Universal Banking Failure? An Analysis of the Contrasting Responses of the Amsterdamsche Bank and the Rotterdamsche Bankvereeniging to the Dutch Financial Crisis of the 1920s

摘要

Whilst in some financial systems in the early twentieth centurycommercial and investment banking activities were carried out by functionallyseparate firms, in others both kinds of operation were conducted under one roofby “universal banks”. Explaining the evolutionary paths that lead to thesedivergent banking structures has remained a hot topic of multidisciplinarydebate for many years. So has their respective exposure to financial crises. Onthe one hand, universal banks – which hold both long- and short-term assets –are able to reduce information asymmetries and internalise risk. But on theother hand, their mixed asset structure arguably decreases versatility during aneconomic downturn and may create a “dual market for lemons” in whichinformation asymmetries cause financially sound clients and banks to exit themarket, leaving only the riskier crisis-prone ones behind.This paper analyses these debates using the case study of theNetherlands in the early 1920s. The literature argues that it is during thisdecade that the Netherlands experienced her one and only traditional bankingcrisis from 1600 to the present day, and after which her short-lived experimentwith a system of universal banking came to an end. By calculating an equitydepositratio panel for the Big Five Dutch banks, this paper attempts to measureto what degree the sector evolved to become universal and subsequentlyreturned to functional separation. It then conducts a matched pair comparison oftwo similar-sized banks operating in the Netherlands in the 1920s: theAmsterdamsche Bank and the Rotterdamsche Bankvereeniging. Whilst the firstescaped the crisis relatively unscathed, the second required assistance fromthe Nederlandsche Bank, the Dutch central bank. A new and detailed narrativeof one episode of the crisis using as yet unused primary sources is developedfor this comparison.This paper finds that the Rotterdamsche Bankvereeniging was moreuniversal than her Amsterdam rival. It concludes that it was primarily thisdifference that caused her to suffer during the crisis. However, it does so withcaution in view of the paucity of data to hand and methodological restrictions.