There was very little interest in the Scottish banking system from outside Scotland until the 1820s. There had been some interest in the 1760s prior to the passing of the Banknotes legislation in 1765 but for the next sixty years the Scots were left to develop their own banking system without outside interference or even much interest from anyone south of the border.

During those sixty years the main elements of the modern banking system developed, i.e., deposits at interest, cash credits, branch banking, joint-stock organisation, note exchanges and small note issues. It was a system which was very different from that which prevailed in England and there were those who thought it to be superior to the English system. Chief amongst these was Thomas Joplin, a Newcastle merchant who published the first edition of his pamphlet An Essay on Banking in England and Scotland in 1822. In this somewhat polemical essay Joplin complained of the poor standards of service and stability in English banking and extolled the virtues of the Scottish system. He advocated strongly that the law should be changed in England to permit the formation of banks on the Scottish model. In fact the law was changed slowly and in a rather piecemeal fashion, but the accuracy of Joplin's arguments seemed to be verified in the commercial crisis of 1825-6 when some sixty English banks failed and only one Scottish bank failed and one retired. There followed a torrent of pamphlet literature and a Parliamentary Enquiry which confirmed Joplin's claims. Legislation was passed first of all for Ireland to permit the formation of joint-stock banks, and Joplin became the first secretary of the Provincial Bank of Ireland (now part of Allied Irish Banks) before joining the National Provincial Bank (now part of National Westminster). Between 1824 and 1844—but particularly in the 1830s—there was a tremendous growth of joint-stock banking in all parts of the British Isles and men with the experience of having worked in Scottish banking were in great demand. One English joint-stock bank—in Huddersfield—wrote to all the larger Scottish banks asking for information on how they organised and operated their business and most furnished the information requested. This information was then assimilated and the Huddersfield Banking Co. was duly launched. Many English and Irish joint-stock banks recruited their staff from Scotland. In fact, at first the Provincial Bank of Ireland recruited only Scotsmen to its posts as branch managers. The Huddersfield Banking Company appointed Hugh Watt who was then Cashier with the Arbroath Banking Company to be its Cashier (Chief Executive). Watt was one of Scotland's most experienced bankers having been clerk, teller, inspector or branches and branch manager with the Perth Banking Company before taking up his appointment in Arbroath. This was the beginning of a movement which has continued—with varying degrees of intensity—down to the present day. Nowadays, of course, Scottish-trained bankers are valued, not so much for their experience of a system which no one else knows, and everyone wants to copy, but for the particular quality of training which they experience in a Scottish bank.

Hugh Watt, whom we have mentioned, was a cautious man and it was not long before he published his own pamphlet The Practice of Banking in England and Scotland which appeared in 1833. In this pamphlet he argued that too many banks had been formed too quickly and that too many branches were being set up. His word of caution, however, fell on deaf ears and although there were problems in these early years of joint-stock banking there were very few failures. Significantly enough the two banks which were the most disastrous failures, i.e., the Northern and Central Bank of England and the Agricultural and Commercial Bank of Ireland were the two which had developed their own systems and had ignored the Scottish model. Certainly the general level of development of the banking system was very rapid and within twenty years the banking system of the whole of the British Isles had been transformed. In Scotland too, a new generation of banks were formed, although here the degree of change was much less marked than elsewhere, being confined to a growth in the scale of banking, while other parts of the British Isles experienced a change in structure and function.

The Government of the day, however, were not prepared to countenance this unbridled development of banking for long and moved in 1844 to limit the right of people to form note issuing banks. After 1845 no further banks were formed in Scotland and only a few were formed in England, Wales and Ireland.

That did not mean, however, that the influence of Scottish banking was at an end for by that time its reputation had spread to other parts of the world and many commercial men either came to Scotland to study it or corresponded with Scottish banks to learn about it. For example, the Chamber of Commerce in Paris carried out an extensive correspondence with Scottish bankers in the 1860s. The famous Pereire brothers were great admirers of the Scottish system. Similarly, the economist, J. G. Courcelle-Seneuil, who became economic adviser to the Government of Chile was a strong advocate of what he called "the free banking system of Escocia" and persuaded the Chilean Government to institute a new banking structure based on the Scottish model.

The mid-19th century also saw the beginnings of the emigration of Scottish bankers, especially to the white populated dominions and colonies, but also to the United States and South America. It is an axiom of history that every corner of the world contained its Scottish merchant, doctor, engineer and banker. The extent of the influence of Scottish bankers is, of course, difficult to measure but it was extensive. One attempt to give some dimension to the phenomenon suggested that some two-thirds of the entire Canadian banking staff in 1912 were Scotsmen (Scottish Bankers Magazine). The most famous of these although, of course, not the most typical, was the poet, Robert Service, who had begun his career in the Commercial Bank of Scotland at Anderston in Glasgow before joining the Canadian Bank of Commerce. He was the author of such unbanking-like poetry as Dangerous Dan McGrew and The Woman Whose Name Was Lou.

Scots were also to the forefront in the founding of many British overseas banks, i.e., banks with head offices in London but whose main field of operation was overseas. Such banks as the former Standard Bank of Britain (1862) with its main activities in Africa and the former Chartered Bank of India, Australia and China (1853) with its principal operations in India and the Far East (now merged as the Standard Chartered Bank) numbered several Scots amongst their founders and staff. Similarly, banks founded overseas like the Hong Kong and Shanghai Banking Corporation (1864), were founded by Scots. Sutherland, a Scots merchant, although he was not a banker, founded the Hong Kong and Shanghai Bank on "Scottish principles" and employed many Scottish-trained bankers as staff.

After the Meiji restoration in 1868 the Japanese also came to study banking in Scotland and one man in particular, A. A. Shand, was of enormous influence in the setting up of the Japanese Finance Ministry and banking system. He was a Scottish-trained banker and, although we know nothing of his early career, he went to Japan where he became an adviser to the Japanese Government. He also wrote a book which was translated into Japanese and which was the standard Japanese textbook on banking practice well into the 20th century.

Although many Scottish-trained bankers went to work in other parts of the British Isles and overseas, there was no real attempt by the Scottish banks themselves to move outwith the confines of their domicile. For many years certain Scottish banks had maintained a few branches in the north of England although they were prevented from issuing their notes there after 1829. There was never any attempt to move further into the English provinces. Indeed an understanding seems to have been entered into, although it was never made explicit, that the Scots would confine their activities to Scotland and the English to England.

The first major break in this understanding was seen in the 1860s, when in 1864 the National Bank of Scotland opened an office in London. It was, of course, prevented from issuing its notes there but succeeded in attracting a sufficient amount of deposit money to make the venture worthwhile. It was not, however, just the search for deposits which had motivated the National to open in London. The role of London as the financial centre of the world was growing daily and the Scottish banks found it increasingly inconvenient and expensive to have to transact all their London business and remittances through the medium of a London correspondent, so before long all the Scottish banks had followed the National's example and opened branches in London.

The Clydesdale Bank used the opportunity to open a few branches in the North of England and considered opening in the major English cities but the feelings of English bankers were already aroused, and after a Parliamentary Enquiry the Clydesdale was persuaded to abandon its intentions. The English bankers were already angry at the Scots opening in London but the Scots pointed to the offices of Irish and Overseas Banks which were already there and claimed that they had a right to be there too. The English undoubtedly feared the competition which the Scots would bring to the London money market, and lost no opportunity to thwart their intentions as when the Scots applied to join the London Clearing House and were firmly excluded.

There the situation remained for about 100 years with the Scots and English largely respecting each other's territorial imperative although the Scots kept their London offices and a few branches in the north of England.

Having been thwarted in their attempts to move into the English provinces, it might have been reasonably expected that the Scots would look furth of the British Isles for opportunities to expand. It is one of the mysteries of banking history that they did not. Admittedly there may have been some legal difficulties—particularly associated with the note issues—but these could have been fairly easily overcome. There were tremendous opportunities in the areas of new settlement such as Canada, Australia and New Zealand and the Scots had an abundance of contacts with people in these countries. There were also opportunities in India and Hong Kong and perhaps even in the countries of South America and the United States of America. Some Scottish banks were financing trade with, and railway building in, other parts of the world, and the Investment Trust movement which was a Scottish innovation of this time, invested substantial sums of money overseas but while the trusts often had a man on the spot to oversee their investment, the banks did not. There is no indication in any of the banks' archives that they even considered having branches overseas.

The problem was not that the task could not be accomplished for several banks had their head offices in London and their branches in one or more overseas countries, for example, the Bank of British North America, British and Australian Bank and Colonial Bank. In mitigation, however, it must be said that no English-based bank developed overseas branches at this time either and there was still plenty of scope for development within the British Isles. The steel age was only just beginning and there was an abundance of opportunities for lending, and as the population continued to grow and urban areas developed apace there was an identifiable need for more branches. It may be that the Scottish banks found sufficient activity to occupy their interest and energy within Scotland.

Banks were not unaware of the developing international economy and Scottish banks were in the forefront of developing new methods of financing international trade. Most appear to have set up overseas departments at their head offices in the late 19th century and these consolidated and extended the range of correspondent banks throughout the world through whom foreign trade transactions could be settled.

This situation pertained and operated satisfactorily until the late 1960s when banks began to extend the operational scope of their overseas departments and often re-designated them as International Divisions. To a large extent this development followed from vastly improved and rapid communications together with the discovery and exploitation of North Sea oil. But it was also associated with the movement of the banks into lending and deposit taking in currencies other than sterling which grew very quickly indeed from the mid-1970s.

By the end of 1980 the Bank of Scotland had full branches in Hong Kong and New York, and representative offices in Houston (Texas), Los Angeles and Moscow. The Royal Bank of Scotland had branches in Hong Kong and New York, an agency in San Francisco and representative offices in Chicago, Houston, Los Angeles, New York and San Francisco. The Clydesdale Bank which had traditionally conducted much of its overseas business through its parent, the Midland Bank, set up an International Division in the early 1970s and opened an office in Houston. The Royal Bank now also has an interest in the Associated Merchant Bank Pte Ltd of Singapore and Bank of Scotland owns a large percentage of Banque Worms.

Just as several English banks had broken the tradition of a century by opening offices in Scotland in the 1970s so the Bank of Scotland decided to open offices in England and began with a branch in Birmingham.

Many overseas banks have also opened in Scotland, notably Bank of Nova Scotia, Hong Kong and Shanghai Banking Corporation, Standard Chartered Bank, Allied Irish Bank, Citibank, Bank of Ireland and Bank of Credit and Commerce. The earlier overseas banks were set up ostensibly to provide a service for customers from their country of origin who had become domiciled in Scotland but of course they have not limited themselves to servicing their own customers and have sought business more widely, thus providing competition for the Scottish banks.