SCOTTISH BANKS In 1695 the Scottish parliament passed an Act establishing the Bank of Scotland. This, though contemporaneous with the Bank of England, was given wider privileges, for it received the ex clusive right to carry on the business of banking for 21 years, and not only had to give no consideration in return, but was expressly forbidden to lend money to the king.
In addition to issuing notes, the Bank of Scotland began at an early date to accept money on deposit and current account, a record of the last-named being found in 1729. Early in that century the Bank, the head office of which was at Edinburgh, made sporadic attempts to found branches in other Scottish burghs, but it was only in 1744 that these proved successful. By this time, the next Scottish bank, called the Royal Bank of Scotland, had established itself, while in 1746, the year after the invasion of the Young Pretender, came the British Linen Com pany. Henceforward, banking in Scotland was an old-established and highly competitive business.
There is little doubt that Scotland had one great advantage over England in these early years, and that was that there was no law restricting the foundation of joint-stock banks as was the case in England. The result was that whereas all country business in England perforce fell into the hands of numberless small private bankers, of varying capabilities and experience, banking in Scot land remained in fewer but stronger hands. Nor were the public starved of banking facilities, for branches were rapidly established, and in 1844 there was one banking office to every 7,00o people in Scotland as against a ratio of r : 16,000 in England.
The strength of Scottish banking was proved in the crises of the Napoleonic wars and the following years. Only one failure occurred, and even here the creditors were ultimately paid in full.
The Scottish note issue came within the scope of Peel's act of 1844. A definite limit was laid down, and every note issued above that limit had to be fully covered by gold. The amount of specie thus to be held was to be dependent upon the average amount of notes issued during the four weeks preceding April 25, 1844. One result of this restriction was that since that date no important bank has been established in Scotland. The reason is that in the i9th century, the right to issue notes was still in Scotland an essential to a successful banking business.
Despite its previous immunity, Scotland did not escape the major crises of 1847 and 1857, while allusion has already been made to the failure of the City of Glasgow Bank in 1878. Pro gress was in general similar to that made in England, and from 1844 to 1906, the number of banking offices grew from 368 to 1,180. Notes circulated freely in Scotland, but were not legal tender in England, and most British banks made a small charge for changing them.
The World War had similar effects in Scotland as in Eng land. As part of the general measures to relieve the pressure for currency, Scottish bank notes were made legal tender, though this privilege was withdrawn after the conclusion of hostilities. The introduction of currency notes, of course, made its effect felt in Scotland as in England.
Since the closing years of the 19th century Scottish and English banks have naturally drawn closer together. Many of the Scottish banks opened London offices, and on its foundation Scottish banks were admitted to the British Bankers' Association. More im portant still, the amalgamation movement initiated by the war spread to Scotland, and some of the "big five" have acquired the control of famous Scottish banks. The British Linen bank is now affiliated to Barclays, while the Midland bank has the control of the Clydesdale bank.