WITH the accession of
Queen Victoria to the throne of Great Britain, on 20th June 1837,
commenced a new era in the history of the country. From that date onward
there has been a triumphant progress of more remarkable development of
industry, science, and social improvement, than history records of any
former age. The beginnings of this social revolution have been indicated
in previous chapters as concurrent with the century ; but it was
reserved for the Victorian era to achieve its development. The
application of steam to navigation and manufactures had accomplished a
mighty work, but the connecting link was wanting so long as inland
transit was conducted under the slow and laborious methods of highways
and canals. When steam railways became an established system, men's eyes
were opened; and from thenceforth they thought and acted with an
independence and activity they had never formerly displayed.
Improvements in every department of business and social relationship
succeeded each other with uninterrupted rapidity.
The general condition of
the country, however, at the time with which we are at present dealing,
was not yet one of emancipation. Men's eyes were indeed opening to the
realisation of brilliant possibilities, but they failed not also to see
intolerable evils around them. The achievement of constitutional liberty
in 1832 had, as yet, done little beyond making the nation conscious of
its power to accomplish its own emancipation. But when that
consciousness had been attained, the good work sped apace. Deterrent
influences were, however, at work. Wars in China and India—costly and,
at times, very disastrous; Chartist riots and Irish troubles; industrial
and agricultural distress and disturbances, and a high rate of
bankruptcies, followed, for a few years, the effects of the crisis of
1837. But the national appreciation of railways was not to be checked in
its manifestation. A mania for investment in railway undertakings set
in, resulting in a much more rapid expansion of the system than the
circumstances of the country warranted. Trade was thus stimulated, both
directly and indirectly, to an unusual extent.
The position of banking
in Scotland at the close of 1837 was as follows:—There were five
chartered banks, with aggregate capitals amounting to £4,600,000, on
which dividends averaging six per cent were paid. Five other joint-stock
banks had capitals amounting to £1,550,000, on which the dividends
averaged slightly less than six per cent. These ten banks had 213
branches, of which the chartered banks held 158. There were, besides,
other seven joint-stock banks, and seven private banks, with 37
branches. This gives a total of twenty-four banks, with 274 offices. The
average circulation of these banks does not appear to have much exceeded
three millions sterling, the small notes forming about two-thirds of the
total amount. The amount of the deposits was estimated at twenty-five
millions; but little weight can be attached to a calculation which, in
the absence of official information, must have been largely founded on
imagination. The average price of the stocks of the chartered banks was
178 per cent, and such of the shares of the other banks as were quoted
stood at high premiums.
In 1838 the affairs of
the Western Bank of Scotland again came into prominence. The experience
of the recent crisis, combined with the results of injudicious banking
in America, and the public attention which was increasingly bestowed on
banking, led the Edinburgh banks to consult with the other banks in
Scotland as to the advisableness of permanently maintaining large
reserves of coin and Government securities, in order to secure the
proper conduct of banking in Scotland. It may be presumed that there was
a consensus of opinion on this point; but it was a wise and even
necessary step that negotiations on the subject should be held,
considering that one powerful establishment had hitherto ignored the
principle. This was the Western Bank of Scotland. They had a paid-up
capital of £600,000, on which a dividend of five per cent was paid, and
they had seventeen branches throughout the country. Four years
previously they had been remonstrated with on the same matter, on an
application by them for assistance. They had then given a reluctant
adhesion to the practice, and had obtained large advances to enable them
at once to carry it out. But, the immediate necessity past, they appear
to have relapsed into their bad habit. When the Edinburgh banks again
remonstrated in 1838, they defended themselves on the grounds that
investments of a fluctuating character should be avoided, and that the
fostering of the trade of the country was their first duty. The banks
then intimated that after 21st July they would decline to take Western
Bank notes, unless their wishes were complied with. After further
negotiations the Western Bank again undertook to conform to the practice
of investing in Government stocks, and the Edinburgh banks withdrew
their resolution. Later in the same year the Western Bank applied to the
Crown for a charter of incorporation ; but, on representations by the
Edinburgh banks, based on the tenor of the correspondence referred to,
the application was refused.
During the year 1838, six
new joint-stock banks were established in Scotland. Of these, the most
important, as viewed from the present time, was the Clydesdale Banking
Company in Glasgow, with a paid-up capital of £375,000, in £20 shares
with £10 paid. Three years later its paid-up capital was £500,000, and
the shares sold at £12: 17s. At first its only branch office was in
Edinburgh. The only other bank started in this year, which has survived
to the present time, is the Caledonian Banking Company in Inverness. It
began with a capital of £125,000, one quarter of which was paid up. It
would appear that its projection met with serious opposition in some
quarters, but that, nevertheless, its shares were popular with the
public. In 1841 the paid-up capital was £75,000, and the £2: 10s. shares
sold at £3. The Eastern Bank of Scotland was a hurriedly-organised
concern, destined for a special purpose. That purpose was to take over
the business of the Dundee Commercial Bank, whose affairs had got into a
hopeless condition, before the state of the latter bank should ,become
public. This object was successfully accomplished, and the Eastern Bank
of Scotland commenced business in July 1838, with a paid-up capital of
£112,510. The chief office was in Dundee, but there was also a nominal
head office in Edinburgh.
A still more important
establishment was the Edinburgh and Leith Bank. It is stated to have
been designed for the benefit of the "industrious middle class," and it
at once sprang into popularity. A contemporary writer says of it—"A
great deal of speculation took place in the stock of the Edinburgh and
Leith Bank. The shares went to 5s. premium as soon as they were in the
market, and 2000 or 3000 shares have been known to change hands in the
course of a single day. It is now (1841) one of the most popular banks
in Edinburgh, and sells at a high premium." [Manual of the Scottish
Stocks and British Funds, p. 22, by John Reid. Second edition.
Edinburgh, 1841,] Its capital was £500,000 in £5 shares fully paid. It
had six branches. In 1844 it was re-organised as the Edinburgh and
Glasgow Bank, at which time the Glasgow Joint-Stock Bank joined it, with
a paid-up capital of £1,000,000. No bank had better chances of a long
and prosperous career than this one. Starting with popularity, it
rapidly obtained a large deposit business. Its authorised circulation
under the Act of 1845 was £136,657, which was much in excess of that of
any other bank of its own age. But antagonistic management between the
western and eastern offices, and incompetent direction under the two
boards, which the Edinburgh directors were too feeble and ignorant of
financial business to control, occasioned the losing of the golden
opportunity. Heavy losses were incurred; the bank's credit was affected
during the crisis of 1857, and next year its valuable business, together
with the large authorised issue, passed into the hands of the Clydesdale
Bank by amalgamation, in which the shareholders gained nothing except
relief from a responsibility which never emerged.
The Paisley Commercial
Bank was also formed in 1838. Its capital was £200,000 in £20 shares,
one half being paid up. After a short career it was merged in the
Western Bank. Another venture of this year was the Southern Bank of
Scotland, with its bead office in Dumfries. Its projection was coldly
received, but it would seem that its shares went to a premium very soon.
It had a capital of £500,000 in £20 shares, with £5 paid. In 1841 its
shares, with a five per cent dividend, were at 2s. 6d. premium; but on
31st October next year it was fain to find rest from incompetent
management in the bosom of the Edinburgh and Leith Bank. It had seven
branches.
Next year (1839) the
prospectus of a new bank in Glasgow was issued, in which it was
observed—"It is not a little astonishing that, notwithstanding the rapid
strides which commercial enterprise has taken in Glasgow (and a correct
idea of its extent may be formed by a glance at the shipping arriving at
the harbour, the revenue from which, during the last thirty years, has
increased from £1000 to nearly £40,000 during that period), only three
new banks have been formed in Glasgow, all of which have been eminently
successful." This new financial venture, designed to make amends for
want of enterprise in former years in accommodating the expanding trade
of the great western community, and intended as an addition to the roll
of brilliant banking successes, was the now world-known City of Glasgow
Bank. It had a capital of £750,000 in £10 shares, of which £656,250 was
paid up by the middle of 1841, the price then being £9: 10s. for £8 :
15s. paid per share. The lamentable manner in which this bank failed to
realise its intentions, as expressed by its promoters, is now only too
well known. It suspended payment for thirty-three days during the crisis
of 1857, having succeeded, during the eighteen years of its existence,
in laying the foundation of a style of bank management peculiar to
itself. Having tided over its difficulties, it resumed the practical
study of those economic theories, the full development of which won for
it, twenty-one years later, greater notoriety than had ever previously
fallen to the lot of any business establishment.
The Glasgow Joint-Stock
Bank and the Greenock Union Bank were formed in 1840. It is stated that
the projection of the former bank "met with great encouragement, and the
applications for shares were very numerous." In 1841 it had a paid-up
capital of £562,500, and its shares stood at a fair premium. As already
stated, it joined the Edinburgh and Leitli Bank, in 1844, as the
Edinburgh and Glasgow Bank. The Greenock Union Bank had a paid-up
capital of £125,000. Its shares sold at a discount soon after it
commenced business. It joined the Clydesdale Bank in 1844, after a good
deal of coquetting with both them and the Western Bank. The Glasgow
Banking Company (the second of similar name) was formed, or at least
promoted, towards the close of 1843, but it does not seem to have
commenced business until the next year. At all events, it is said not to
have issued notes prior to 6th May 1844, and consequently to have been
unable to secure the right of note-issuing in terms of the prohibition
of the Act of 1844 applied to banks which were not issuing at that date.
It may be that the average issue was so small as to be considered
practically worthless, no value being placed at that time on the right
to issue against coin in reserve. When the Act of 1844 was passed, it
amalgamated with the Western Bank. [Banking in Glasgow during the Olden
Time, p. 32. Glasgow,1862. See also Boase, second edition, p. 425.
Logan, second edition, p. 24, states the National Bank Glasgow branch
scheme as having been carried out, which is an erroneous anticipation.
R. Allan's Share Circular of 30th.Noveniber 1843 gives details of the
scheme.] That it was considered of importance is evident from the facts
that its shares at once went to a considerable premium, that it was said
to have secured 800 shareholders, and to have met with warm support in
Glasgow. Moreover, so strong an institution as the National Bank appears
to have contemplated its acquisition as their Glasgow office (although
they already had a branch there) on favourable terms. The arrangement
with the Western Bank was concluded in July 1844, the new bank getting
shares of the former on terms which are stated to have yielded them
about 7s. 6d. premium on their own shares. Thus practically ended the
formation of new banks in Scotland. It must be admitted, however, that,
for a population of about 21 millions, the finish was rather brilliant.
But while so many new
banks were entering the list, some veteran firms were retiring. The
business of Sir William Forbes & Company ceased to be a private bank in
1838, when an amalgamation was effected with the Glasgow Union Bank. In
consideration, however, of the extent of business and high reputation of
the firm, the old designation continued to be used until the Glasgow
Union Bank transformed itself into the Union Bank of Scotland in 1843.
The Paisley Union Bank Company also joined the Glasgow Union Bank in
1838. On 2nd May 1843 the Glasgow Union Bank assumed the national
designation of the Union Bank of Scotland, at the same time reducing its
nominal capital of 2½ millions to 1 million, one half of which was paid
up. Soon thereafter (August) it absorbed the old-established house of
Hunters & Co., the Ayr Bank. It made a still more important arrangement
a few months later, whereby a junction with the Glasgow and Ship Bank
took place as of 1st December. In connection with this event, the
paid-up capital was raised to £1,000,000. [The terms of purchase are
stated to have been, that for each £10,000 share of the latter bank
(valued at £18,000), 200 shares of the former (market quotation, £90)
were given, together with a bonus of about £1000 a share in lieu of
dividend.] In November the Western Bank absorbed the Greenock Banking
Company, paying the partners a large premium, an event which is usually
considered as the extinction of private banking in Scotland. About this
time also the Greenock Union Bank arranged to join with the Clydesdale
Bank, an event which appears to have taken place at the close of the
year. [The equation in this case was one Clydesdale £20 share (£10 paid)
at £12 :10s. for every two Greenock Union, £5 paid, at par; the new
holder to pay the difference of £2 :10s. in cash.] It is said there was
considerable competition between the banks in both Edinburgh and Glasgow
to get the business. In 1844, in addition to the Edinburgh and Glasgow
union just referred to, the Paisley Commercial Bank and the Dundee Union
Bank joined the Western Bank (31st March), and the Arbroath Banking
Company joined the Commercial Bank.
At this time, moreover,
the City of Glasgow Bank acquired the Edinburgh establishment of the
Eastern Bank, which included a local board of directors. There is also a
statement that they took up "the Commercial of Aberdeen;" but, although
they did open a branch there in 1844, the reference is not easily
understood, as the Commercial Banking Company of Aberdeen was absorbed
by the National Bank in 1833. The acquisition of the new Glasgow Bank by
the Western (already referred to) closed this great series of
amalgamations. But it was not only by the honourable means of
amalgamation that the roll of banks was being reduced. Insolvency, also,
was thinning the ranks. In 1842 there were three failures, but none of
them was of great magnitude. These were the Leith Banking Company (25th
April), the Renfrewshire Banking Company (1st April), and Hay & Ogilvie
(the Shetland Bank), all of whom were sequestrated with considerable
loss to their creditors. The liabilities of the Leith Bank were
£123,582, on which dividends of 13s. 4½d. per .£ in all were paid. The
circulation was small—about £10,000. There were six branches in
Scotland, and, from 1835-37, one in Carlisle, which was registered as an
English bank. The Renfrewshire Bank had debts to the amount of £226,545,
and paid about 9s. per £; but holders of receipts or notes dated prior
to 1840 were paid in full by Mr. Dunlop of Keppoch, a former partner.
They had five branches. The Shetland Bank's debts were about £140,000,
and the dividend 6s. per £. A somewhat exceptional action was taken by
the Eastern Bank in 1844 (November 1), in repaying one-third of their
capital to the shareholders, thus reducing it to £400,000, while at the
same time they retained £2 a share to clear off bad debts. The movement
seems to have favourably affected the market price of their shares. As
curiosity became excited, towards 1843, as to the intentions of the
Government in regard to banking and currency, private banks rapidly
disappeared by amalgamation with their joint-stock rivals, until, in
1844, all had disappeared with the doubtful exception of Alexander Allan
& Co. in Edinburgh. |