacopini’s and Stanciu’s}

case studies regard the banks’ multinational networks in Central and East Europe. Iaccopini underlined the BCI’s reluctance to advance the foreign policy goals of the Fascist government, although he argued that the BCI handled the loans Fascist Italy made to those governments, while Stanciu noted that the BCI retreated from the region as this was ravaged by the Great Depression because of poor managerial investment decision. 60_{The Banco di Roma developed mainly as a Mediterranean and}

colonial bank making inroads into the former Ottoman Empire, in the horn of Africa and in Libya, the first of Italy’s colonies. Its significant development in these regions and its ambitious plans to become the leading European bank in the Mediterranean under Fascism were explored by De Rosa and Di Vittorio. The Banco’s multinational network was justified by its desire to become the bank of reference of Italian exporters in these corners of the world and by its wish to cater to the banking needs of Italian colonists. The same aim guided the BCI’s and Credito Italiano’s decision to enter South America in the early 20th_{century, a history that is comprehensively analysed by Piluso,}

who focused on the two banks’ South American business between 1906 and 1933. 61

On the cusp of the Great Depression, the two banks were present in all the countries that mattered in South America. Those foreign markets were not virgin territory from the standpoint of European banking. Nevertheless, Piluso shows that the two Italian

59_{Roberto Di Quirico, Le Banche Italiane All’estero, 1900-1950: Espansione Bancaria All’estero}

eIntegrazione Finanziaria Internazionale Nell’Italia Degli Anni Tra Le Due Guerre (Fucecchio: European Press Academic Publishing, 2000); Alessandro Iacopini, ‘L’espansione della Banca Commerciale Italiana in Europa orientale durante il Fascismo,’ Diacronie. Studi di Storia Contemporanea, Vol 5, Issue 3 (2013), 1-23; Laura Stanciu, ‘Italian multinational banking in interwar east central Europe,’ Financial History Review, Volume 7, Issue 1, April 2000, pp.45-66; Giandomenico Piluso, ‘Le Banche Miste Italiane in Sud America: Organizzazioni, Strategie e Mercati (1905-1921)’, Archivi e Imprese, no. 13 (gennaio-giugno): 7–57; Antonio Di Vittorio, ‘A Multinational Bank: The Banco Di Roma’, The Journal of Economic History, no. 2 (1987): 389–98; Gabriele De Rosa, Storia Del Banco Di Roma, vol. III (Roma: Banco di Roma,1982).

60_{Alessandro Iacopini, ‘L’espansione della Banca Commerciale Italiana in Europa orientale durante il}

Fascismo,’ Diacronie. Studi di Storia Contemporanea, Vol 5, Issue, 3, (2013) 1-23.

61_{Giandomenico Piluso, ‘Le Banche Miste Italiane in Sud America: Organizzazioni, Strategie e Mercati}

International and multinational banking under Bretton Woods (1945-1971) : the experience of Italian banks

INTERNATIONAL AND

MULTINATIONAL BANKING UNDER

BRETTON WOODS (1945-1971)

The experience of Italian banks

Ioan Achim Balaban

European University Institute

Department of History and Civilization

International and multinational banking under Bretton Woods (1945-1971)

The experience of Italian banks

Ioan Achim Balaban

Abstract

Table of Contents

List of Tables

List of Abbreviations

Acknowledgements

Chapter 1 Introduction

The aim of the thesis

Literature review: the dynamics of multinational banking

under Bretton Woods