Economic history reveals that the center of commerce never stayed long in one place, as well as the growth of commercial banking activity.
Thus, during the seventeenth century, Amsterdam, which had experienced the benefits of the great maritime commerce of its traders as early as the fourteenth century, emerged as the major money center in Europe. As a consequence, Dutch banks dominated trade and finance.
During Amsterdam’s economic dominance, two distinct types of banking activity began to emerge: acceptance credits and loans to foreign governments.
In the conducting of international commerce, Dutch merchants relied extensively upon commission merchants, agents who resided in commercial centers and sought out customers without owning the commodities in which they traded.
In the course of the eighteenth century it became a practice among these merchants to ask established houses to endorse their trade bills and enhance their acceptance by exporters or bankers at home and abroad.
In essence, these houses were asked to assess credit risk and offer their guaranty. Bills guarantied in this way came to be known as “acceptances” and the houses that guarantied them as “acceptance houses”, The development of this practice played an important role in the growth of trade financing in nineteenth century England.
The wealth of Amsterdam also contributed to the development of another financial activity which is that of lending to foreign governments.
Indeed, in the course of the seventeenth and eighteenth centuries, the Dutch banks loaned substantial sums to finance the needs of foreign kings and governments. Initially, these loans were taken almost entirely by the lenders for their own accounts; gradually, however, other merchants and wealthy individuals were recruited to share in the financing of theses loans.
In the second half of the eighteenth century, this process of syndication was further refined and developed into a specialized financial activity of international dimensions.
A case on record is that of the leading Amsterdam firm of Hope and Company which floated ten loans for the Kingdom of Sweden (1767-1787) and eighteen loans for Russia (1788-1793).
The loan contractors of the late eighteenth century also assumed the responsibility of retailing the bonds to investors not only on the Amsterdam stock exchange but also throughout Europe. This pioneering technique of syndicating risk and distributing securities flourished in nineteenth century England and evolved into the modern-day securities underwriting.
