Networks of information, markets, and institutions in the rise of London as a financial centre, 1660–1720

Abstract

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.