My word is my bond ; reputation as collateral in nineteenth century English provincial banking

There are few real-world economic transactions that do not involve an element of trust, yet in textbook economics trust is not prominently discussed. In that world, perfectly informed and computationally endowed agents reach optimal, enforceable decisions in continuously harmonizing exchanges. Trust is therefore linked to deviations from the textbook ideal: incomplete information, costly enforcement, and computational limitations faced by agents. Trust can then be thought of as an algorithm, in other words, a way of resolving uncertainty in a complex world. In this sense trust may be seen as a form of expectation concerning the behavior of other agents whose actions and intentions cannot be (fully) observed. This paper pursues this approach by “running the algorithm backwards” and trying to establish what factors led a 19th century provincial English bank to trust different loan applicants. Using a data-set of some 200 loan decisions, and knowing the size of collateral (if any) requested, we develop a method to estimate the probability that the bank attached to each borrower’s promise to repay (i.e., the trust the bank had towards the borrower), adjusting for stages in the business cycle. We then regress this estimated probability on a variety of observable borrower characteristics. We find that trust is not correlated with a priori expected variables, such as borrower’s assets or frequency of interaction. This suggests that trust was built up in other interactions, possibly through social or religious networks, and that the banking relationship reflected information available to bank directors other than what was purely pertinent to the borrowers’ economic conditions. This has strong implications for the allocation of credit to industry in 19th century England.

Trust and virtue in banking: the assessment of borrowers by bank managements at the turn of the twentieth century

Crucial in a bank's role as financial intermediary is the ability to extract information from borrowing customers in order to reduce the risks inherent in lending. This paper examines the perceptions of banks' managements and the procedures undertaken by them in such risk assessment in England and Wales at the turn of the twentieth century. The use of 'subjective' information in particular will be considered. It is argued that although social/moral 'virtues' such as reputation and trust were important in the banks' risk assessment, the collection of information concerning a customer's ability to, and likelihood of, repaying credit was paramount. The context in which such decisions took place are also considered, particularly the impact of the financial crisis of 1878 and the amalgamation movement of the late nineteenth century which led to increasing standardisation and centralisation in the banks' evaluation of clients. Despite such changes, the types of information and the language used in banks' assessment of creditworthiness changed little over the period examined

Branding, Marketing and Product Innovation: The attempts of British Banks to Reach Consumers in the Interwar Period

This paper considers the relationships of the ‘Big Five’ British clearing banks with their personal customers in the interwar period. British banks formed a cartel and dominated the market for domestic financial services from the early twentieth century onwards. This cartel, combined with government imposed restrictions upon lending, meant that banks were severely restrained in their ability to offer new products and consequently to distinguish themselves from their competitors. It also meant that consumers had limited choices in terms of financial service providers. In this environment, bank managements had to rely heavily upon building brand image and utilising marketing techniques in order to differentiate themselves and to attract customers. For many bankers such techniques were new and unpopular – they were not used to communicating with their customers. From the perspective of the consumer, the paper aims to examine if the adoption of such marketing, brand building and public relations efforts were successful or not. It draws upon sources from bank archives but also from newspapers and public inquiries in an attempt to gather both the perceptive of banks and of their customers. The paper presents an analysis of personal customers and their relationships with, and views of, British banks in order to build upon the growing literature concerned with corporations and their consumers.

How far does the apple fall from the tree? The size of English bank branch networks in the nineteenth century

After the Bank Charter Act in 1833, English banks could branch nationally without legal or geographical restriction. It has been previously thought that despite this freedom, early English joint-stock banks predominantly began as single units. Drawing upon a new dataset, this article maps the growth of branch banking, the size of bank networks and their geographical location and spread. It demonstrates that banks pursued branching strategies against the intentions of regulators and were successful in forming large and complex networks. However, ultimately, the majority settled for local, district and multi-regional structures, as opposed to national structures

War memorials in organizational memory: a case study of the Bank of England

Nation-states are not the only bodies to have invested in memory-building through the construction of war memorials. This article moves the analysis on from nation-states to firms. It undertakes an analysis of war memorials built by the Bank of England. At the close of World War I, the Bank of England was not yet a nationalized company. Yet, it still, like many other organizations, engaged in this process of memorialization. We show that businesses closely followed the habits of nation-states when it came to commemorating war. The building of monuments and the ceremonies, which took place around them assigned values to the imagined communities, groups and nations. These events continue to the present day

Visualizing organizational identity: the history of a capitalist enterprise

This article examines the context in which firms reflect on their own history in order to help form their organizational identity. By undertaking research in business archives, it shows that external change is as important as an internal transition in understanding shifts in the way an organization understands its past. We trace the messages communicated internally through paintings of past chairmen and senior staff when they were displayed inside the head office of Lloyds Bank during the 1960s and 1970s. These portraits generated interest and were an effective means of non-verbal communication which provoked a discussion about the purpose, values and norms in the firm’s past, present, and future. The objects retold the story of the bank’s success as a privately owned family firm in the midst of on-going political debates inside the Labour party about the nationalization of large banking companies. With the portraits in place, they recognized the bank’s history as a capitalist enterprise. The pictures legitimized the tradition of private ownership, helped to form organizational identity, and set future obligations that would see its continuation in what was a period of potential change