Édouard Hentsch: the risks of high finance

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Édouard Hentsch: the risks of high finance
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A financier by both origin and inclination, Édouard Hentsch turned the Comptoir d’Escompte de Paris into a ‘mixed’ bank.

Édouard Hentsch was born in Geneva in 1829. At the age of 25 he joined the Executive Board of high finance specialist Hentsch Frères et Cie, which was founded by his grandfather in 1806 and had been based in Paris since 1813. He quickly made his mark as a man of initiative, taking part in a number of financial deals and industrial operations such as the founding of railroad companies.

CEP becomes a merchant bank

While continuing to run the family bank, he joined Alphonse Pinard, one of the founders, and Deputy Director of Operations, of the Comptoir National d’Escompte de Paris, in setting up the Nederlandsche Credit- en Deposito Bank in Amsterdam in 1863 and Société Générale in 1864. A Board member of a large number of financial and industrial companies, Édouard Henstch took over as Chairman of Comptoir d’Escompte de Paris (CEP) in 1874, and steered the bank towards an investment banking role, specialising in setting up and overseeing the running of banking and industrial businesses. This new policy quickly led to a step-change in the bank’s business and its balance sheet total increased three-fold between 1873 and 1880. By then CEP had become a ‘mixed’ bank, combining bill discounting and lending, securities dealing, and bond issuance on behalf of both French and foreign borrowers.

CEP hit by the 1880s slump

However, as the economic depression of the 1880s took hold, CEP entered a difficult phase. Seven of the fourteen branches opened between 1860 and 1872 in France and abroad were closed or reduced to the status of representative office.

In 1887, CEP was drawn into risky speculations, committing too much capital to metals sector companies, which placed severe strain on its liquidity. The bank was no longer able to meet withdrawal demands from its customers and had to close its doors. The fall of the Comptoir d’Escompte de Paris in 1889 put an end to Édouard Hentsch’s brilliant career and he died a ruined man in 1892.

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