The Reciprocity Principle in Global Correspondent Banking: Some Historical Evidence

Since the first economic globalization (1870-1914), banks increasingly relied on correspondent relationships to facilitate international trade and financial transactions. Correspondent banking across borders involves one bank (the correspondent bank) providing services on behalf of another (the respondent bank) in a different country. This relationship allows banks to extend their reach and offer services such as exchanging currencies and handling payments for customers in regions where they do not have a physical presence.

Correspondent banking relations are not only transactional but also relational. While personal connections and trust played a pivotal role in a bank’s initial decision to establish a correspondent relationship with another by mitigating credit, counterparty, and compliance risks, the persistence of the relationship usually depended on cooperation between banks to increase business and their mutual benefits. Reciprocity, the bilateral (and balanced) exchange of services and business, was pivotal in shaping international banking relationships.

This paper explores the historical role of the reciprocity principle in correspondent banking relations and banks’ internationalization strategies using archival evidence from banks in Europe (Banca Commerciale Italiana, Banque de l’Union Parisienne, Banco Santander) and the Americas (Banco Nacional de México, Banco de México). Reciprocity extended beyond mere transactional interactions; it encompassed the turnover of payment services, the size of balances maintained, access to financial markets, and information sharing.

In managing their correspondent relationships, banks aimed to maintain a balanced and stable volume of business with their counterparts in different countries. When a bank assigned a specific volume of financial transactions or business (such as payment orders and bill collection) to a bank in a different country, it expected a comparable volume of deals in return. This decision was highly strategic in cities where banks maintained multiple relationships. Larger banks could leverage reciprocity to sustain long-term, stable relationships by spreading their business judiciously. Reciprocity was also crucial in banks’ internationalization strategies, as establishing branches/subsidiaries in other countries often translated into losing business from the former correspondents.

Marco Molteni is assistant professor at the University of Turin and affiliated with the History Faculty of the University of Oxford. He specialises in both quantitative and qualitative research methods. Marco's main areas of expertise are financial history and Italian economic history. Marco completed his DPhil in September 2021 in Economic and Social History at Pembroke College (Oxford) and wrote his thesis on banking failures and crisis management policies in Fascist Italy (1926-1936), 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 then was a Post-Doctoral Researcher - Data Analysis on the ERC funded Global Correspondent Banking 1870-2000 project at the University of Oxford. Previous to this he studied at the University of Milan (BA in History) and at Warwick University (PG Diploma in Economics). His research is published in international journals like Business History, Economic History Review, Cliometrica, and European Review of Economic History.

Jamieson Myles is a Teaching and Research Fellow (maître assistant) at the Department of History, Economics and Society at the University of Geneva. Before that, he was a postdoctoral researcher on the ERC-funded project “Global Correspondent Banking, 1870-2000” (GloCoBank) with a focus on European banking networks. In the past, he has held visiting positions at Harvard University and the Humboldt University of Berlin. As an associate member of the GloCoBank team and University of Oxford’s Faculty of History, Jamieson is currently pursuing research on the historical relationship between payment clearing/settlement and credit in global correspondent banking, and the effects of Parisian money market reforms in the late 1920s on French banks’ European banking networks. His broader research agenda focuses on the political economy of international trade finance in the first half of the twentieth century. His latest publication is Trade Acceptances, Financial Reform, and the Culture of Commercial Credit in the United States, 1915-1920 (Enterprise & Society, 2023).

Manuel Bautista-Gonzalez  is a Post-Doctoral Researcher on the GloCoBank  project where his research analyses inter-bank relations with financial centres in regions beyond the core of the international system, focusing on  Mexico, Brazil, Argentina, Colombia, Uruguay and Chile, each of which were connected to the global system in different ways through New York and London. Manuel is a financial historian of the Americas, focusing on the United States and Mexico. He holds a B.A. in economics from the National Autonomous University of Mexico (UNAM) and a Ph.D. in United States History from Columbia University in the City of New York, with the dissertation “Gold and Silver Chains. The New Orleans Specie Market under International Bimetallism, 1839-1861,”. He is a convener of the Financial History Network since its launch in 2020.Outside academia, Manuel was the lead historian in projects to commemorate the 150th anniversary of a global investment bank as a Winthrop Group consultant (2018-2020). He is a contributing writer for Cash Essentials, a discussion platform on retail payments and monetary ecosystems.