LONDON AND PARIS AS INTERNATIONAL FINANCIAL CENTRES IN THE TWENTIETH CENTURY pot

LONDON AND PARIS AS INTERNATIONAL FINANCIAL
CENTRES IN THE TWENTIETH CENTURY
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London and Paris as
International Financial
Centres in the
Twentieth Century
Edited by
Youssef Cassis
E
´
ric Bussi
E
`
re
1
3
Great Clarendon Street, Oxford ox26dp
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British Library Cataloguing in Publication Data
Data available
Library of Congress Cataloging in Publication Data
London and Paris as international financial centres in the twentieth century /
edited by E
´
ric Bussie
`
re, Youssef Cassis.
p. cm.
ISBN 0–19–926949–1 (alk. paper)
1. Financial institutions, International–England–London. 2. Financial institutions,
International–France–Paris. 3. Banks and banking, International–England–London.
4. Banks and banking, International–France–Paris. 5. International finance.
I. Bussie

`
re, E
`
ric, 1955- II. Cassis, Youssef.
HG3944.L66 2005
332.1’5’094210904–dc22
2004024144
ISBN 0–19–926949–1
13579108642
Typeset by Kolam Information Services Pvt. Ltd, Pondicherry, India
Printed in Great Britain
on acid-free paper by
Biddles Ltd., King’s Lynn, Norfolk
Preface
This volume originates from the third Anglo-French business history conference,
organized by the Business History Unit at the London School of Economics, on 4–
6 April 2001. A first conference, on ‘Management in the Age of the Corporate
Economy, 1850–1990’, took place in September 1992 (the proceedings were
published in Y. Cassis, F. Crouzet, and T. Gourvish (eds.), Management and Business
in Britain and France: The Age of the Corporate Economy (Oxford, 1995)), and a second,
on ‘Les Strate
´
gies de commercialisation et de marketing’, in Paris in October 1995.
The need was felt by scholars in both countries to compare the financial sector in
Britain and France from a business history perspective, and the theme of ‘London
and Paris as international financial centres, 1890–2000’ was chosen for the third
conference.
The editors would like to thank the many people who have helped them in their
endeavours. They are particularly grateful to Kathleen Burk, Fo rrest Capie, Fran-
c¸ois Crouzet, Patrick Fridenson, and Terry Gourvish for chairing the conference’s

five sessions, as well as to Franc¸ois Caron, Maurice Le
´
vy-Leboyer, Piere de Long-
uemar, Roger Nougaret, Geoffrey Owen, John Plender, Geoffrey Wood, and the
others who attended the conference and enhanced the quality of the debates. They
are also grateful to Pascal Boris (BNP Paribas), David Green (Financial Services
Authority), David Kynaston (London), David Lascelles (Centre for the Study of
Financial Innovation), Philip Mallinckrodt (Schroder Salomon Smith Barney), and
Fre
´
de
´
ric Pe
´
rier (Paris Europlace) for participating in the round table, chaired by
Martin Dickson from the Financial Times, which provided a highly stimulating
conclusion to the conference. Dr Christophe Revillard, of the University of
Paris IV, skilfully edited the final manuscript, Dr J. C. Whitehouse translated
Chapters 3, 11, 13, and 15, and Mr Owen Leeming Chapter 5, from the French.
Sonia Copeland efficiently dealt with all organizational issues. The editors would
also like to express their gratitude to the funding organizations which generously
supported the conference, namely the Bank of England, the Banque Vernes Artesia,
BNP Paribas, the Caisse des De
´
po
ˆ
ts et Consignations, the European Association for
Banking History, Euronext, and N. M. Rothschild & Sons.
Y.C.
April 2004 E.B.

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Contents
List of Figures ix
List of Tables xi
Notes on Contributors xiii
1. Introduction: Comparative Perspectives on London and Paris
as International Financial Centres in the Twentieth Century 1
Youssef Cassis
Part I: London and Paris in Long-Term
Perspective, 1890–2000
2. A Financial Phoenix: The City of London in the Twentieth Century 15
Ranald Michie
3. When Paris Dreamed of Competing with the City. . . 42
Alain Plessis
Part II: ‘Golden Age’, 1890–1914
4. The City of London and British Imperialism: New Light on
an Old Question 57
Niall Ferguson
5. Paris, London, and the International Money Market:
Lessons from Paribas, 1885–1913 78
Marc Flandreau and Franc¸ois Gallice
6. London Banks and International Finance, 1890–1914 107
Youssef Cassis
7. Banking Alliances and International Issues on the
Paris Capital Market, 1890–1914 119
Samir Saul
Part III: From Global Reach to
Regional Withdrawal, 1914–1958
8. Established Connections and New Opportunities: London
as an International Financial Centre, 1914–1958 153

P. L. Cottrell
9. The Challenged Competitiveness of the Paris Banking
and Finance Markets, 1914–1958 183
Hubert Bonin
Part IV: The Road to Globalization, 1958–1980
10. Crisis and Opportunity: The Policy Environment of International
Banking in the City of London, 1958–1980 207
Catherine Schenk
11. The International Opening-up of the Paris Bourse:
Overdraft-Economy Curbs and Market Dynamics 229
Olivier Feiertag
12. London as an International Banking Centre, 1958–1980 247
Mae Baker and Michael Collins
13. French Banks and the Eurobonds Issue Market during the 1960s 265
E
´
ric Bussie
`
re
Part V: Internationalization and
Globalization, 1980–2000
14. London as an International Financial Centre, 1980–2000:
Global Powerhouse or Wimbledon EC2? 287
Richard Roberts
15. The Future of the Paris Market as an International Financial
Centre from the Point of View of European Integration 313
Andre
´
Straus
Index 326

viii Contents
List of Figures
4.1. British overseas investment earnings as a percentage of
GDP, 1850–1913 62
4.2. Overseas investment as a percentage of British GNP, 1856–1913 63
4.3. Value of colonial and foreign government bonds quoted on the
London Stock Exchange as a percentage of GDP, 1853–1913 64
4.4. Average bond yields, 1870–1914 66
4.5. Debt–revenue ratios for Egypt and Turkey, 1876–1913 70
4.6. Turkish–Egyptian yield spread, 1870–1914 70
4.7. Capital flows from Britain to Egypt and Turkey, 1865–1914 71
4.8. Anticipated and actual returns on eleven governments’
bonds, 1850–1914 72
4.9. Anticipated and actual returns on nine governments’
bonds, 1915–1945 73
5.1. Paribas portfolio, 1885–1913 87
5.2a. Paribas ‘pure’ foreign portfolio, 1885–1913 88
5.2b. Paribas ‘pure’ London bills 88
5.3. Assets foreign correspondents nostri–lori 91
5.4a. Assets nostri by type 92
5.4b. Assets lori by type 92
5.5a. Assets nostri: geographical distribution 93
5.5b. Assets nostri: share of foreign and Anglo-foreign
banks in Paribas nostri in London 93
5.6. Assets lori: geographical distribution 94
5.7a. Liabilities lori: geographical distribution, 1885–1913 96
5.7b. Liabilities lori by type 96
5.8. Parisbas/Bank of France £ bills portfolio 99
10.1. Annual growth rate of Eurocurrency market
(Net of interbank holdings) 208

10.2. Net new international lending, 1971–1979 208
10.3. Share of total Eurobond issues by type of borrower 211
11.1. Average monthly transactions on foreign securities
compared with those on French securities in the
share market, 1963–1983 232
11.2. Admission of foreign securities to the official
Bourse list, 1963–1983 235
12.1. Foreign banks in London, 1870–1980 (direct representation) 249
12.2. Origins of foreign banks in London 250
12.3. Percentage of deposits to total deposits, by origin 260
14.1. Employment in wholesale financial services
in London, 1971–2000 289
14.2. Male City salaries, 1970–2000 299
14.3. Female City salaries, 1970–2000 299
15.1. Borrowing requirements of public administrative bodies 318
15.2. Ratio of foreign share transaction to total transaction 319
x List of Figures
List of Tables
4.1. Cumulated flows and stocks of British overseas capital 65
4.2. Measures of indebtedness in Fenn’s Compendium, 1887 67
4.3. Anticipated and actual returns on a selection of
international bonds, 1850–1945 72
5.1. Stylized ‘monetary’ sub-balance of Paribas 85
5.2. Explaining sterling holdings 89
5.a1. Concentration of Paribas deposits, 1905 105
5.a2. Data for regressions in Table 5.2. 105
7.1. Stock publicly issued in France 122
7.2. Stock issues in France 123
7.3. Stock issues for capital to be used in France 124
7.4. Foreign stock issued by the syndicates studied 126

7.5. South-East Railways syndicate 129
7.6. Syndicate for the 1907 Japanese loan 132
7.7. Underwriting syndicates for Scandinavian loans 136
8.1. Overseas capital issues made on the UK capital market,
1920–1936 163
8.2. Overseas capital issues, 1939–1958 175
12.1. Foreign banks in London, by country
250
12.2. Foreign banks in New York and London 251
12.3. Ratios of deposits of domestic banks and deposits
of foreign banks to total deposits 254
12.4. Deposits: domestic banks 255
12.5. Deposits: foreign banks 255
12.6. Ratio of deposits to total deposits, by origin 259
12.7. Advances by British and foreign banks to UK
residents and overseas residents 261
12.8. Investment of foreign banks’ liquid reserves 262
13.1. The achievements of Paribas on the international
market, 1964–1965 268
13.2. Cre
´
dit Lyonnais: a comparison of the results obtained
in the international issues field, 1964–1965 270
13.3. Co-operation with British and continental banks 272
14.1. London wholesale financial services activities, 2000 293
14.2. Number of foreig n banks, 2000 294
14.3. International cross-border bank lending, market share, 2000 294
14.4. Foreign exchange trading volume, 1998 294
14.5. Number of foreign companies listed on selected exchanges, 1999 294
14.6. Average daily turnover of OTC derivatives, 1998 296

14.7. Holdings of institutional equities in leading financial centres, 1999 296
14.8. Sale of UK merchant banks, 1989–2000 305
15.1. Ratio of foreign share transactions to total transactions 320
15.2. Balance of payments finance account 321
xii List of Tables
Notes on Contributors
mae baker is a lecturer at the University of Leeds.
hubert bonin is a professor at the Institut d’E
´
tudes Politiques de Bordeaux.
E
´
ric bussiE
`
re is a professor at the University of Paris IV.
youssef cassis is a professor at the University of Geneva and a visiting fellow at
the Business History Unit, London School of Economics.
michael collins is a professor at the University of Leeds.
p. l. cottrell is a professor at the University of Leicester.
olivier feiertag is a professor at the University of Rouen.
niall ferguson is a professor at the University of Oxford.
marc flandreau is a professor at the Institut d’E
´
tudes Politiques de Paris.
fran
C¸ ois gallice is a researcher at the University of Paris X-Nanterre.
ranald michie is a professor at the University of Durham.
alain plessis is a professor emeritus at the University Paris X-Nanterre.
richard roberts is a reader at the University of Sussex.
samir saul is a professor at the University of Montre

´
al.
catherine schenk is a senior lecturer at the University of Glasgow.
andr
E
´
straus is a research fellow at the CNRS.
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1
Introduction: Comparative Perspectives
on London and Paris as
International Financial Centres
in the Twentieth Century
Youssef Cassis
Throughout the ‘long nineteenth century’, Lond on and Paris were the world’s two
leading financial centres. Whether an international financial centre is defined as a
cluster of financial service providers serving the requirements of either a region, a
continent, or, indeed, the whole world, or as a central location where an area’s
financial transactions are coordinated and cleared,
1
the British and French capitals
were at the forefront in fulfilling these tasks. Their financial markets were ahead of
those of other European centres—Amsterdam, Brussels, Hamburg, Frankfurt, and,
from 1870, Berlin—as well as New York. This hierarchy changed during the
twentieth century with the rise, first, of New York and, later, Tokyo. Although
London, Paris, and New York competed during the 1920s, New York’s global
dominance had become clearly established by 1945. While London from the 1960 s
re-emerged, and Tokyo from the 1980s emerged, as global financial centres along-
side New York, Paris, despite some attempts during the 1960s, remained in the
‘second division’, behind Frankfurt and Zurich in Europe, and Hong Kong

worldwide. Only in the closing years of the twentieth century did Paris appear
capable of re-establishing itself as a prime European financial centre.
The destinies of the two centres thus followed parallel courses until the 1950s,
thereafter diverging, although significant differences, and similarities, can be ob-
served during both eras. The main differences during the first sixty to seventy years
surveyed by this volume, say from 1890 to 1958 (and even earlier during the nine-
teenth century), were a matter of size and international outlook. London was always
the larger,by a significant margin. There are no available statistics for the magnitude of
international financial centres, especially befo re 1960, and, indeed, no clear criteria
regarding the basis on which to rank them. Nevertheless, all the suggestive indicators
for 1913, a convenient vantage point for an approximate quantitative comparison
between the two centres, clearly point to London’s advantage.
In term s of financial capacity, Britain was by far the larger exporter of capital,
with a stock of foreign investment reaching some $18.3bn. (about 42 per cent of the
world’s total) as against $8.7bn. for France (20 per cent and second only to
London).
2
Many more foreign issues were floated in the City, whether for govern-
ments or private companies, than in Paris, and London’s banks, primarily the
merchant banks, were more likely to le ad international syndicates. The bulk of
world trade was financed through the medium of bills of exchange drawn on
London, with Paris only playing a supporting, parallel role, primarily within
Europe. London ’s huge discount market hardly had any equivalent in Paris. The
London Stock Exchange was nearly twice as large as the Paris Bourse, with the
nominal value of the securi ties quoted on the two markets being respectively
£11.3bn. and £6.2bn. in 1913.
The largest French bank, the Cre
´
dit Lyonnais, was on a par with the leading
three British clearing banks (London City & Midland Bank, Lloyds Bank, and

London County & Westminster Bank), with deposi ts of c.£100m. in 1913.Ithad
only been rivalled as the world’s largest bank since the turn of the century.
Although it had a network of foreign branches, including a powerful presence in
the City, the Cre
´
dit Lyonnais’s stature was a consequence of its domestic, rather
than its international, affairs. In any case, British international banking was primar-
ily conducted by merchant banks and corporate ove rseas banks, which numbered
thirty-one in 1913 and had collectively 1,387 branches abroad.
3
There were fewer
French overseas banks (a dozen), since the large deposit banks mostly undertook
this type of business. Nonetheless, the Banque de l’Indochine, Banque de l’Alge
´
rie,
and the Banque Impe
´
riale Ottomane were all major financial institutions.
4
In 1913,
London was also host to some thirty foreign banks from twelve different countries,
including the four largest French banks (Cre
´
dit Lyonnais, Socie
´
te
´
Ge
´
ne

´
rale, Comp-
toir 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).
5
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.
6
London was also more international, or truly global, as opposed to Paris’s
somewhat regional specialization. British capital flowed to nearly all parts of the
world, though with a clear preference for the Americas (34 per cent for North
America and 17 per cent for South America), the balance being more or less equally
divided between Europe (13 per cent) Asia (14 per cent), Africa (11 per cent), and
Australasia. French investors, on the other hand, favoured Europe (including
Russia) and the Middle East (Ottoman Empire and Egypt), which together
absorbed 60 per cent of their foreign investment. And, while th e British Empire
took up 40 per cent of the metropolis’s overseas investment, the smaller and
geographically more restricted French empire received a not insignificant 13 per
cent.
7
These differences were largely reflected in the geographical distribution of
2 Youssef Cassis
the securities quo ted on the London Stock Exchange and the Paris Bourse.
However, both were highly internationalized markets, with foreign securities

accounting for more than 50 per cent of stocks traded. As we have just seen,
foreign banks established in London and the London-based multinational banks
came from, and went to, a greater number of countries.
It should be emphasized that, on most if not all these counts, Paris was second
only to London. The differences that have been highlighted must be considered
alongside the intense vibrancy of Paris as an international financial centre during the
belle e
´
poque, the French Edwardian Age, when its financial market is aptly described
in this volume by Alain Plessis as a ‘‘noteworthy number two’’. Nevertheless, even
during this era of broadly parallel developments, the gap between the first and
second international financial centres was substantial, and this had more to do with
London’s exceptional position than with any failings on Paris’s part.
The financial capacity of both centres was weakened by the impact of the First
World War, though more so in the case of Paris, not least as a consequence of the
Russian losses in 1917, than in that of London. While the pound struggled to return
to gold at its pre-war parity, eventually accomplished in 1925, the franc suffered
two severe crises in 1924 and 1926 before being officially stabilized in 1928 at a fifth
of its pre-war value. French financial institutions we re severely weakened by
inflation and the depreciation of the franc. In real terms, the Cre
´
dit Lyonnais’s
total balance sheet did not regain its 1913 level before 1931.
8
In terms of size, the
French big deposit banks were no longer in the same league as their English
counterparts. In 1929, the total assets of Lloyds Bank, the largest British bank by
this measure, reached £431m. and those of the National Provincial Bank, the
smallest of the ‘Big Five’, £307m. as against £112m. for the Cre
´

dit Lyonnais and
£108m. for the Socie
´
te
´
Ge
´
ne
´
rale.
9
A similar difference is observable in the two
countries’ long-term foreign investments. While Britain’s total overseas investment
reached $22.9bn. in 1938, France’s had shrunk to $3.9bn., behind the United States
($11.5bn.) and even the Netherlands ($4.8bn.).
10
It thus appears that during a period when both London and Paris lost some
ground in terms of international status and influence, the gap between the two
markets actually increased. The challenge to London’s world leadership came from
New York, not from Paris, and this contest over primacy only gradually developed
because, if capital was henceforth more plentiful in New York, experience and
expertise remained in London.
11
However, the role of Paris should not be over-
looked, especially after 1926, once Poincare
´
had de facto stabilized the franc. Despite
a conscious attempt at creating an acceptance market, Paris was never able to
develop the range of financial services that would have enabled it seriously to
challenge London. However, the Banque de France’s go ld reserves and sterling

assets put Paris in a strong position vis-a
`
-vis London and enhanced its international
status, particularly during the immediate aftermath of Britain’s departure from gold
in 1931 (in many respects the real turning point in the City’s history). This led the
financial journalist Paul Einzig to write of a fight for financial supremacy between
London, Paris, and New York during the early 1930s.
12
The depression of the
Introduction 3
1930s and withdrawal into regional spheres of influence would put an end to this
rivalry.
The divergent paths which London and Paris took during the second part of the
twentieth century increased the gap separating these two centres with regard to
their roles as providers of international financial services. Yet, the overall conditions
prevailing within their two host countries were in many respects similar. For banks,
the legacy of the war meant, as far as their business operations were concerned, a
shift from commercial to government lending. Furthermore, state intervention
took a further step after the war. In France, this led to the nationalization of the
Banque de France and the four major deposit banks (though not the banques
d’affaires), adding to a public sector that already included the Caisse des De
´
po
ˆ
ts et
Consignations (the recipient of most of the assets of the savings banks). In Britain,
only the Bank of England was nationalized, but the Big Five remained under strict
official control, receiving precise instructions from the Treasury concerning not
only their liquidity but their lending priorities; as Keynes had reflected, they hardly
needed to be nationalized. In both countries, currency convertibility was only

officially reintroduced at the close of 1958. And, since the 1930s, the two imperial
powers had withdrawn into their colonial empire and zones of influence. The
pound remained the world’s second leading currency after the dollar thanks in large
part to its role within the sterling area, while the franc remained the anchor of the
smaller zone franc.
As is well known, the revival of the City of London during the 1960s was a result
of the emergence of the Eu rodollar market.
13
This is not the place to discuss the
origins of these transactions in dollars outside the United States, which have to do
with the United States’ overseas investment and banking regulations, in particular
the so-called Regulation Q (dating back to 1933 and enabling the Fede ral Reserve
System to put a ceiling on the rate of interest that banks paid on domestic deposits).
As foreign banks, initially British banks, were able to offer a higher rate, dollars
were attracted to London. In the context of a comparison between London and
Paris, it is of anecdotal interest to note that the first such dollar deposit is tradition-
ally considered to have been made in Paris—at the Banque Commerciale pour
l’Europe du Nord, a Russia n bank whose telegraphic address was Eurobank, hence
the appellation ‘Eurodollar’. However, the Eurodollar market found its home in
London, not in Paris, for reasons mainly connected with the amount of expertise
existing in the City, its tradition as a global financial centre (which had not
disappeared with the depression and the war), the English language, and the
monetary authorities’ relaxed attitude towards this new market.
Thereafter, the gap between the two centres grew much wider as London
regained its position, alongside New York, as the world’s leading financial centre.
Indicators of size and performance are no more perfect for the late than for the early
twentieth century, but those available are telling. International banking activity was
far more intense in the United Kingdom than in France. The share of the former,
measured by the foreign assets held by the country’s deposit banks, was 17.1 per
cent in 1965 and 25 per cent in 1970, as against 4.3 and 6 .8 per cent for the latter.

14
4 Youssef Cassis
The number of branches of foreign banks in London rose from 54 in 1955 to 118 in
1970, as against 16 to 18 in Paris during the same period.
15
A wide array of figures is
available for the very recent years in Richard Roberts’s chapter in this volume,
which compares London with other leading financial centres with regard to a
number of key activities. The contrast between London and Paris is striking.
There were 481 foreign banks in London in 2000 as against 187 in Paris. That
same year, the United Kingdom’s share of international cross-border lending was
19.5 per cent, as against 6 per cent for France. In 1998, London had a 32 per cent
share of the average daily turnover in foreign exchange trading, as against 4 per cent
for Paris. In 1999 , 499 foreign companies were quoted on London Stock Exchange,
as against 169 at the Paris Bourse.
These broad quantitative comparisons should assist to place the chapters that
follow in an overall perspective. Throughout the twentieth century, there have
always been substantial differences in both the scale and the scope of the operations
of London and Paris as international financial centres. Moreover, these have been
greater than those prevailing in most industrial sectors, which until the 1960s were
far from insignificant.
16
And, unlike most sectors, and, indeed, the economy as a
whole (whether measured by GDP or GDP per head), there has been no conver-
gence between the size and overall influence of London and Paris as international
financial centres since 1945. The two markets were in fact closer when the
difference between the sizes of the British and the French economies was at its
greatest (Britain’s GDP was 69 per cent higher than France’s in 1913), and further
apart when this difference was at its narrowest (about 3 per cent in favour of France
in 1989, and 8 per cent in favour of Britain in 2003).

This raises the question of the comparability of the two centres and, more
generally, of the conditions under which comparative history can be undertaken.
In a previous discussion of the matter, I had observed that comparative history
would flourish when two alternative conditions were met: on the one hand,
when the countries had a relative homogeneity—in terms of size, level of develop-
ment, historical experience; and, on the other hand, when comparing a country
with the leading power of the day, in order to measure the gap separating it from
assumed best practice. As far as Britain and France are concerned, the first condition
was met from the beginning of the seventeenth to the end of the nineteenth
century. Thereafter, especially in the field of economic and business history, the
motivation for Anglo-French comparisons weakens since the two countries were,
in turn, overtaken by new competitors—the United States, Germany, and later
Japan.
17
From this perspective, London and Paris as international financial centres present
some peculiarities in comparison with the two ‘host’ countries’ general courses of
economic and business development. It is, for example, significant that the dis-
course on the performance of the financial sector, whether by contemporaries or by
historians, contains no reference to two popular thou gh increasingly discarded
concepts used to analyse the two countries’ respective business and economic
performance: French backwardness and British decline. This could be explained
Introduction 5
by the fact that both centres enjoyed what was undoubtedly their golden ages when
Britain and France were no longer the world’s two leading economic powers .
Nonetheless, their standings were not identical. Before 1914, London’s pre-emi-
nence rested on Britain’s position as a ‘dominant economy’, even though it had
been overtaken as an industrial power by the United States during the 1880s and by
Germany at the turn of the century. London’s, and Britain’s, position derived from
strengths in foreign trade, services, and finance as well as discharging roles at the
centre of the multilateral payments system.

18
Paris’s rank as number two was
possibly less in line with France’s economic power and international influence. In
both count ries, there were discussions of a mature or rentier economy and concerns
expressed about excessive capital exports to the detriment of domestic industrial
investment, though they have been dispelled by historical research.
19
However,
from a business history perspective, the emphasis has been on the dynamism and
entrepreneurship of British and French bankers and financiers and, whatever
doubts might have been raised, on the efficiency of their capital market.
The issue of decline has been discussed in connection with both centres, after the
First and, especially, the Second World War, but in a context quite different from
similar debates related to other fields of business activity or to the two countries’
overall economic performance. Interestingly, the theme of entrepreneurial failure is
rarely found in analyses of the performance of London and Paris as international
financial centres. The concept, admittedly, has become less fashionable in business
and economic history, though it has far from entirely disappeared and is still referred
to in different guises, whether structural or cultural. As far as London and Paris are
concerned, the causes of decline have been considered as primarily exogenous: war,
inflation, the sale of foreign assets, constraints on the balance of payments, state
intervention and regulation—which all played in favour of the new main con-
tender in world finance: New York. Criticisms have been made of financial insti-
tutions, but they do not necessarily apply to financial centres taken as a whole.
Paris’s lacklustre role as an international market after the Second World War has not
been attributed to any failure on the part of the French banks but rather to the
constraints resulting from the ‘overdraft economy’ (financing through banks rather
than capital markets) established by the authorities. Conversely, the fact that
virtually all the merchant banks, once the flower of the City, have been taken
over by foreign banks during the last fifteen years of the twentieth century could be

considered as a case of entrepreneurial failure, though this does not affect the global
success of the City, which is enjoying a position reminiscent of its pre-1914 ‘glory
days’.
Whatever these common features, the experiences of London and Paris have also
presented, as we have seen, a sharp contrast over the course of the twentieth
century. This raises the question: why has there not been a greater convergence
between the size, range of services, and internatio nal openness of the two centres
since 1945? The question is relevant given, as we have noted above, the ‘compar-
ability’ of Britain and France and the convergence that has taken place with regard
to most other aspects of their economies. Moreover, financial activities have always
6 Youssef Cassis
played an important role in France’s economic life, and repeated attempts have
been made to promote the role of Paris as an international financial centre and
challenge London’s pre-eminence. The most serious contest was mounted during
the 1860s, when France, spurred by the dynamism of the Pereire brothers and their
rivalry with the Rothschilds, was exporting more capital than Britain, and Napo-
leon III seized the opportunity to launch the Latin Monetary Union and a proposal
for a monetary unification.
20
Paris had no real possibility of supplanting London,
but the ambition was there, as it was to be, as we have seen, in the 1920s and, again,
in the 1960s. During the latter decade, a series of liberalizing measures intended to
enhance the importance of Paris as an international financial centre, in particular
within the context of the Common Market, were taken. However, as in the 1920 s,
they remained short lived and partially implemented, and any chance of success was
thwarted by the events of May 1968.
The reasons for the diverging paths followed by London and Paris over the
second half of the twentieth century are to be found in both the two markets’
capabilities to rise to real global status and the strategic choices made by political and
business leaders. As far as capabilit ies are concerned, although the two centres

declined from 1914, London had fared better, being the much larger centre during
the 1950s, supplying a far wider range of services and international connections. But
it was somnolent. For Lord Franks, chairman of Lloyds Bank between 1954 and
1962 and a former acade mic and senior civil servant, ‘it was like driving a powerful
car at 20 miles an hour’.
21
Yet the power, inherited from more than a century of
world dominance, was there and, certainly, in greater abundance than in Paris or
any other European centre. Making it run at full capacity, however, could no
longer be done on the British economy’s dwindling strength. This could only be
attained through internationa lization, starting with the birth of the Eurodollar
market and culminating in ‘Big Bang’ in 1986. The choice of opening up the
City was in many respects deliberate, though it was taken in several steps extending
over two decades and it is doubtful whether all its implications, ultimately leading
to the ‘Wimbledonization’ of the City in the 1990s, had been foreseen.
Paris did not have the same opportunities for growth during the 1950s and 1960s.
Convergence in the financial sector took place during the Trente Glorieuses, but
mainly in domestic banking as measured, however imperfectly, by the size of the
French big deposit banks. These institutions, by the early 1970s, caug ht up with
their British counterparts and then overtook them a decade later. But not in
international banking. The dirigisme of the French state certainly played a role in
this, though liberalizing measures were taken from the late 1950s. However, the
degree of control exerted by the British Treasury over the financial sector should
not be underestimated. Nonetheless, a distinction was made between retail domes-
tic banking, denominated in sterling, where exchange controls remained in place
until 1979, and wholesale intern ational banking, denominated in foreign curren-
cies, above all in dollars, which the Bank of England, unli ke other European central
banks, including the Banque de France, was prepared to leave mainly unregulated.
When deregulation took place in all major financial centres during the 1980s and
Introduction 7

1990s, London had already asserted its position, with New York and Tokyo, as one
of the world’s three global centres.
Strategic choices were thus partly dictated by existing opportunities and, vice
versa, in permanently changing conditions. But they are also the result of idiosyn-
cratic economic and political cultures, which are different though not diametrically
opposed—and thus comparable—in Britain and France. Be that as it may, French
financial leaders have tended to favour institutions, whether publicly or privately
owned, over markets. French banks have been more successful internationally than
Paris as an international financial centre, despite the crisis experienced by Cre
´
dit
Lyonnais in 1994. When faced with the same opportunities, it is doubtful whether
the French authorities would have been prepared to open up the Paris markets to
the extent that their British counterparts eventually did—no doubt a heritage of
Britain’s world role. In the same way, the global role traditionally played by the
City can be contrasted with Paris’s more European tradition, reflected in the
leading French banks’ European strategies. There is also a specific financial culture
which, though present in France and within the Parisian business elite,
22
has been
pervasive in Britain since the eighteenth century. This point arises whether one
considers the ‘weight’ of finance in the British economy or the position of the
financial elites in British society,
23
a peculiarity well described by the concept of
‘gentlemanly capitalism’ coined by Peter Cain and Tony Hopkins in the mid-
1980s.
24
In the end, Paris appears to have been more in the ‘norm’ than London, if the
‘norm’ is for a country to have an international financial centre more or less

commensurate with its ‘host’ economy’s size and international influence. In that
respect, the City is far more an ‘offshore’ centre than Paris, bringing nonetheless
enormous benefits to London and south-eastern England, and to the British
economy as a whole. However, the risks associated with such a statu s remain to
be properly assessed. On the other hand, the City has been increasingly contr ib-
uting to the economy of the European Union, with a 55 per cent share of its
wholesale financial services in 2000. It has been estimated that a fragmentation of
this concentration would result in severe losses not only for London but also for the
entire European economy.
25
There remains the question of why Paris, given the
deeper international financial traditions existing in France than in Germany and the
convergence between the French and German economies, has not managed to steal
a march upon Frankfurt. The answer will have to be left for another volume,
though Paris’s ascendancy might have taken place by the time it is published.
In the meantime, this volume concentrates on London and Paris, and it should
by now be clear that this bilateral comparison is a worthwhile undertaking.
Multilateral comparisons or other bilateral comparisons could be equally or possibly
even more interesting, but they would serve a different purpose. As much as a
comparison between London and Paris as international financial centres, this book
intends to be an Anglo-French comparison; in other words, to consider, through
the prism of finance, several aspects of the two countries’ economic, business,
social, and political histories. This is undertaken in a ‘parallel’ rather than in a direct
8 Youssef Cassis
comparative way. The following chapters are not in essence comparative; each
primarily deals with either London or Paris, or with an aspect of either centre’s
financial activities. The objective of this Introduction has been to give the reader a
few comparative keys with which to link together the national studies rather than
summarize them. In addition, a broad chronological and interpretative framework
is provided in the first two chapters, by Ranald Michie and Alain Plessis, who offer

an overview of the long-term development of each centre from the late nineteenth
to the late twentieth century.
For the rest of the book, the comparison between London and Par is has been
conceived as a contrast between two eras of globalization: the pre-1914 years (with
four chapters) and the last four decades of the twentieth century (with six chapters),
while two chapters deal with the intervening period of nationa l and regional
withdrawal. Throughout, each chapter on the City is matched by one concerned
with Paris and, for the periods 1890–1914 and 1958–80 (which each comprise of
four chapters), two primarily concerned with the funct ioning of the capital
markets, and two with the networks of relationships and the strategies of the leading
protagonists. Nevertheless, differences in both content and approach still remain
between parallel chapters, with archive-based case studies—more frequent in the
case of Paris—occasionally matching literature surveys. Such differences are un-
avoidable given the uneven state of historical research on the subject in the two
countries and their idiosyncratic historical questioning, not to mention the authors’
personalities. These should not deter from the capturing and comparing the nature
of each centre and its market and institutional surroundings at a given period, and
from better understanding the political economy of Britain and France in the
twentieth century.
Notes
I should like to thank Eric Bussie
`
re and Philip Cottrell for their helpful comments on an
earlier draft of this chapter.
1. On definitions of financial centres, see C. P. Kindleberger, ‘The Formation of Financial
Centers’, Princeton Studies in International Finance, 36 (1974), 1–78; H. C. Reed, The
Preeminence of International Financial Centers (New York, 1981); G. Jones, ‘International
Financial Centres in Asia, the Middle East and Australia’, in Y. Cassis (ed.), Finance and
Financiers in European History (Cambridge, 1992), 405–28; R. Roberts (ed.), International
Financial Centres: Concepts, Development and Dynamics (Aldershot, 1994).

2. United Nations, International Capital Movements during the Interwar Period (New York, 1949).
3. G. Jones, British Multinational Banking 1830–1990 (Oxford, 1993).
4. E. Kaufmann, La Banque en France (Paris, 1914), 181–201; H. Bonin, ‘L’Outre-mer,
marche
´
pour la banque commerciale de 1875 a
`
1985 ?’, in La France et l’outre-mer. Un
sie
`
cle de relations mone
´
taires et financie
`
res (Paris, 1998), 437–83.
5. Y. Cassis, La City de Londres 1870–1914 (Paris, 1987), 40–2.
6. Kaufmann, La Banque en France
; L. Dufourq-Lagelouse, Les Banques e
´
trange
`
res en France
(Paris, 1922).
Introduction 9
7. M. Simon, ‘The Pattern of New British Portfolio Investment, 1865–1914’, in
A. R. Hall (ed.), The Export of Capital from Britain 1870–1914 (London, 1968), 15–44;
J. Bouvier, R. Girault, and J. Thobie, La France impe
´
riale 1880–1914 (Paris, 1982),
99; J. Marseille, Empire colonial et capitalisme franc¸ais. Histoire d’un divorce (Paris, 1984),

100–1.
8. O. Feiertag, ‘Le Cre
´
dit Lyonnais et le Tre
´
sor Public dans l’entre-deux-guerres: les
ressorts de l’e
´
conomie d’endettement du XX
e
sie
`
cle’, in B. Desjardins et al., Le Cre
´
dit
Lyonnais 1863–1986 (Geneva, 2003), 809.
9. Banking Almanac (1929).
10. C. H. Feinstein and K. Watson, ‘Private International Capital Flows in Europe in the
Inter-War Period’, in C. H. Feinstein (ed.), Banking, Currency, and Finance in Europe
between the Wars (Oxford, 1995), 97.
11. K. Burk, ‘Money and Power: The Shift from Great Britain to the United States’, in
Cassis (ed.), Finance and Financiers, 359–69.
12. P. Einzig, The Fight for Financial Supremacy (London, 1931). See also P. Coste, Les Grands
Marche
´
s financiers: Paris, Londres, New York (Paris, 1932).
13. A recent discussion of the various aspects and implications of the phenomenon
can be found in S. Battilossi and Y. Cassis (eds.), European Banks and the American
Challenge: Competition and Cooperation in International Banking under Bretton Woods
(Oxford, 2002).

14. IMF, International Financial Statistics Yearbook (1981, 1988).
15. C. Schenk, ‘International Financial Centres, 1958–1971: Competitiveness and Comple-
mentarity’, in Battilossi and Cassis (eds.), European Banks and the American Challenge, 75.
16. For comparative data, see Y. Cassis, ‘Divergence and Convergence in British and French
Business in the Nineteenth and Twentieth Centuries’, in Y. Cassis, F. Crouzet, and
T. Gourvish (eds.), Management and Business in Britain and France: The Age of the Corporate
Economy (Oxford, 1995), 1–29.
17. Cassis, ‘Divergence and Convergence in British and French Business’, 1–2. See also
Y. Cassis, Big Business: The European Experience in the Twentieth Century (Oxford, 1997
).
18. See F. Crouzet, L’E
´
conomie de la Grande-Bretagne victorienne (Paris, 1978).
19. See S. Pollard, ‘Capital Exports, 1870–1914 : Harmful or Beneficial?’, Economic History
Review, 38 4 (1985); M. Le
´
vy-Leboyer, ‘La Balance des paiements et l’exportation des
capitaux franc¸ais’ in M. Le
´
vy-Leboyer (ed.), La Position internationale de la France,
XIX
e
–XX
e
sie
`
cles (Paris, 1977).
20. See J. Autin, Les Fre
`
res Pereire. Le Bonheur d’entreprendre (Paris, 1984), B. Gille, Histoire de

la maison Rothschild, 2 vols. (Geneva, 1965); L. Einaudi, Money and Politics: European
Monetary Unification and the International Gold Standard (1865–1873) (Oxford, 2001).
21. Quoted in A. Sampson, The Money Lenders (London, 1981), 121.
22. See for example L. Bergeron, Les Capitalistes en France 1780–1914 (Paris, 1978); A. Plessis,
‘Bankers in French Society 1860s–1960s’, in Cassis (ed.), Finance and Financiers, 147–60.
23. See Y. Cassis, ‘Financial Elites Revisited’, in R. Michie and P. Williamson (eds.), The
British Government and the City of London in the Twentieth Century (Cambridge, 2004).
24. P. J. Cain and A. G. Hopkins, British Imperialism: Innovation and Expansion 1688–1914
and British Imperialism: Crisis and Deconstruction 1914–1990 (London, 1993). The
concept of ‘gentlemanly capitalism’ first appeared in Cain and Hopkins’s two articles:
‘Gentlemanly Capitalism and British Expansion Overseas, I. The Old Colonial System,
1688–1850’, Economic History Review, 39 4 (1986), 501–25 and ‘Gentlemanly Capitalism
10 Youssef Cassis