Bankers Trust

Bankers Trust was a historic American banking organization founded in New York in 1903. It was established by a group of national banks to provide trust services and reserve support without directly competing for the ordinary commercial customers of those banks. The institution also operated as a bankers' bank: it held reserves for other banks and trust companies and could lend to them when unexpected withdrawals created liquidity needs. Although it had numerous shareholders, voting control was associated with three associates of J. P. Morgan, and Morgan himself held a controlling interest. This connection led contemporaries to regard Bankers Trust as a Morgan institution. The company grew rapidly and became one of the largest trust companies in the United States. During the Panic of 1907 it worked with J. P. Morgan to provide liquidity to sound banks and help contain the risk of a broader financial collapse. It expanded through acquisitions, including the Mercantile Company in 1911, Manhattan Trust Company in 1912, and Astor Trust Company in 1917. The 1917 Astor transaction gave Bankers Trust a larger deposit and capital base and preserved Astor's operations as an uptown branch. The company joined the Federal Reserve System in October of that year. Bankers Trust's early leadership included Edmund C. Converse, its first president, and Benjamin Strong Jr., who later became the first governor of the Federal Reserve Bank of New York. Under executives such as Seward Prosser, S. Sloan Colt, Alex H. Ardrey, William Moore, Wallis B. Dunckel, and Alfred Brittain III, the organization remained an important Wall Street institution. Its original business centered on trust services, commercial banking, institutional deposits, reserve management, and related financial services rather than mass-market retail banking. In the late twentieth century, the institution changed direction. Under Alfred Brittain III it withdrew from retail banking in the early 1980s, selling most of its branch network to other banks while retaining interests associated with its credit-card operations. The organization increasingly concentrated on institutional finance, investment banking, trading, risk management, and financial innovation. Under Charlie Sanford in the late 1980s and early 1990s, Bankers Trust became especially prominent in over-the-counter derivatives and developed a reputation for sophisticated trading and risk-management capabilities. It also built internal information and trading technology, including the BIDDS system and its Montage front end. That strategy brought both commercial prominence and serious reputational risk. In the early 1990s, complex derivative transactions with Gibson Greetings and Procter & Gamble generated major losses and litigation. The cases raised questions about whether customers had been adequately informed about the risks and valuations of derivative contracts. They also helped focus regulatory and public attention on the largely opaque over-the-counter derivatives market. Bankers Trust settled the Procter & Gamble case in 1996, while the Gibson matter also resulted in litigation and regulatory consequences. The institution acquired Alex. Brown & Sons in 1997 to strengthen its investment-banking franchise. It then suffered substantial losses during the 1998 Russian financial crisis because of its exposure to Russian government bonds. At the same time, a separate institutional-fraud case concerned the handling of abandoned property, dormant accounts, and uncashed checks that should have been transferred to state authorities. The bank pleaded guilty in 1998, damaging its ability to conduct business with municipalities and other entities that restricted dealings with convicted institutions. Deutsche Bank agreed in November 1998 to acquire Bankers Trust for $10.1 billion, and the transaction was completed on June 4, 1999. Deutsche Bank combined Bankers Trust with Deutsche Morgan Grenfell to form Deutsche Asset Manage…

Bankers Trust Company was incorporated in New York on March 24, 1903, with initial capital of $1.5 million. Its founders were a group of national banks seeking a specialized trust institution that would serve banks and their customers without aggressively competing for ordinary commercial deposits. The organization held reserve funds for other banks and trust companies and provided liquidity during periods of unusual withdrawals. Its shareholder structure was broad in formal terms, but voting influence was concentrated among associates of J. P. Morgan, contributing to its reputation as a Morgan-affiliated institution. Edmund C. Converse, a financier and president of Liberty National Bank, became its first president. The new company quickly became one of the leading American trust companies. During the Panic of 1907, it cooperated with J. P. Morgan in lending to solvent banks and helping stabilize the financial system. It expanded through the acquisition of the Mercantile Company in 1911 and Manhattan Trust Company in 1912. Benjamin Strong Jr. served briefly as president before leaving to become the first governor of the Federal Reserve Bank of New York. Seward Prosser then led the institution and oversaw its 1917 merger with Astor Trust Company. Astor continued as an uptown Bankers Trust branch, while the combined organization reported significantly greater capital and deposits. Bankers Trust entered the Federal Reserve System in October 1917. During the interwar period and the middle decades of the twentieth century, the company remained centered on institutional banking, trust administration, commercial finance, and securities-related services. Its leadership changed several times, including transitions involving Albert Arthur Tilney, Henry Cochran, S. Sloan Colt, Alex H. Ardrey, William Moore, Wallis B. Dunckel, and Alfred Brittain III. The company also developed an international presence. In 1966 it acquired a one-third interest in the Antwerp banking firm Banque G.&C. Kreglinger, which was renamed Banque de Benelux after the transaction. A major strategic change began around 1980, when Bankers Trust abandoned retail banking. It attempted to sell its branches and credit portfolio to the Bank of Montreal, but disagreements over the treatment of the BankAmericard program prevented completion of that transaction. Bankers Trust ultimately sold 89 branches to five banks, including Republic National Bank of New York. The withdrawal freed management to concentrate on institutional customers and capital-markets activities. Under Charlie Sanford and other executives, Bankers Trust became a prominent participant in the rapidly developing derivatives business during the late 1980s and early 1990s. Rather than compete primarily through the broad corporate relationships of larger rivals, it emphasized trading, innovation, quantitative techniques, and risk management. The bank also invested in proprietary technology, developing the BIDDS information-distribution system and Montage trading interface in London rather than relying entirely on commercial market-data platforms. The derivatives strategy produced significant reputational damage in the early 1990s. Transactions involving Gibson Greetings and Procter & Gamble resulted in large client losses and lawsuits alleging inadequate disclosure and poor customer understanding of complex risks. Recordings of Bankers Trust personnel became central to the public controversy. The disputes drew attention to the limited transparency and reporting requirements surrounding over-the-counter derivatives. Procter & Gamble's case was settled in 1996, while the Gibson matter also led to regulatory action. The episode became an important public example in debates over derivatives supervision. Bankers Trust acquired Alex. Brown & Sons in 1997, seeking to strengthen its investment-banking platform. The following year, the Russian financial crisis caused substantial losses because the bank held a large exposure to Russian government bonds. Bankers Trust also faced a separate institutional-fraud matter involving abandoned property. Senior personnel had treated certain dormant account balances and uncashed checks as income and moved them into an operating account instead of remitting them to the relevant states. The company pleaded guilty in 1998. Bruce J. Kingdon, who led the Corporate Trust and Agency group, later pleaded guilty and received a community-service sentence; certain subordinates were subsequently barred by the Securities and Exchange Commission from the securities industry. The guilty plea restricted the bank's ability to transact with municipalities and other organizations that prohibited business with convicted entities. Deutsche Bank agreed in November 1998 to acquire Bankers Trust for $10.1 billion, and the acquisition closed on June 4, 1999. Deutsche Bank combined the Bankers Trust operations with Deutsche Morgan Grenfell under Deutsche Asset Management. The independent Bankers Trust organization thereby ended. Deutsche Bank sold the former Australian division to the Principal Financial Group in 1999, with subsequent transfers of Australian investment-banking and asset-management activities to Macquarie Group and Westpac. In 2003, State Street Corporation acquired the former Bankers Trust trust and custody division. The brand survives primarily as a historical reference to an influential American banking and capital-markets institution.

1. 2003Trust and custody operations sold

   State Street Corporation acquires the former Bankers Trust trust and custody division.

   Source
2. 1999Acquired by Deutsche Bank

   Deutsche Bank completes the purchase and combines Bankers Trust with Deutsche Morgan Grenfell.

   Source
3. 1997Alex. Brown & Sons acquired

   The acquisition expands Bankers Trust's investment-banking business.

   Source
4. 1980Retail-banking exit

   The company leaves retail banking and sells most of its branch network.

   Source
5. 1966Banque de Benelux investment

   Bankers Trust acquires a one-third interest in an Antwerp banking company that is renamed Banque de Benelux.

   Source
6. 1917Astor Trust Company merger

   Bankers Trust merges with Astor Trust Company and preserves Astor's operations as an uptown branch.

   Source
7. 1917Joins the Federal Reserve System

   The company becomes a member of the Federal Reserve System.

   Source
8. 1912Manhattan Trust Company acquired

   Bankers Trust continues its early consolidation by acquiring Manhattan Trust Company.

   Source
9. 1911Mercantile Company acquired

   The company expands through the acquisition of the Mercantile Company.

   Source
10. 1907Role during the Panic of 1907

    Bankers Trust works with J. P. Morgan to lend to sound banks and help contain the financial panic.

    Source
11. 1903Bankers Trust Company is incorporated

    A group of New York national banks establishes Bankers Trust with an initial capital of $1.5 million.

    Source

Bankers Trust positioned itself as an institution-focused banking and markets organization rather than a mass-market retail bank. Its later identity emphasized trading, derivatives, financial engineering, risk management, investment banking, and sophisticated services for corporations and financial institutions.

• Institutional trust servicesTrust banking1903

  Trust administration was part of Bankers Trust's founding purpose. The institution served banks, corporations, and other organizations through fiduciary, agency, and related institutional services. Its later Corporate Trust and Agency group handled activities connected with securities, corporate obligations, and client assets.

• Bank reserve and liquidity servicesInstitutional banking1903

  Bankers Trust originally operated as a bankers' bank. It accepted reserve funds from other banks and trust companies and provided loans when unexpected withdrawals created short-term liquidity pressure. This role distinguished it from a conventional retail deposit institution.

• Commercial and investment bankingCorporate finance

  Over time, Bankers Trust provided corporate banking, securities, financing, and investment-banking services. The acquisition of Alex. Brown & Sons in 1997 was intended to increase the scale and reach of its investment-banking franchise.

• Over-the-counter derivativesDerivatives

  During the late 1980s and early 1990s, Bankers Trust became known for designing and trading complex over-the-counter derivatives for corporate and institutional clients. The business relied on quantitative analysis and risk-management capabilities, but disputes with Gibson Greetings and Procter & Gamble exposed problems involving disclosure, valuation, and client understanding.

• Trust and custody servicesSecurities services

  Trust and custody operations supported the safekeeping, administration, and servicing of institutional assets and securities. After Deutsche Bank acquired Bankers Trust, this division was sold to State Street Corporation in 2003.

• Asset managementAsset management

  Bankers Trust developed asset-management activities that became part of Deutsche Asset Management after the 1999 acquisition. Related Australian activities were later transferred through transactions involving the Principal Financial Group and Westpac.

• 2003Sale of trust and custody division to State StreetM&A

  After the Deutsche Bank acquisition, selected Bankers Trust businesses were reorganized or divested.

  What changed. Deutsche Bank sold the trust and custody division to State Street Corporation.

  Aftermath. The transaction transferred a major surviving line of Bankers Trust-related institutional services to State Street.

  Source
• 1998Agreement to sell Bankers Trust to Deutsche BankM&A

  Losses related to Russian government bonds and the consequences of the abandoned-property conviction weakened Bankers Trust's strategic position.

  What changed. Deutsche Bank agreed to acquire Bankers Trust for $10.1 billion.

  Aftermath. The transaction closed in June 1999, ending Bankers Trust as an independent organization and leading to the creation of Deutsche Asset Management from the combined operations.

  Acquisition consideration. $10.1 billion (Agreement announced November 1998; completed June 4, 1999)

  Source
• 1997Acquisition of Alex. Brown & SonsM&A

  Bankers Trust sought to expand its investment-banking activities and compete more effectively in corporate finance.

  What changed. It acquired Alex. Brown & Sons, an investment bank with roots dating to 1800.

  Aftermath. The transaction broadened the organization's investment-banking platform, but the combined institution was acquired by Deutsche Bank two years later.

  Source
• 1980Exit from retail bankingStrategy

  Management concluded that Bankers Trust should focus less on branches and consumer banking and more on institutional finance and capital markets.

  What changed. The bank sold 89 branches to five banks after an attempted sale to the Bank of Montreal failed over disagreement concerning the BankAmericard program.

  Aftermath. The decision reinforced Bankers Trust's identity as an institutional, investment-banking, and trading organization.

  Source

• 1998Abandoned-property and escheatment fraudControversy

  Bankers Trust pleaded guilty after senior personnel improperly treated dormant customer funds and uncashed dividend and interest checks as income rather than transferring them to state authorities as required. The conviction restricted the institution's eligibility to do business with many municipalities and companies.

  Source
• 1994Derivative-sales litigation involving Gibson Greetings and Procter & GambleControversy

  Two major corporate clients alleged that Bankers Trust had failed to adequately explain the risks and valuations of complex derivative transactions. The disputes, including the release of broker recordings, damaged the bank's reputation and contributed to broader scrutiny of the over-the-counter derivatives market.

  Source

• 2003Bankers Trust trust and custody business sold to State Street

  State Street Corporation acquired the former Bankers Trust trust and custody division from Deutsche Bank.

  M&A
  Source
• 1999Deutsche Bank completes Bankers Trust acquisition

  Deutsche Bank completed the acquisition and combined Bankers Trust with Deutsche Morgan Grenfell to create Deutsche Asset Management.

  M&A
  Source
• 1998Bankers Trust suffers losses during the Russian financial crisis

  The bank incurred major losses because of a substantial position in Russian government bonds.

  Other
  Source
• 1998Deutsche Bank agrees to acquire Bankers Trust

  Deutsche Bank announced an agreement to purchase Bankers Trust for $10.1 billion; completion followed in June 1999.

  M&A
  Source
• 1997Bankers Trust acquires Alex. Brown & Sons

  The acquisition was intended to expand Bankers Trust's investment-banking capabilities.

  M&A
  Source
• 1980Bankers Trust withdraws from retail banking

  The institution exited retail banking and sold most of its branch network to other banks, reinforcing its institutional and markets focus.

  Other
  Source
• 1917Bankers Trust merges with Astor Trust Company

  The merger expanded Bankers Trust's capital, profits, and deposits and made Astor Trust an uptown branch of the combined institution.

  M&A
  Source

1. Bankers Trust