Once again, Philippe Marguerat takes up the subject of the relationship between banks and large companies. As before, he undertakes a comparative approach, thanks to investigations into the bank accounts and into large samples of companies. He assesses how the financing needs of companies were met and how financial and banking resources contributed to their competitiveness, investment capacity, and profitability. From each country, he considers ten to fifteen companies in the heavy sectors of the Second Industrial Revolution.

From 1880 to 1913, the challenge for British employers was to find ways to compete against German investment and productivity. Bank binarism (that is the separation into merchant banks and joint stock banks [JSBs]) and the proliferation of medium-sized enterprises could constitute disadvantages. The British JSBs, with equity capital representing only half that of German banks, benefiting from a “mixed bank” profile, did not entertain a portfolio of securities, unlike the latter, nor did they participate in syndicates for the issue and placement of company titles. Thanks to the absorption of several regional and local banks, the JSBs reinforced their aspect of local and embedded banking and granted a lot of credits, generally guaranteed by securities and monitored by a centralized management. They provided liquidity to support the tight cash flow of customers, not investment credits—and this was a key difference with German banks, generous in overdrafts, but often opening doors to the consolidation of such bank debt by a securities issue into financial debt.

The merchant banks, with their large capital, operated an active market for industrial securities, but they were mainly oriented toward American stocks and organized few issues for the companies of their country. With only a few exceptions, they did not penetrate the heart of the English industrial system. Because British firms had less capital than their German counterparts, they endured a lower capacity for rapid development. To grow, they needed to give priority to self-financing, to draw from tight treasuries, and to use bank overdrafts. JSBs did not act enough as intermediaries between their depositors and savers and the needs of companies. They remained smaller in size, lacked capital, and suffered from economies of scale—except for a few cases, such as Vickers.

Marguerat highlights the economic model of the large German banks, articulated around the model of mixed banks. He emphasizes the self-financing capacity of the banking groups; they relied on the big banks but also on coalitions of “private banks” with which they used to work and on the legacy transmitted by the regional banks that JSBs had absorbed. This led to an effective partnership between bankers and industrialists, especially since a good collection of term deposits could feed sustainable credits. This network also meant that the asymmetry of information could be reduced thanks to a frequent presence on the boards of directors. Before the 1920s, despite the weak balance sheet of the British JSBs, which were not very rich in equity, firms had large financing needs because they were experiencing a trend toward vertical integration and diversification. While the merchant banks were much more concerned about the internal market, the JSBs contracted their overdrafts and were not sufficiently involved in the life of the financial market. Mergers between companies did not lead to sufficient rationalization and economies of scale, hence profitability and cash flow were often fragile; the business of bankers was not, then, to procure advice on this register.

German firms had to make large investments to offset the loss of European assets and strengthen their vertical integration. The financial market and the collection of banking resources were disrupted by the political and monetary situation. The Reichsbank and a few foreign banks partially replaced the banks in lending. Even when the situation stabilized between 1924 and 1930, the power of banks to supply loans was dulled because they lacked capital. The self-financing of firms became more essential, rationalization was intensified, and a tendency to over-indebtedness was emerging.

With regard to France, inflation had corroded the means of action of the great banks, and Marguerat furnishes renewed proof. Their capacity for action was reduced in the field of corporate and merchant banking. As they cut into their activity abroad, they could devote themselves more intensely to firms and amplify their offer of credits. The two big investment banks, Banque de l'union parisienne and Paribas, were undertaking offensives in central Europe through initiatives in Czech mechanics and electrotechnics (with the Schneider group) and Romanian oil. Many of these trails dwindled because of the crisis of the 1930s, which led to a great need for money to be sustainable. French banks were returning to their core know-how as leaders of syndicates for issuing and investing securities of client companies, satisfied to benefit from banks asserting themselves as more dynamic than the British in this register.

A broad conclusion confirms Marguerat's talents in discussing complex and often boring themes from a broad perspective and with a bold comparative approach. This book will relaunch debates about the connections between banking and business histories.