Abstract: Networks in Finance: Directors, Shareholders, and Borrowers in English and Welsh Joint Stock Banks, 1826-1860

Lucy Newton

Abstract

In 1826 legislation was passed that permitted the formation of joint-stock banks in England and Wales. This paper focuses on these new financial institutions, which played an important role in the development of more formalized English capital and credit markets. The paper describes how these banks, formed between 1826 and 1844, were local organizations in terms of their shareholders, management, and customers. As such they made extensive use of networks in establishing their businesses—developing their lending bases, but also selling their shares to individuals who would be of benefit to the institution and secure its capital base. The new joint-stock banks had to face fierce competition from their private counterparts and some resistance from business communities that were suspicious of the new form of financial institution. The involvement of bank managements and proprietors in local business networks highlights how the joint-stock banks managed to establish their businesses in a sometimes hostile environment. The work draws upon an extensive database of bank shareholders, customers, and managements in England and Wales collected from the archives of the four major UK clearing banks and provides a detailed analysis of the networks utilized in establishing the new joint-stock banks.