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Aberdeen Finance

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James VI Mark
A merk was a Scottish Silver Coin. Originally the same word as a Mark of silver, the merk was in circulation at the end of the 16th century and in the 17th century. It was originally valued at 13
s 4d (exactly ⅔ of a pound Scots, or about one shilling in English coin), later raised to 14s Scots. In addition to merks, half-merk and quarter-merk coins were produced with values of, respectively, 7s and 3s 6d, as well as a 4-merk coin of 56s (£2 16s).

As children we called half pennies 'Mecks' and Thrupenny bits were 'Tickies', Farthings, Florins, Half Crowns (Half a Dollar) were also in circulation with a range of Scottish Notes from obscure local Banks.

Aberdeen had its share in the troubles and misfortunes of the succeeding reigns, and in 1272, according to Boece, it was reduced to ashes by the fires caused by a tempest which devastated a great part of Scotland, and which is mentioned also by Fordun, though he does not speak of the destruction of Aberdeen by it.  Subsequent to this time Aberdeen was repeatedly honoured by the visits or the prolonged residence of the Scottish King, and a Mint was established in the town, Exchequer Row from which coinages were issued both by David and Robert III

During its time of free banking Scotland's economy grew much quicker than England's, which had a more regulated and failure-prone system. Even though England was in the midst of its 1st industrial revolution during this period, Scotland's approximate per capita income went from half of England's in 1750 to being virtually equal to it in 1845. Supported by a banking system marked by innovation, reliability, and stability, Scotland transformed from a poor agricultural and household economy to an advanced industrial economy specializing in iron production, shipbuilding, and engineering.

 The New Inn, built by the Freemasons in 1755, visited by James Boswell and Dr Johnson in 1773; the Freemasons had their Lodge on the top floor, hence the adjacent Lodge Walk.   The New Inn was replaced by the North of Scotland Bank, later the Clydesdale Bank, built in 1839-42 as the corner piece of Castle St./King St., now a pub named after its illustrious architect, Archibald Simpson

 

 

BANKS
A Bank was first established at Aberdeen, about the year 1752, on a small scale, in an office on the south side of Castle Street. This establishment, however, did not thrive, and it was soon given up; but, not long after, the Thistle Bank of Glasgow opened an agency here, and its notes speedily got so wide a circulation, that specie was almost banished the area.

 

In the course of 1766, a number of the gentlemen of the town and county formed themselves into a co-partnership, for the purpose of establishing a native Banking Company, under the title of "The Banking Company in Aberdeen," and a capital stock of £72,000 was subscribed for, in shares of £500. On the 1st January, 1767, the Bank was opened for business.  This Company is still in existence, and is one of the most flourishing and stable companies in Scotland. Its original paid up capital of £150 per share now sells for upwards of £3000.  Two other native Banks (viz. the Town and County and the North of Scotland, both flourishing establishments), and 4 branches of Edinburgh Banks, now divide the business of the city with the Aberdeen Bank.  On establishment its shares were issued in denominations of £1,500 and by 1810 the bank had become so profitable that each share was worth £6,880

The Banking Company in Aberdeen £20, 1 Aug 1801 (uncirculated)The Banking Company of Aberdeen entered the market in 1747 and promptly issued too many notes for its specie holdings.

They were readily made illiquid by the return of notes from Edinburgh and went under in 1753.  Perhaps the most important aspect of this occurrence was a ruling that summary diligence did not hold for bank notes except those issued by the Bank of Scotland. A Banking Company of Aberdeen note holder filed the lawsuit. It was not until over 10 years later, in 1765, that this ruling was reversed.

 
The Bank had to struggle to survive during the 1st 18 months of its existence as a result of a bank note war waged on it by agents of the Thistle Bank and the British Linen Bank.  This difficulty was exacerbated by the chronic shortage of coin being experienced throughout the country at this time.  These initial problems were overcome however and by 1770 the company had 7 agencies (branches) in Inverness, Huntly, Forres, Peterhead, Banff, Montrose and Fraserburgh.  Nevertheless, it was not until 1771 that a substantial profit was made, and the first dividend was not paid until March 1772. It issued its own notes and briefly opened a branch in Arbroath (by 1793)

As well as providing local banking services, the bank was also established in response to the problem of the proliferation of small banknotes of doubtful value in Scotland during the 1760s.  The original contract of co-partnership made reference to this, warning of "the imminent danger that all ranks of people are exposed to from the extensive and industrious circulation of a variety of Bank Notes from distant and remote parts of this Kingdom, issued and signed by people for the most part totally unknown in this Part of the Country".  In 1833, when the co-partnership was dissolved, the bank had £20,000 notes in circulation and £90,000 on deposit. The business and premises were taken over by National Bank of Scotland.

National Banking Company of Scotland was established in 1825 as a co-partnership, with an authorised capital of £5 million, and attracted more shareholders than any other bank in Britain. Its 1st Governor was Duke of Roxburghe and its 1st Chairman was Alexander Henderson. It opened 13 branches in its 1st year, began to circulate notes through the offices of its provincial shareholders (£133,000 was in circulation by 1826), and acquired head office premises in St Andrew Square, Edinburgh.

The Emergence of the Union Bank
As a result of these numerous amalgamations, it was agreed in May 1843 that the company's name would change to the Union Bank of Scotland.  The change in name reflected the bank's expansion, both in terms of its balance sheet figures, and also in terms of its coverage of the country.  There were 2 further amalgamations, with the Aberdeen Banking Company in 1849, and then the Perth Banking Company in 1857.

In July 1746, the British Linen Company was chartered. It followed the same path into banking as some of the smaller merchants had in Aberdeen during the 1730s, but with success on a much larger scale. In 1747, the British Linen Company started issuing interest-bearing notes to pay "agents, weavers, manufactures, and other customers." (Malcolm, p. 26) It had become a necessity for its agents, who were spread out all over the country, to have these funds at hand in order to facilitate the company's linen trade. In 1750, they moved further into the banking business by issuing non-interest bearing notes. By 1760, the British Linen Company had completely stopped the linen trade and was devoted fully to banking. Using their agents throughout Scotland, they instituted the world's first successful branch banking arrangement (12 branches by 1793) and by 1845 had the largest note circulation in Scotland.

Banking and Finance

North of Scotland Bank (based in Aberdeen). North of Scotland had become the major bank in that area of Scotland after it
acquired the Town and County Bank of Aberdeen before the 1st World War. However North of Scotland refused to adopt a mooted merger with Clydesdale Bank.  The merger eventually happened some 27 years later in 1950, after there were refusals
to do so in 1937 and 1941. By 1950 Clydesdale was the third largest Scottish Bank and North of Scotland was the eighth and smallest, and the merger allowed for a better pooling of resources in two different areas. Clydesdale and North of Scotland Bank
continued to grow under the chairmanship of Sir Harold Yarrow until his death in 1962. In 1963 the bank became simply The Clydesdale Bank, and continues under this name today.

Aberdeen has 2 native Banks, the Town and County (1825), and the North of Scotland (1836). The former in October 1880 had 1021 partners, 51 branches, a paid-up capital of £252,000, a reserve fund of £126,000, and deposits and credit balances amounting to £1,912, 603: the latter, with 2136 partners and 60 branches, had £394,500 of paid-up capital, £203,441 of reserve fund, and £2,678, 172 of deposits and credit balances. The Town and County has splendid new premises (1863) near the junction of Union and St Nicholas Streets, which, Roman Classic in style, cost £14,000: as also did the North of Scotland Bank (1839), at the corner of Castle and King Streets, whose Corinthian capitols exhibit a delicate minuteness never before attained in granite. There are, besides, the National Security Savings' Bank of Aberdeen (1845), and branches of the following banks, with dates of their establishment:-The Bank of Scotland (1780), the Commercial Bank (1811), the National Bank (1833), the British Linen Co. (1833), the Royal Bank (1862), and the Union Bank (1849), with which was incorporated the Aberdeen Bank (1767). The Scottish Provincial and Northern Assurance Companies were further established here in 1825 and 1836, the one with 20,000 £50 shares, the other with 30,000 £100 shares: and there are 4 navigation companies and about 80 insurance agencies.

The estimated total loss to the public up to 1841 from all Scottish bank failures was only £32,000.  The public had lost twice that amount in London in the previous year alone.  The formation of the Commercial Bank of Scotland in 1810 and the start of its extensive branching signalled the end of small private bankers in Scotland. Founded as the "bank of the citizens," the Commercial Bank allowed no private bankers to sit on its board and was founded on the joint stock of over 650 shareholders. This particular part of its constitution was not lost on the general population, and bolstered by their policy of heavy branching, the Bank quickly became a success. By 1819, they had 14 branches and by 1830 it had surpassed all competitors with 30 branches.

The Scottish system of free banking had resulted in a successful banking industry that consisted of many competitive banks with well-distributed market share.  Most of the banks throughout the experience had been well capitalized, and those that were not were quickly weeded out with little repercussions for the general public and depositors.  Bank services were available to most of the public, counterfeiting was insignificant, and many important banking innovations still in use today resulted out of the competitive pressures to attract customers. Despite all these benefits, Peel's Act of 1844 and the Scottish Banking Act of 1845 effectively closed down Scottish free banking by ending free entry into the market and instituting additional regulations.


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Last modified: 01/09/2013