Sir Felix Schuster
As governor of a large London bank, Sir Felix provided leadership to the banking community during the 1914 financial crisis.
Felix Otto Schuster was born in Frankfurt in 1854, the son of a merchant banker. In 1869, when he was 15, the family moved to Britain, following the Prussian annexation of their home state of Hesse. Felix became a naturalised British subject in 1875.
From 1878 Schuster was a partner in the family firm Schuster, Son & Co of London. In 1887 part of that business was acquired by Union Bank of London, a shareholder-owned bank which – unusually for the time – was heavily involved in international finance. Following the acquisition, Schuster became a director of the enlarged bank. He was appointed deputy governor in 1893 and governor in 1895.
Under Schuster’s guidance the bank grew rapidly in the next two decades, particularly through a series of major acquisitions in 1902-3. Its deposits trebled, and Schuster earned a reputation for dedication to the interests of his customers and shareholders.
Schuster’s reputation grew far outside the bank. He was frequently consulted on economic affairs by Chancellors of the Exchequer, and his speeches were widely reported in the press. He became known as one of the nation’s leading anti-protectionists, and (unsuccessfully) stood for parliament in 1906 as a Liberal free trade candidate. He was created a baronet in 1906.
By summer 1914, when Britain’s financial system encountered the biggest crisis it had ever faced, Schuster was firmly established as one of the nation’s leading bankers. The Treasury immediately looked to him to speak on behalf of his fellow bankers in its hastily-convened planning and co-ordination efforts.
Schuster was one of six bankers on the Bankers’ Emergency Committee, which represented Britain’s banks during the crisis. He spoke for the London clearing bankers at the Treasury’s three-day conference in the first week of August, which sought to secure consensus on the way forward. His firm views and their articulate expression made a valuable contribution to the maintenance of calm.
Later in August 1914, it was partly on Schuster’s advice that the government agreed to extend the moratorium, after he warned of the dangers of lifting it too soon; ‘it will be a very fatal thing’, he said, ‘to do away with it now, and then to put it on again later.’
While Schuster worked to help the banks and the British economy to weather the storm, he also faced attacks from sections of the British press and public. Anti-German feeling was running high, and public figures with German connections found themselves under suspicion. Sir John Bradbury, Treasury permanent secretary, noted the pressure this placed on Schuster, remarking (in a comment typical of his macabre style), ‘he has some troublesome problems but what worries him most are all those lamp-posts in Whitehall’. The spectre of anti-German lynch mobs roaming the streets of London was not, it seems, beyond the reach of imagination.
Schuster faced more legitimate criticisms, too. In September 1914 the economist John Maynard Keynes published an article damning the banks’ actions in the crisis. In private his anger was directed quite specifically towards the two men who had spoken for the banks; Schuster, whom he called ‘cowardly’, and Midland Bank’s Edward Holden, whom he called ‘selfish.’ Infuriated, Schuster later met Keynes to explain more about the crisis negotiations, to which Keynes himself had not been a party. Keynes was at least partly persuaded by what he heard. He later published a sequel article, admitting that ‘imperfect knowledge caused me to describe the action of the clearing banks…with less than fairness’. He still thought the banks were guilty of failing to act boldly, but now said ‘my disappointment…was that of an admirer.’
Others, among them many staff and shareholders of Union of London & Smiths Bank, were immensely proud of their chairman and the role he had performed. In October 1914 the board formally recorded its appreciation of Schuster’s work and the good he had done, ‘not only to the bank but also to the country during the present crisis.’
Schuster continued to play a public role, sitting on the important wartime foreign exchange committee. He also remained busy at the bank, and in 1918 negotiated Union of London & Smith’s Bank’s acquisition by National Provincial Bank. The merged bank became one of the UK’s ‘big five’ clearing banks, and Schuster remained on its board until his death in 1936.