Acceptance Business Firmly Established

In the course of time these merchants turned more and more to the business of lending their credit in the form of acceptances, not only at home, but to foreign merchants, banks and corporations. In connection with this work and on account of their intimate knowledge of certain overseas countries, they became pioneers in extending loans abroad, and thus exerted a vast influence on the extension of English foreign trade.

France And Germany

Turning now to the economic history of France and Germany, these two countries were likewise developing credit systems of their own. The foreign trade of both France and Germany increased step by step, and the ever increasing demand for acceptance credits, whereby to finance overseas trade, called for the development of the same facilities extended by the English merchant bankers for the benefit of English trade and commerce.

First Efforts To Establish Acceptance Business Unsuccessful

Both France and Germany had at that time, in the economic histories, been patrons of the banking system of England. However, the time had come when an effort had to be made by both to break away from London and establish their own acceptance market for the creation and absorption of credit paper.

But their efforts in the first instance were far from successful, and the franc and mark were found to be poor competitors alongside of the English pound sterling. The reason for this was due to the fact that London was the only free gold market in the world, and it was a well known fact and a practice in national and international commerce, that a bill on London meant gold and nothing but gold, if demanded. Another reason was the superiority of the London discount market, which, guided by a far sighted discount policy on the part of the Bank of England, was always able and willing to absorb any bills offered in the market.

Of great importance to the further development of the English system of discount and rediscount, was the final recognition of this undeniable preference of the pound sterling, as a result of which a number of the most powerful continental banks established branches in London, bringing along with them large sums of money and additional facilities for the granting of sterling acceptance credits, particularly, of course, for the benefit of the customers of their home country.

The Bank Acceptance Today Is Used In Most Important Countries Of Europe

From the early periods of the development of English banking until the present day, a review of the system of credit in England shows remarkable growth. There, a broad discount market capable of absorbing all the commercial paper produced by the nation's business is at all times in existence.

The countries of France and Germany were able, in time, to establish the franc and the mark in the international commerce carried on by the merchants of their respective countries, and, while their development has not yet reached the importance of the pound sterling nor has their acceptance business reached that of England in volume, still, the benefits from the introduction and development of a system of discounts in the respective countries, have brought home to their merchants a decided advantage in the conduct of their trade.

Some of the factors that have been found particularly effective in establishing acceptance markets in foreign countries have been large exports, with which to offset imports; direct steamship connection with all important overseas ports; the establishment of a charter market; the upbuilding of insurance companies to underwrite marine and other risks; extension of loans to foreign governments, thus encouraging and creating valuable trade relations; extended and direct means of communication with foreign governments; and lastly, the strengthening of the financial structure at home and the establishment of a stable and elastic discount market.