The partnerships of London and New York: a comparison
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The model of the bank organised as a partnership is not peculiar to Switzerland. In London, the great houses of the City were for a long time partnerships, whose partners were personally answerable for their commitments. In New York, several major investment banks remained partnerships until the end of the twentieth century, before going public.1
Several observers have argued that the abandonment of the partnership model contributed to greater risk-taking in the large investment banks, since their executives no longer risked their own fortune and could draw on the capital of dispersed shareholders.2 This thesis remains contested, as many other factors played a part in the crises. It nevertheless accords with the analysis of incentives presented above.
The collapse of Barings Bank in 1995, brought about by the unauthorised dealings of a trader in Singapore, showed for its part that an old and prestigious house could disappear within a few weeks if its internal controls failed.3 For Geneva’s private bankers, these foreign examples are a reminder that personal liability is not enough on its own: it must go hand in hand with rigorous organisation, effective internal controls and a culture that does not tolerate hidden risk-taking.
| Financial centre | Traditional form | Evolution |
|---|---|---|
| Geneva | partnerships with unlimited liability | transformation of the great houses in 2014, partners’ control retained |
| London | partnerships of the City houses | absorption into banking groups, spectacular failures |
| New York | partnerships of the investment banks | stock market flotations at the end of the twentieth century |
Notes
- Goldman Sachs, “In a Paradigm Shift, Goldman Sachs Decides to Go Public” (goldmansachs.com, History): partners’ vote in 1998; initial public offering on 4 May 1999 (69 million shares at USD 53, approximately USD 3.657 billion raised, 15% of the capital); “Goldman Sachs was the last big private investment bank in the United States”. ↩
- Carola Frydman and Eric Hilt, “Partnerships, Corporations, and the Back Office Crisis of the 1960s” (egc.yale.edu, 2021; published version 2023): the New York Stock Exchange admitted corporations as members in 1953, then listed companies in 1970, and nearly half of the member firms were incorporated by 1975; advocates of a return to the partnership argue that unlimited personal liability curbs excessive risk-taking and that the illiquidity of a partner’s interest encourages long-term management; the authors’ examination of the back office crisis of the 1960s leads them to the opposite conclusion, partnerships having neither survived at a higher rate nor avoided the practices that compromised their stability, in particular reliance on subordinated loans from clients. ↩
- Encyclopaedia Britannica, “Bankruptcy of Barings Bank (1995)”: collapse at the end of February 1995 after losses of approximately GBP 830 million accumulated by a single employee, Nick Leeson, sentenced to six and a half years’ imprisonment; Bilan, “Il y a 20 ans, Nick Leeson coulait la banque Barings” (Twenty years ago, Nick Leeson sank Barings Bank) (2015): losses of GBP 827 million hidden in account 88888 at SIMEX in Singapore; takeover of the assets by the ING group for one pound. ↩
For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.