2: Barings at the outbreak of War
We fear banking troubles inevitable - Barings by telegraph, 28 July 1914
Barings was by no means alone in being unprepared for the outbreak of war. To give the City time to adjust, the Bank Holiday of 3 August was extended by three days. Nonetheless Barings managed to open its doors on Tuesday 4 August.
In addition to the extended holiday, a moratorium was granted which permitted a one month renewal of all acceptances given prior to the declaration of war on 3 August. Effectively this meant that banks had a month to reorganise their affairs before needing to pay acceptances that they had guaranteed. Barings were fortunate in only needing to avail themselves of the moratorium for two days.
Barings had £5.35 million acceptances outstanding. However, when they reviewed their situation it became clear that a mixture of prudent management and luck meant that they were in a relatively good position. Only around £700,000 of the credits were at risk and German debts amounted to just £144,000. There was also something of a rush of funds into client accounts as part of the general flight of capital from continental Europe.
In early August Barings became members of the London Committee which was working with US bankers to arrange a shipment of gold for the relief of Americans in Europe. The money was used to provide immediate assistance and to enable people to reach ports so they could return to America.
Barings also undertook tasks for the British government before it had set up its own purchasing agencies. In December 1914, for instance, Barings instructed Kidder Peabody of Boston to contract for the purchase of 250,000 yards of cloth for jackets, 475,000 for trousers and 750,000 for overcoats from the American Woollen Company. Barings organised similar contracts for items such as telephone cable, gun cotton, picric acid and fishing boats.