The bi-annual fairs of Medina del Campo, near the center of Castile, were the epicenter of commercial and financial activities in an age of difficult communications and travel. Before 1575, the crown strongly supported the regular holding of these fairs which were essential for getting new loans from bankers, selling long-term annuities and tax collection contracts. The great crisis of 1575–1577 forced their suspension, after which they never regained their central role. The description of the fairs’ work provides important insights on the financial and fiscal context in which Philip operated.

The central money problem of Philip was the conflict between the spending for the defense of his Habsburg inheritance, mainly in the Low Countries, and the resistance of cities to pay for this, within Castile’s implicit constitution from a medieval tradition. The bankers, mainly from Genoa, jumped at the opportunity to provide the wheels of finance between the tax collection at the center, Castile, and the spending at the periphery. These actors are presented in this chapter.

Various characters take center stage in this book: the king, his ministers, and prominent bankers like Grimaldo, but throughout history, regardless of place or time, crises have been endured by the general population. The king’s suspension brought the entire credit market, based on interconnected relationships, to a standstill. This chapter gives a voice to the ordinary people who had to suffer this experience. Their grievances have been documented in the archives, with their own names.

As merchant power grew in the eighteenth century, the merchant political economy became increasingly unstable. Merchant control over banks and credit and their ability to obtain state backing for monopolistic corporations meant that non-merchant groups were increasingly pressured, leading to the Age of Revolutions, while unified markets and interconnected credit chains generated runaway competition and violent financial crises. By the 1800s, technical developments in manufacturing led to ever larger fixed capital, an unsustainable burden in unstable markets. Using textile factories in Waltham and Lowell, Massachusetts and iron manufacturers in Trenton, New Jersey, the chapter shows how merchant factories, still focused on quality and dealing with crises mostly by trying to cut wages, were displaced by modern industrial capitalists working on the whole production function to cut costs and gain market shares, leading to the large, market-dominating oligopolies of today. Even a cursory analysis of today’s accounting and management methods and business practices, centered on cost and productivity issues, shows how different they are from the merchant practices of the Age of Commerce.

In the third chapter we describe the takeoff of commercial banking in Latin America from midcentury onwards, as witnessed by the establishment of almost 100 joint-stock banks in the more dynamic economies of the region between 1850 and 1873. The creation of banks was especially notable in cities and ports of Argentina, Brazil, Chile, Cuba, Peru, Mexico and Uruguay, developments that have not previously been analyzed from a comparative perspective. Our text argues that the dynamics of export economies (from the early 1850s) as well as the entry of foreign direct investments (from the 1860s) generated demand for the creation of new types of financial enterprise that spurred early capitalism in Latin America. A striking feature was the growing prominence of large banks that had connections with public administrations, such as the Banco do Brasil (1853), which became a pillar of finance for the imperial government, and the Banco de la Provincia de Buenos Aires (1854), a commercial bank that operated in Argentina as a key agency for the government and for ranchers and merchants. Finally, attention is turned to the Banco Español de la Habana, which became the main financial support for the Spanish colonial administration in Cuba during the Ten Years’ War (1868–1878).

In the sixth chapter we underline the extensive enthusiasm for the creation of national banks in the 1870s and 1880s. A first hypothesis concerns the increasingly close relationship between states and banking systems, emphasizing the growing financial requirements of nation-building. A crucial factor was the ascent of a series of political and/or military leaders in the 1880s in Latin America who promoted banks to contribute to more integrated state-building projects. Banks and railroads went hand in hand in this new export age and provided a formidable impetus to economic development in the late nineteenth century. This was clearly an age when capitalism was coming of age in many countries, large and small. Despite some similarities, the relations between large banks and governments in Latin America took different paths in each nation. For instance, the Banco do Brasil (1853) and the Banco Nacional de México (1884) were both large private firms, although each assumed a central role within the public administration and managed financial operations for the private sector and for governments. In contrast, the Banco Nacional de Argentina (1872) was more of a public entity. A final section analyzes the acute banking and financial panics in the 1890s in Argentina, Brazil and Uruguay.

This book focuses attention on the antecedents, birth and relatively late development of modern banking in Latin America. The novelty of the chapters that follow is to offer a panoramic overview of the trajectories of banks and credit markets across a significant number of nations in this extensive region over a long time period. The approach is chronological, but each chapter pays attention to a distinct theme that can allow the reader to grasp key problems that refer to the process of creation and expansion of banks in order to grasp the successes as well as the failures of different financial regimes and enterprises during successive phases from the end of the colonial regimes down to 1914. We maintain that the economic history of the nations of this vast region should not be viewed simply as a story of failure, but rather as an expression of a prolonged and sometimes unstable process of slow capitalism during what we describe as the long nineteenth century.

Financial Crime Risk Management (FCRM) is one of the top priorities of senior managers in the banking industry. The use of AI tools, products and services by banks is on the rise. Using AI in FCRM is a natural progression in combating financial crime such as fraud detection. It also enables financial institutions such as banks to reduce costs as well as to improve customer satisfaction and their performance ratings with regulators, including the Financial Conduct Authority (FCA) and Competitions Market Authority (CMA). Current approaches to managing financial crime risk (FCR) may become outdated if banks do not align themselves with the opportunities that can be derived from the use of AI. AI already in use to combat fraud and other financial crimes in banks includes AI tools and products that have successfully mitigated against money laundering, blocked suspicious transactions and phishing emails, and managed sanctions risks, while strengthening Know Your Customer (KYC) processes. The use cases of AI within banks, such as pattern recognition and data analysis as well as machine learning for predictive analysis, are explored further in this chapter. Despite the risks and vulnerabilities associated with the use of AI to counter financial crime such as algorithmic bias and data privacy, financial institutions and their employees have increasingly continued to use it. The voices of bank employees on the use of AI in their banks in fostering its responsible use are, therefore, included in this study, using empirical data gathered from three United Kingdom (UK) high street banks. Harnessing AI’s power and promise responsibly will help in managing FCRs. This chapter, as such, offers novel ways in which stakeholders of banks can use the transformative power of AI in FCRM sustainably and responsibly, while promoting the principles of Fairness, Education, Accountability, and Transparency (FEAT).

This chapter describes the main types of financial institutions analysed in the book.

This chapter analyses the political economy of Rwanda’s financial sector. It presents the evolution of Rwanda’s national banking sector and the ways the Rwandan Patriotic Front has sought to mobilise domestic resources to invest in strategic sectors. It provides an overview of how African financial sectors have been transformed in varied ways through adapting to three kinds of financial sector reforms: policies influenced by the market-led consensus, developmentalist strategies and the influence of offshore sectors. Rwanda, in its attempt to transform Kigali into a financial sector while mobilising state-driven investments for strategic investments and adopting ‘best practice’ financial sector reforms, encapsulates the contradictions associated with being influenced by these three sets of policies concurrently. Next, the chapter describes how the Rwandan government has innovatively mobilised domestic resources to fund strategic investments. Innovations include its pension fund, the Rwanda Social Security Board. The chapter concludes by discussing how elite vulnerability has constrained the capacity of the Rwandan government to concentrate resources and financial expertise in one specific financial institution, thereby inhibiting the effectiveness of strategic investments.

Financial diplomacy played a critical role in the remaking of diplomatic alignments during the ‘great turning point’ of European and international politics between the Russo-Japanese War and the formation of the Triple Entente. French governments used access to the Paris capital markets to secure the alliance with Russia, loosen Italy’s place in the Triple Alliance, and shape the outcome of the First Moroccan Crisis. British ministers supported Barings’ participation in the 1906 loan to Russia as a way to stabilise the Tsarist Empire and prepare for the Anglo-Russian Entente. German financial diplomacy was hampered by smaller capital markets and government borrowing, in part, to fund naval expansion. In 1910, German banks lent large sums to Hungary and to the Ottoman empire, to consolidate its alliance and influence in Constantinople. But Hungarian and Ottoman governments had first looked to Paris, which blocked access for political reasons. Examining Russian loans, the Italian debt conversion of 1906, and the Hungarian and Ottoman loans casts new light on how financial diplomacy recast power politics in the early twentieth century.

Trade and finance together formed the third-largest livelihood type in colonial India. These two activities were interdependent because banks and moneylenders mainly financed commodity trade. The combined share of the two activities rose significantly in national income in the early twentieth century. Behind this growth, the expansion of transport infrastructure and an open economy with few barriers to foreign trade were responsible. It was not, however, a business without friction. A great deal of the historical scholarship around these activities asks how environmental risks, information asymmetry, law and politics shaped the decisions of merchants, lenders and firms, as this chapter shows.

The private sector, including but not limited to banks, plays a vital role in countering the financing of terrorism. The success of the private sector has been uneven when it comes to countering the financing of terrorism. In some cases, this has resulted in groups gaining access to funds in furtherance of their objectives. The chapter also points to the importance of true collaboration between the public and private sectors in combatting the financing of terrorism.

As a monetary capital provider, creditors play an important role in external governance with shareholders, although they have no legal voting right outside of the bankruptcy process. Chapter 8 will compare the legal institutions and practices regarding the roles of creditors in the three countries by dividing them into ex ante monitoring of solvent firms, renegotiation in financially distressed firms, legal bankruptcy, and debtor directors’ fiduciary duty during the zone of insolvency. In the United States, banks play an active role in the governance of the firm whose business stumbles, by using the loan agreements for the revolving credit facilities. In Japan, contingent governance by main banks as representative of monetary capital providers worked well during Japan’s rapid economic growth era, but was not able to monitor their client companies’ use of free cash flow after the economic growth stopped. Although China is a bank-centered economy and state banks keep a dominant position, Chinese banks play a limited role in monitoring borrowers, especially borrowers who are SOEs, which can be supported financially by the government with cheap credit.

This chapter discusses a third fictional case involving incomplete contracts. It tells the story of someone grappling with an ethical dilemma related to his bank deposits. After years of having his money deposited, he realizes that the bank invests in the arms and gambling industries. As a result, he looks to transfer his savings to a different bank without facing the costs outlined in his current contract. The chapter aims to clarify how he can use moral principles from the three economic enlightenments to articulate his moral reasons for changing the contract terms, while also showing how bank managers might employ a similar approach.