ABSTRACT
There has been considerable controversy since the years immediately before the First World War over the extent to which commercial banks met the financial requirements of manufacturing industry. At the centre of the debate has been the provision of medium- and long-term finance, and English banks have been critized for not behaving like their continental counterparts in either sponsoring new industrial issues on the capital market or providing firms with more than working capital. These problems will be explored in this chapter by looking at the lending policies of a number of banks in industrial areas over a period from 1840 to the 1890s. However, it is important to realize that the structure of the banking system did not remain unchanged during this period. Whereas, at the outset, a manufacturer probably banked with a local concern which at the most had a handful of branches, and was generally accommodated through the discount of bills of exchange, by the beginning of the twentieth century the industrial firm, if it was still in existence, was probably a customer of a limited joint stock bank which had its head office in London, had a considerable branch network, and normally supplied its clients with the finance that they required through overdraft facilities. These structural changes had consequences for lending policies and will be considered in the first section of this chapter, while the latter part will consist of a review of empirical evidence concerning lending policies.
