British Overseas Banks’ Activities in the London Financial Market Before the First World War from a View Point of Bill Transactions

This chapter intends to shed light upon the activities of British overseas banks’British overseas banks London offices in the period from the mid-nineteenth century to the eve of the First World War (1913). The main sources of sterling for their banking operations can be classified into the following activities: receiving fixed depositsFixed deposits in Britain; collecting bills from acceptors that their Asian branches purchased and sent to London; and selling bills to bill-brokersBill-brokers/discount houses or discount houses. British overseas banksBritish overseas banks effectively invested the funds thus raised in the following ways: purchasing bills of exchangeBills of exchange drawn by British exporters to Asia, and sending them for collection to Asian branches; purchasing Indian Council Bills and sending them to Indian branches; sending gold and silver bullion to Asian branches; undertaking or subscribing bonds that Asian countries floated in London; depositing money into corresponding banksCorresponding banks (London correspondents/agents) as cash reserves for paying telegraphic transferTelegraphic transfer and money exchange; and lending call money or short-term money. They carefully avoided exchange and credit risk, and benefited ultimately from these operations. The chapter will focus on a variety of transactions between British overseas banksBritish overseas banks and the London clearing banksLondon Clearing Banks (LCB). At first, the businesses of British overseas bank London offices will be scrutinized. The role of bills on LondonBills on London through the mechanism of the multilateral trade system of settlements will be shown. Then, the structure and function of the London discount marketLondon discount market, which played a substantial part of circulating bills among financial institutions in London, will be described empirically.