The origin of
modern banking in Britain
can be traced back across four centuries and the history of the Royal Bank of
Scotland Group’s past constituents perfectly illustrates the story of the
industry’s development.
The Birth Of British Banking
In the 1660s London dominated England’s political and economic
lie and , with a population of 450,000 was the fourth largest city in the
world. The established importance of London
in raising and servicing government finance and in international trade had led
to the development of a relatively sophisticated money market. It was
consequently here that the profession of banking emerged from the trade of
goldsmith during the course of the seventeenth century.
The goldsmiths,
makers and sellers of plate and jewellery, flourished after the dissolution of
the monasteries in the 1530s increased the available supplies of gold. Many
goldsmiths developed strong connections with the crown and , from the 1940s,
most began to take in valuables for safe keeping in their vaults.
THE GROWTH OF PROVINCIAL BANKING
The number of
banks in London grew during the eighteenth
century, but their business was restricted and provincial banks began to
flourish outside London
to serve industrialists and merchants remote from the capital.
Thomas Smith , a
cloth merchant in Nottingham, began operating
the earliest known provincial bank in the 1650s , by offering banking services
to his customers. Most country’s banks however, were established from the
mid-eighteenth century onward.
Before 1750
there were only a handful of bankers in the country outside London . by 1784 this number had grown to 119
and by 1810 to a massive 650. similarly in Scotland,
by 1772 there were eight banking companies operating in Scotland outside Edinburgh &
Glasgow, a number that had increased to 21 by 1810.
From the 1770s a
more sophisticated banking infrastructure began to emerge, with the creation of
a clearing house in London
for settling inter-bank payments
THE ARRIVAL OF JOINT STOCK BANKING
Lancaster
Banking Company , became the first British joint stock bank in 1826 , whilst other
important constituents of the Royal Bank of Scotland were established soon
after. These included Manchester & Liverpool District banking Company in
1829, National Provincial Bank of England in 1833 and Manchester
& Sal ford bank and Ulster Banking Company in 1836.
THE EMERGENCE OF LARGE NATIONAL
BANKS
Despite the
success of Scotland’s banks,
London still
dominated the nation’s financial system. The volume of transactions settled
through London
was also increasing. In 1864 National Bank of Scotland
became the first Scottish bank to open a London
office.
THE EMERGENCE OF LARGE NATIONAL
BANKS
Despite the
success of Scotland’s banks,
London still
dominated the nation’s financial system. The volume of transactions settled
through London
was also increasing. In 1864 National Bank of Scotland
became the first Scottish bank to open a London
office.
The end of the
nineteenth century may have seen a slower pace of change in the banking sector,
but nonetheless the lending and share underwriting activities of banks had made
possible vigorous industrial and commercial growth in Britain and her empire. in
addition, bankers were held in high regard in their local communities as men of
influence and importance.
THE ‘BIG FIVE’
In 1900 there
were around 250 private and joint stock banks in Britain
and London was
undoubtedly the world’s largest and busiest banking center.
The outbreak of
the First World War heralded a period of rapid change in the banking industry.
Overall the volume of banking business grew during the war and many of the
private banks responded by opening additional branches, developing businesses
abroad and embarking on a series of major amalgamations.
‘Big Five’-Westminster, National Provincial, Barclays, Lloyds and Midland. The smaller
banks, like then Royal Bank of Scotland,
were little affected by these controls.
SHORT HISTORY OF BRITISH BANKING
The origin of
modern banking in Britain
can be traced back across four centuries and the history of The Royal Bank of
Scotland Group’s past constituents perfectly illustrates the story of the
industry’s development.
WAR AND CHANGE
During the
Second World War, all the banks experienced similar problems as in 1914 to
1918, with controls over foreign exchange and lending priorities, and
responsibility for the marketing and distribution of savings certificates and
defense bonds. Meanwhile, the government signaled the softening of its
hard-line opposition to bank mergers resulting in the amalgamation, announced
in 1968, of the biggest High Street banks –National Provincial Bank and
Westminster bank. Likewise, in Scotland,
in 1969 the Royal Bank of Scotland
merged with National Commercial Bank of Scotland.
EXPANSION, CONSOLIDATION AND
INNOVATION
In 1971, a
government white paper published a scheme of monetary control, which encouraged
the banks to compete more actively with one another and with other financial
institutions. As a result many of the banks began to provide additional
services and to sharpen their public image.
During
the late 1980s and early 1990s many banks developed their overseas
representation, but there was also widespread retrenchment due to the impact of
both the deep recession in the UK
economy and the fierce competition bred by deregulation
