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Networks of information, markets, and institutions in the rise of London as a financial centre, 1660–1720
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2001
Year
LawFinancial CentreFinancial Network AnalysisEconomic HistoryFinancial SystemFintechLondon BankersInternational FinancePayment SystemDigital BankingGeography Of FinanceFinanceSpread InformationSeventeenth Century LondonFinancial EconomicsBusiness HistoryMoney LaunderingFinancial NetworkBusinessPayment Systems
In the seventeenth century, London’s financial system relied on a network of credit and information, with bankers and merchants monitoring overseas agents and enforcing claims in the absence of a central exchange bank. The study demonstrates how London bankers used merchants to channel funds across Europe. Bankers leveraged merchants as stakeholders in the payment system, incentivizing them to monitor foreign agents and disseminate default information. The information network promoted market integration through arbitrage, while formal legal instruments supported informal enforcement.
Seventeenth century London formed a network of credit and information, necessary for the City to become a hub of international finance. Lacking a central exchange bank, London-based finance involved bankers and merchants monitoring overseas agents and enforcing international claims. Using archival sources, we show how London bankers employed merchants to channel funds around Europe. As merchants became stakeholders in the payments system, they developed incentives to monitor foreign agents and spread information of defaults. The resulting web of information flows encouraged market integration by facilitating arbitrage. Finally, the availability of instruments for formal legal enforcement assisted informal enforcement.