Global Reach by Australian Banks

Correspondent Banking Networks, 1830–1960

Bibliographic Data

ID8419147
AuthorsD T Merrett (The University of Melbourne), David Merrett (0000-0003-0904-0474, The University of Melbourne, corresponding author)
Year1995
Volume37
Issue3
Pages70-88
Publication date1995-07-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueBusiness History (JOURNAL)
Journal identifiersISSN: 0007-6791 • E-ISSN: 1743-7938
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/00076799500000091
OpenAlexW2035865390
LanguageEN
Citations received9

This paper argues that the bulk of international funds transfers to and from Australia from the 1830s until the 1960s were handled through correspondent banking relationships rather than internalised by multinational banks. The pervasiveness and longevity of this market-based contractual mode is explained with reference to the theory of transaction costs, agency and contracting. An examination of the evolution and practice of correspondent relationships of Australian banks suggests that the intrinsic nature of the services being provided reduced agency costs. Despite asymmetries in information and bounded rationality, agents had little incentive or opportunity to cheat as contracts were easy to negotiate, write, monitor and enforce. Agents were bonded to principals by a number of mechanisms, the most important of which was protection of their reputation. The move by Australian banks to branch abroad after the 1960s cannot be explained by any systemic failure of agency arrangements in the correspondent networks

Agency (philosophy · Agency cost · Business · Database transaction · Economics · Incentive · Information asymmetry · Market economy · Multinational corporation · Negotiation · Political science · Rationality · Reputation · Sociology · Transaction cost · Australian History and Society · Finance · Law

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