Global correspondent banking relations have been the pipes of the international payments system for centuries, but we know little about their operation. Financial historians have acknowledged their importance, but to a large extent, they remain a black box. This paper sheds light on foreign correspondent banking in the XX century using Banca Commerciale Italiana (Comit) as a case study. Comit was the most prominent Italian bank with an established network of affiliates, branches, and correspondents abroad. Archival evidence from the circular letters to Comit branches of the Ufficio relazioni estere URE (foreign relations office), supplemented by internal notes and memoranda, allow to open the ‘black box’ of correspondent banking.
Before the 1900s, Comit operated abroad only through correspondent banks, but ad hoc arrangements prevailed and did not have a centralised system to coordinate them. In the early 1910s, the first foreign branch opened in London, the leading financial centre of the times. Subsequently, in the first years after WWI, Comit developed an extensive network of subsidiaries and affiliates. In parallel, the number of correspondent banking relations surged. On the eve of the Great Depression, Comit had correspondent banking relations with ~4100 bank branches around the World. In 1925, Comit created URE to coordinate (correspondent) relations with foreign banks to manage this complex network.
The correspondence between URE and Comit branches shows that reciprocity was vital in correspondent banking. Banks sought to maintain bilateral credit and debit relations of approximately equal magnitude. When individual branches favoured certain correspondents more than others, creating disequilibria in the reciprocal current accounts, URE intervened to fix the unbalances. When foreign correspondents did not direct enough work on Comit own accounts, URE complained and lobbied Comit’s partners to equilibrate their positions. Evidence from the archives of Credito Italiano and Banco di Roma, the two other main Italian banks with an extensive international network, confirms the centrality of reciprocity in correspondent banking relations.
Marco Molteni is a Post-Doctoral Researcher on the ERC funded project Global Correspondent Banking 1870-2000 where his role involves carrying out data analysis related to the correspondent banking relationships of international banks from 1870-2000. He is part of a team using advanced statistical analysis and relevant software to prepare the data and develop visualisation and network analysis of the many thousands of correspondent banking links recorded in published sources during this period.
Marco completed his DPhil in Economic and Social History at Pembroke College (Oxford) and wrote his thesis on banking failures and crisis management policies in Fascist Italy (1922-1943), reconstructing the story of what happened using the banking supervision archives at the Bank of Italy, where he spent a semester as visiting guest researcher at the Economic History Division. He is currently one of the editors of the Oxford Working Papers in Economic and Social History.
