European Banks and the American Challenge: Competition and Cooperation in International Banking under Bretton Woods (review)

The publication of Jean-Jacques Servan-Schreiber's Le Défi Américain [The American Challenge] in 1967 touched the nationalistic nerve of European business and in particular the established practices of its banking sector. U.S. banks indeed mounted a serious challenge to the banking institutions of Europe. However, the competition was indirect, and asymmetric regulatory structures created complementary opportunities for internationalization. Consequently, the space in which U.S. banks operated was oblique and additive to the traditional terrain, much of which the Europeans continued to defend. The extra business came from two sources: new institutions (in particular the Eurocurrency and Eurobond markets), and related innovative financing instruments (particularly those that plugged the gap in medium-term corporate financing requirements).

European Banks and the American Challenge provides a series of perspectives on these developments. Stefano Battilossi's introduction sets out the twin foundations of the American challenge, the Eurocurrency and Eurobond markets. Youssef Cassis provides historical context in a chapter on European Banks in the 1950s. Richard Sylla covers the U.S. banks' strategy toward Europe. Catherine Schenk analyzes the competitive advantage of leading international financial centers as a function of their historical development, nature of the domestic economy and geographical location, and regulatory environment. Battilossi, Eric Bussière, and Ulrich Ramm analyze strategies of leading British, French, and German banking institutions, respectively. Duncan Ross complements these chapters in an examination of the role of European banking clubs and consortia. Finally, Harold James offers further perspective with a chapter on the role of central banks and the process of financial internationalization.

The editors' stated objective is to discuss a subject hitherto neglected: the internationalization of banking in industrial countries and the rise of a new global financial order, with the added perspective offered by rigorous use of archival material. The book makes only limited progress toward this objective, beginning with the inconsistent use of archives. Some of the essays are indeed grounded in archival research—Bussière's chapter almost exclusively—but others rely equally exclusively on secondary literature. Some essays also overstate the accusation of prior neglect, although the editors acknowledge that contemporaries, economists, and financial analysts have already researched the subject extensively. For the reader, the problem is to determine where the original contribution of the book really lies. If we forget the stated objective and concentrate instead on the substantive content, the contribution turns out to be a multilens perspective on the interaction of competitive, cooperative, and regulatory processes in Europe and the United States in the period c. 1958-1974.

The result is an eclectic series of essays, which, overall, complement each other very well. There is little evidence of editorial heavy-handedness, and the reader seeking enlightenment in a given specialist area will benefit from the self-contained presentation of the essays. This feature is less appealing to those seeking a more integrated text or to those expecting a structured interrelation or set of themes linking the individual chapters. Laudable aspects of individual chapters add to the impression of asymmetry in the whole. Ross's chapter in particular uses theoretical perspectives from strategic management literature to set up the ensuing empirical story, whereas others find such frameworks less necessary. Further asymmetries arise from noncontiguous time periods, with the chapters by Cassis, Ramm, and James offering much longer historical perspectives. There are advantages insofar as the content is complementary, but there is no concluding chapter, and much is left to the reader when it comes to considering the overarching themes and principal findings.

To summarize the story briefly, U.S. regulation pushed U.S. banks overseas, and European regulators were happy to welcome their branch offices. After 1945, the basic problem for U.S. administrations was the overseas demand for the dollar...