London has long been a global financial hub. This history dates as far back as 50 AD, after the Romans invaded the north bank of the River Thames. Because of its status as a port, the city drew in merchants from far away lands to trade. This trend continued in the coming centuries and by the 1520s, the city had a population of 50,000 to 60,000. According to historical demographer Tony Wrigley, London attracted 8,000 immigrants every year from 1650 to 1750, and by the end of the 18th century, its population had ballooned to a million people.
These merchants wielded considerable influence in the city, securing special privileges and autonomy for themselves. To this day, the city has its own governing body called the City of London Corporation. Emboldened by their autonomy, the merchants set out to promote trade by establishing banks. The Bank of England was established in 1694 and, over time, it became a banking monopoly at the heart of the city. The London Stock Exchange was founded just over a century later. It was established by stockbrokers who did their business in a coffee house in Change Alley. The famous Lloyd’s of London insurance market was founded similarly, by marine underwriters who regularly met at a coffee house on Tower Street. In the 1830s, the United Kingdom invested in an expansive rail network that strengthened the city’s connectivity. Now a major port with a strong merchant base, a rich banking history, and access to marine and rail transport channels, the City of London emerged as a top financial hub in Europe. Interestingly, London’s rise coincided with the decline of the Dutch empire and the fall of Amsterdam as a key financial center. London borrowed many of the financial innovations begun in Amsterdam and gradually improved on them. At the time, only Paris rivaled London as a center for European commerce, but Paris lost its mantle in the mid 19th century after losing a war with Prussia. Following the defeat, the Bank of France lost its reserve status, leaving the Bank of England as Europe’s dominant settling house of exchange transactions. London reigned supreme as a global financial center in the last half of the 19th century, and in the first half of the 20th century before falling behind New York after World War II. It re-emerged in the 1950s thanks to a host of reforms that allowed it to capitalize on the Eurodollar market, attracting hundreds of foreign banks into the city. From the 1980s all the way to 2020, banks with offices in London had much higher cross-border exposure than banks in other countries including Germany, France, Hong Kong, and the United States. According to the Financial Times, as of the second quarter of 2020, banks with offices in the UK had $5.1 trillion of cross border liabilities and $4.9 trillion of cross border assets, far more than those in the United States, which had slightly less than $4 trillion in liabilities and over $3 trillion in assets. London is also the center of currencies and derivatives trading. It accounts for 43 percent of the $6.6 trillion traded every day in the foreign exchange markets and 50 percent of the $6.5 trillion traded in the derivatives market. Furthermore, portfolio managers in London manage $8.5 trillion in assets for people who saved in funds and to meet mandates as of 2020, making the United Kingdom the largest investment management center in Europe and No. 2 globally after the United States.
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9/14/2022 06:02:02 am
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AuthorMr. Velutini has experience with both established banks and young banks. S Archives
December 2017
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