Thayer Watkins
Silicon Valley
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Bankers Trust:
The Rise and Decline

Bankers Trust started in 1903 in New York as a service institution for banks. At that time commercial banks were not allowed to provide trust services for their customers. Bankers Trust was formed to provide those services and regular commercial banks sent their clients to them.

In 1914 with the formation of the Federal Reserve System commercial banks were allowed to provide trust services and Bankers Trust's market disappeared. Bankers Trust became a commercial bank, but it was decidedly smaller than the other commercial banks in New York City. After struggling along for decades it decided to leave the commercial bank field when Automatic Teller Machines came into vogue. Citibank announced it was going to spend $100 million for ATM's and Bankers Trust barely could match that figure in terms of total assets.

Bankers Trust morphed itself into an investment bank. Always innovating, Bankers Trust developed a specialization in derivative securities. It rose to be the dominant bank in the derivatives field. Then it was sued by several customers who claimed they were victimized by Bankers Trust in derivative transactions. In the suit brought by Procters & Gambles of Cincinnati some tape recordings of Bankers Trust employees talking about how they would victimize their customers became part of the public record. This lost Bankers Trust its reputation and creditability. It began to lose money and agreed to its acquisition by Deutsche Bank. Under Deutsche Bank, Bankers Trust still operates but it does not have the high profile it once had.

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