Bank based in Edinburgh, Scotland
The
Bank of Scotland plc
(
Scottish Gaelic
:
Banca na h-Alba
) is a
commercial
and
clearing bank
based in
Edinburgh
, Scotland, and is part of the
Lloyds Banking Group
. The bank was established by the
Parliament of Scotland
in 1695 to develop Scotland's trade with other countries, and aimed to create a stable banking system in the
Kingdom of Scotland
.
[2]
With a history dating to the end of the 17th century, the Bank of Scotland was the first bank to have been established in Scotland, and,
[3]
it is the
fifth-oldest extant bank
in the United Kingdom (the
Bank of England
having been established one year earlier). It is the only commercial institution created by the Parliament of Scotland, when Scotland was an independent,
sovereign state
, to remain in existence. It was the first bank in Europe to successfully print its own
banknotes
,
[4]
and it continues to print its own
sterling banknotes
under legal arrangements that allow Scottish banks to issue currency.
In June 2006, the
HBOS Group Reorganisation Act 2006
was passed by the
Parliament of the United Kingdom
, allowing the bank's structure to be simplified. As a result,
The Governor and Company of the Bank of Scotland
became Bank of Scotland
plc
on 17 September 2007.
[5]
Bank of Scotland has been a subsidiary of Lloyds Banking Group since 19 January 2009, when
HBOS
was acquired by Lloyds TSB.
History
[
edit
]
Establishment
[
edit
]
The Governor and Company of the Bank of Scotland was established by an
act
of the
Parliament of Scotland
on 17 July 1695,
[6]
the Act for erecting a Bank in Scotland, opening for business in February 1696. Although established soon after the
Bank of England
(1694), the Bank of Scotland was a very different institution. Whereas the Bank of England was established specifically to finance defence spending by the English government, the Bank of Scotland was established by the
Scottish government
to support
Scottish business
, and was prohibited from lending to the government without parliamentary approval.
[6]
The founding Act granted the bank a monopoly on public
banking
in Scotland for 21 years, permitted the bank's directors to raise a nominal capital of £1,200,000
pound Scots
(£100,000
pound sterling
), gave the proprietors (shareholders)
limited liability
, and in the final clause (repealed only in 1920) made all foreign-born proprietors naturalised Scotsmen "to all Intents and Purposes whatsoever".
[6]
John Holland
, an
Englishman
, was one of the bank's founders.
[6]
Its first chief accountant was
George Watson
.
[7]
18th and 19th centuries
[
edit
]
The Bank of Scotland was suspected of
Jacobite
sympathies.
[6]
Its first rival, the
Royal Bank of Scotland
, was formed by
royal charter
in 1727.
[6]
This led to a period of great competition between the two banks as they tried to drive each other out of business.
[6]
Although the "Bank Wars" ended in around 1751,
[6]
competition soon arose from other sources, as other Scottish banks were founded throughout the country.
[6]
In response, the Bank of Scotland itself began to open branches throughout Scotland.
Following the
Acts of Union
in 1707, the bank supervised the reminting of the old Scottish coinage into
Sterling
. It was one of the first banks in Europe to print its own
banknotes
, and it continues to print its own
sterling banknotes
under legal arrangements that allow Scottish banks to issue currency.
[8]
The bank also took the lead in establishing the security and stability of the entire Scottish banking system, which became more important after the insolvency of
Alexander Fordyce
and collapse of the
Ayr Bank
in 1772,
[9]
in the
crisis
following the collapse of the London house of
Neal, James, Fordyce and Down
.
Henry Dundas
was Governor of the Bank of Scotland from 1790 to 1811. As well as governor, he was also
Home Secretary
in
William Pitt the Younger
's government. In 1792, Dundas was successful in passing the Slave Trade Bill in the House of Commons.
[10]
The bank was housed in the southern (1588) section of
the Gourlay house
on Melbourne Place before being moved to the customised bank building on
the Mound
in 1805.
[11]
The Western Bank collapsed in 1857, and the Bank of Scotland stepped in with the other Scottish banks to ensure that all the Western Bank's notes were paid.
[12]
The first branch in London opened in 1865.
[13]
20th century
[
edit
]
In the 1950s, the Bank of Scotland was involved in several mergers and acquisitions with different banks. In 1955, the Bank merged with the Union Bank of Scotland.
[14]
The Bank also expanded into consumer credit with the purchase of
Chester
-based,
North West Securities
(Later
Capital Bank
).
[15]
In 1971, the Bank agreed to merge with the
British Linen Bank
,
[15]
owned by
Barclays Bank
. The merger saw Barclays Bank acquire a 35% stake in the Bank of Scotland, a stake it retained until the 1990s.
[16]
In 1959, the Bank of Scotland became the first bank in the UK to install a computer to process accounts centrally.
[15]
At 11:00 on 25 January 1985, the Bank of Scotland introduced HOBS (Home and Office Banking Services), an early example of remote access technology being made available to banking customers. This followed a small-scale service operated jointly with the
Nottingham Building Society
for two years but developed by the Bank of Scotland. The new HOBS service enabled customers to access their accounts directly on a television screen, using the
Prestel
telephone network.
[17]
International expansion
[
edit
]
The arrival of
North Sea oil
to Scotland in the 1970s allowed the Bank of Scotland to expand into the energy sector. The Bank later used this expertise in energy finance to expand internationally. The first international office opened in
Houston
, Texas, followed by more in the United States, Moscow and Singapore. In 1987, the Bank acquired
Countrywide Bank
[15]
of
New Zealand
(later sold to
Lloyds TSB
in 1998). The Bank later expanded into the Australian market by acquiring the
Perth
-based
Bank of Western Australia
.
[15]
A controversial period in the Bank's history was the attempt in 1999 to enter the United States
retail banking
market via a joint venture with evangelist
Pat Robertson
. The move was met with criticism from civil rights groups in the UK, owing to Robertson's controversial views on homosexuality. The Bank was forced to cancel the deal when Robertson described Scotland as a "dark land overrun by homosexuals".
[18]
HBOS
[
edit
]
Formation of HBOS
[
edit
]
In the late 1990s, the UK financial sector market underwent a period of consolidation on a large scale. Many of the large
building societies
were demutualising and becoming banks in their own right or merging with existing banks. For instance Lloyds Bank and TSB Bank merged in 1995 to create
Lloyds TSB
.
[19]
In 1999, the Bank of Scotland made a takeover bid for
National Westminster Bank
.
[20]
Since the Bank of Scotland was significantly smaller than the English-based NatWest, the move was seen as an audacious and risky move. However,
The Royal Bank of Scotland
tabled a rival offer, and a bitter takeover battle ensued, with the Royal Bank the victor.
[21]
The Bank of Scotland was now the centre of other merger opportunities. A proposal to merge with the
Abbey National
was explored, but later rejected.
[22]
In 2001, the Bank of Scotland and the
Halifax
agreed a merger to form
HBOS ("Halifax Bank of Scotland")
.
[23]
HBOS Reorganisation Act
[
edit
]
In 2006, HBOS secured the passing of the
HBOS Group Reorganisation Act 2006
, a private Act of Parliament that would allow the group to operate within a simplified structure. The Act allowed HBOS to make the Governor and Company of the Bank of Scotland a public limited company, Bank of Scotland plc, which became the principal banking subsidiary of HBOS. Halifax plc and
Capital Bank plc
transferred their undertakings to Bank of Scotland plc, and although the Halifax brand name was retained, Halifax then began to operate under the latter company's UK banking licence.
[24]
Capital Bank branding was phased out.
The provisions in the Act were implemented on 17 September 2007.
[25]
Lloyds Banking Group
[
edit
]
In 2008,
HBOS Group
agreed to be taken over by
Lloyds TSB Group
during the
Great Recession
.
[26]
Bank of Scotland sponsored the
Scottish Premier League
from its inception in 1998 to season 2006/2007 when it declined to renew the deal in favour of investing in grassroots sport instead. They also sponsored
Scottish Athletics
for a number of years.
Links to the Atlantic Slave Trade
[
edit
]
Henry Dundas
was Governor of the Bank of Scotland from 1790 to 1811. As well as governor, he was also
Home Secretary
in
William Pitt the Younger
's government. In 1792 Dundas was successful in passing the Slave Trade Bill in the House of Commons.
[27]
Banknotes
[
edit
]
Although the Bank of Scotland today is not a central bank, it retains the right (along with two other Scottish commercial banks) to issue
pound sterling
banknotes to this day. These notes are equal in value to notes issued by the
Bank of England
, the central bank of the United Kingdom.
Banknote history
[
edit
]
Along with the Bank of England, the Bank of Scotland was one of the first European banks to issue paper currency redeemable for cash on demand (which was an extremely useful facility given the poor state of the
Scottish coinage
at the end of the 17th century) on a sustainable basis after the earlier failed attempt of the Swedish
Stockholms Banco
in 1661?64. Following the
Acts of Union
in 1707, the bank supervised the reminting of the old Scottish coinage into
Sterling
. Up until the middle of the 19th century, privately owned banks in
Great Britain and Ireland
were permitted to issue their own banknotes, and money issued by provincial Scottish,
[28]
English, Welsh and Irish banking companies circulated freely as a means of payment.
[29]
In 1826, there was outrage in Scotland at the attempt of the
United Kingdom Parliament
to prevent the production of banknotes of less than five pounds face value.
Sir Walter Scott
wrote a series of letters to the
Edinburgh Weekly Journal
under the pseudonym "
Malachi
Malagrowther
", which provoked such a response that the government was forced to relent and allow the Scottish banks to continue printing £1 notes.
[30]
1995 series
[
edit
]
Bank of Scotland's previous note issue was in 1995, known as the
Tercentenary Series
as they were issued in the year of the three hundredth anniversary of the foundation of the bank. Each denomination features Sir Walter Scott on the front, and on the back are representations of industries that Scotland excels in:
- £5 note featuring a
vignette
of
oil
and energy
- £10 note featuring a vignette of
distilling
and brewing
- £20 note featuring a vignette of education and research
- £50 note featuring a vignette of arts and culture
- £100 note featuring a vignette of
leisure
and tourism.
These notes are no longer in circulation.
2007 "Bridges" series
[
edit
]
Bank of Scotland began issuing a new series of banknotes in the Autumn of 2007, which feature the common theme of Scottish bridges.
[31]
It will take at least three years for the current issue of Bank of Scotland notes to be phased out of circulation. In keeping with the bank's tradition, the front of the notes depict an image of Sir Walter Scott; the image on the 2007 series is based on the portrait of Scott painted by
Henry Raeburn
.
[32]
Some new security features have also been added to the new design. These include a metallic security thread embedded in every banknote, which contains the numerical value of the note and the note's bridge image. A new hologram and foil patch has been introduced on the front of the £20, £50 and £100 notes, which features the Bank of Scotland logo and the numerical value of the note.
On 1 March 2018 the Bank of Scotland decided to withdraw all of its paper £5 and £10 notes, and fully replace them with its polymer equivalents (see below).
[33]
2016 Polymer series
[
edit
]
Bank of Scotland began issuing new banknotes on polymer in 2016, beginning with the £5 note. The main theme of the bridges of Scotland are kept for this series, but have been redesigned to incorporate additional design features. The portrait of Sir Walter Scott by Henry Raeburn is the same as the 2007 issues, but have been shifted from the centre to the right side of the notes. The bank's headquarters, "The Mound" is featured at the centre of the note. The size of the notes for this series is also reduced.
[34]
[35]
[36]
Corporate structure
[
edit
]
Associated brands include:
List of governors of the Bank of Scotland
[
edit
]
- John Holland
1696?1697
- David Melville, 3rd Earl of Leven
1697?1728
- Alexander Hume, 2nd Earl of Marchmont
1728?1740
- Charles Hope, 1st Earl of Hopetoun
1740?1742
- Colonel John Stratton 1742
- John Hay, 4th Marquess of Tweeddale
1742?1762
- Hugh Hume, 3rd Earl of Marchmont
1763?1790
- Henry Dundas, 1st Viscount Melville
1790?1811
- Robert Dundas, 2nd Viscount Melville
1812?1851
- James Broun Ramsay, 1st Marquess of Dalhousie
1851?1860
[37]
- John Campbell, 2nd Marquess of Breadalbane
1861?1862
- George Hamilton-Baillie, 11th Earl of Haddington
1863?1870
- John Dalrymple, 10th Earl of Stair
1870?1903
- Alexander Bruce, 6th Lord Balfour of Burleigh
1904?1921
- William Mure 1921?1924
- Sidney Elphinstone, 16th Lord Elphinstone
1924?1955
- Sir John Craig 1955?1957
- Steven Bilsland, 1st Baron Bilsland
1957?1966
- Henry Hepburne-Scott, 10th Lord Polwarth
1966?1972
- Ronald Colville, 2nd Baron Clydesmuir
1972?1981
- Sir Thomas Risk 1981?1991
- Sir Bruce Pattullo 1991?1998
- Sir
Alistair Grant
1998?1999
- Sir
John Shaw
1999?2001
- Sir
Peter Burt
2001?2003
- George Mitchell 2003?2006
- Dennis Stevenson, Baron Stevenson of Coddenham
2006? 2007
See also
[
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]
References
[
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]
External links
[
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]
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