Barclays started life over three centuries ago as a modest Lombard Street goldsmith-cum-banker. By 1996 the bank employed 87,206 people, 28 per cent of whom worked overseas, a huge City clearing bank with extensive industrial, trade and retail lending. Offshoots grew in the US, Canada and Australia, and there were distinctly difficult operations in Palestine-Israel, Sudan, Libya and Egypt under the rubric of Barclays Dominion, Colonial and Overseas. Although the DCO name was changed in 1971, having attracted epithets such as "Don't Come and Overdraw", overseas operations continued to make valuable contributions to bank assets: in 1996, when this book closes, 22 per cent of the £186 billion of group assets lay abroad.
Now that the dust has settled on DCO, we should be grateful that Barclays's archive survives as a key resource for the 20th-century history of post-colonial regimes, some of which saw significant lapses from the standards of record keeping set pre-independence. The many miles of records also contain papers from dozens of British banking companies drawn into the bank over three centuries. As this book underlines, the archive is a motorway into the problems of economic history. People who ponder why the banks of so many countries are in a mess might benefit from studying Barclays, if only to realise that replicating their success is far from easy.
The original bank was founded by Quakers. It was to be a hub of a wider Quaker banking network, with the Quaker values of honesty, integrity and plain dealing: "my yea is yea and my nay is nay". The spokes were bound by local Quaker meetings, with bonds derived from years of strife in the 17th century that culminated in the appalling treatment meted out to Quakers under Charles II. Business life was hard. Wealth was accumulated slowly and could easily be lost. As John Freame, the founder of the 1690 bank, put it, the current generation had a duty to instil sound values in the next: "To implant in (young) minds a sense of piety and virtue, and to train them up in the best things. This would prove more advantageous to children than getting a great deal of riches for them." Bank deposits were held from customers as a conditional trust, to help fellow men and women advance their businesses and improve their lives. Members were there to aid fellow businesses.
As a result, few Quaker companies collapsed in the 18th century, and only a handful of their banks. As with similar highly motivated groups, the German Palatines, the Dutch, Huguenots and the Scots, the Quakers drew sustenance from the rigour demanded by their religion and community. This is thus a story from the high moral plateau, looking down upon lesser business forms, whose company trajectories show how easy it is to squander inherited wealth.
Instance the salutary story of the Thrales. In early times they were successful brewers. But by the mid-18th century there was too much of the good life: disporting the latest fashions, glittering at London salons, the Thrale women went through tens of thousands sterling urgently required by their brewery. By 1781 the cupboard was bare. Then, miraculously to the chief spendthrift, Hester Thrale, now a widow, "God Almighty sent us a knot of rich Quakers": £135,000 to be precise, in exchange for the brewery; the now Quaker-owned Perkin-Barclay firm was re-capitalised to become a landmark of London enterprise, and repay many times the purchase price. At last Hester was restored "to my original rank in life and a situation undisturbed by commercial jargon, undisgraced by commercial connexion".
The archives illustrate how Quaker bankers rescued under-capitalised firms, shifted resources to new areas, providing good security for depositors, and value for staff and owners. Until quite recently, the Barclays network maintained the local orientation of the original bankers, focusing on what localities did best, and helping head office make sense of local conditions. The wide learning of the authors allows judicious insight into received opinions on lending; the treatment of the so-called funding gap for medium-sized firms in the inter-war years, known as the Macmillan gap, is well executed, as are the problems faced by bankers in the world wars, in postwar reconstruction, and later by the problems of stop-go, dashes for growth, and other hurdles bankers had to cope with.
As we watch the long-drawn-out agonies of foreign banks at the start of the 21st century, it is worth noting that for over three centuries managers at Barclays witnessed every conceivable size and type of crisis. The authors hammer home the case for stability and commonsense in lending; on the need for value over the long term, keeping to strict rules about security and lending. Substituting "less conservative lending policies in an unstable environment", such as those adopted in many countries in the interwar years, and too many today, may serve to aggravate a worsening credit situation.
There are also abundant lessons from the business changes that Barclays undertook in the postwar years, several of which moved the bank a long way from their original Quaker views. Some innovations were not very successful, especially so in lending to countries without the benefits of British attitudes to credit management. Costly mistakes offer disturbing reminders of senior managers who failed to learn from past errors. There is substantive comment on the 20th-century bank data, and a comprehensive statistical appendix. A serious academic read then, well written, with a lot to ponder on.
Richard Saville is a historian, Coutts and Co.
Barclays: The Business of Banking 1690-1996
Author - Margaret Ackrill and Leslie Hannah
ISBN - 0 521 79035 2
Publisher - Cambridge University Press
Price - £35.00
Pages - 481