Development of banking in the UK

Question 1

Banking in England-

How many Partners were English private banks allowed to have in the early 19th century?

Answer 1

Six partners

Question 2

In what year did over 60 private Banks fail in England?

Answer 2

1825

Question 3

After over 60 banks failed in England which act was passed?

Answer 3

Country Bankers Act 1826

Question 4

What did the Country Bankers Act 1826 Permit?

Answer 4

It broke the Bank of England’s monopoly and permitted the creation of joint stock banks outside a 65-mile radius of London with the right to issue notes.

Question 5

What did the Country Bankers Act 1826 mean that New banks could do?

Answer 5

New banks could raise more capital than the old ones to open branches and thus lend to a variety of industries, thereby spreading their risks

Question 6

In 1833 what did a Bank Charter act authorise?

Answer 6

Authorised joint stock banks to open branches within a 65-mile radius provided they did not issue notes.

Question 7

What was established in 1834?

Answer 7

London and Westminster Bank

Question 8

What did the London and Westminster bank become?

Answer 8

Through mergers it became The National Westminster Bank plc, which in turn became part of the RBS group.

Question 9

What increased between 1890-1918

Answer 9

Increase concentration of Banking in England whereby a few banks dominated deposit taking and lending business. The trend was encouraged by the public’s greater confidence in larger banks, a view also held by the authorities.

Question 10

What was set up in 1918?

Answer 10

A Treasury Committee

Question 11

Why was A Treasury Committee set up?

Answer 11

It was set up to examine bank mergers as fears began to be expressed about the size and influence of large banks. A proposed legal ban on mergers was dropped, but the banks did agree to consult the authorities before proceeding with any further amalgamations.

Question 12

From 1918, for the next 50 years the pattern of banking in England remained stable. Five banks dominated the banking scene, What are these?

Answer 12

• Barclays
• Lloyds
• Midland
• National Privincial
• Westminster
• Plus Six smaller joint stocks banks

Question 13

Why was there a strong argument for bank mergers in 1960s?

Answer 13

A strong argument for bank mergers in the 1960s was that England clearing banks faced increased competition from both home and abroad, from finance houses, building societies and foreign banks.

Question 14

Which banks merged in 1968?

Answer 14

Barclays merged with Martins Bank

National provincial, District and Westminster Banks became the National Westminster Bank

Question 15

What 3 Major benefits came from the bank mergers from 1968?

Answer 15

• Strengthening of Bank balance sheets and thereby greater lending capacity
• Cost saving Via branch mergers and reduced staff requirements
• More funds available for investment in new technology available at that time.

Question 16

When was the Bank of Scotland established?

Answer 16

1695

Question 17

When was the Royal Bank of Scotland established?

Answer 17

1727

Question 18

What were the Royal Bank of Scotland & Bank of Scotland?

Answer 18

They were both Legal Corporations with Limited liability for their shareholders.

Question 19

Was the prohibition of having more than six partners in place in Scotland?

Answer 19

No- it was not in place.

Question 20

By the 19th century, what did most major Scottish towns and cities have?

Answer 20

By 19th century, most major Scottish towns and cities had joint stock banks issuing their own notes.

Question 21

When was Clydesdale bank set up in Glasgow?

Answer 21

1839

Question 22

What took place in Scotland similar to England which reduced the number of Scottish banks to 8?

Answer 22

A process of amalgamations took place.

Question 23

In the 1950s and 1960s further mergers took place until there was only 3 banks?

Answer 23

• Royal Bank of Scotland
• The Bank of Scotland
• Clydesdale bank

Question 24

Name the innovations that originated from the Scottish Banking system?

Answer 24

• Overdrafts
• Branch banking
• Joint stock banking
• The clearing House
• The Chartered Banking
• Institute
• Note issue

Question 25

Overdrafts-
The _________ from the cash credit introduced by the Royal bank of Scotland In _______. Under this system, the bank agreed to honour ______ against a person’s account up to an agreed amount. The sum was debited against the customer’s ______ and interest was charged on the outstanding _______.

Answer 25

The overdraft from the cash credit introduced by the Royal bank of Scotland In 1728. Under this system, the bank agreed to honour claims against a person’s account up to an agreed amount. The sum was debited against the customer’s account and interest was charged on the outstanding balance.

Question 26

Branch Banking-
Scotland developed a _______ of branches which added to the _______ of the banking system and allowed bank to tap a ______ source of funds and spread risk associated with ______ over a wider _________ area.

Answer 26

Scotland developed a network of branches which added to the stability of the banking system and allowed bank to tap a wider source of funds and spread risk associated with lending over a wider geographical area.

Question 27

Joint Stock Banking-
This form of banking meant that __________ in a bank were protected from personal _______ for the bank’s debt should it fail. Limited liability encouraged a greater number of people to become _______ in banks, thus providing them with a larger ______ base

Answer 27

This form of banking meant that shareholders in a bank were protected from personal liability for the bank’s debt should it fail. Limited liability encouraged a greater number of people to become investors in banks, thus providing them with a larger Capital base

Question 28

The Clearing House-
In 1771, the _______ banks introduced a note exchange in ________ which meant that each bank’s notes were more acceptable to the public. This example of _______ cooperation encouraged the concept of clearing ______ for ______.

Answer 28

In 1771, the Scottish banks introduced a note exchange in Edinburgh which meant that each bank’s notes were more acceptable to the public. This example of interbank cooperation encouraged the concept of clearing house for cheques.

Question 29

The Chartered Banking Institute-
Established in ____, the institute was the world’s first professional body for _______ bankers. It dedicated itself, as it does today, to the ________ and educating of bankers and other ________ services practitioners both in the UK and _______.

Answer 29

Established in 1875, the institute was the world’s first professional body for practising bankers. It dedicated itself, as it does today, to the training and educating of bankers and other financial services practitioners both in the UK and globally.

Question 30

Note issue-
A distinctive feature of Scottish banking is the right of Scottish Banks to issue their own notes. The Bank ______ Act 1844, which gave the Bank of England an eventual _______ of the note issue in England and Wales, did not apply to ________. Thus the Scottish joint stock banks _______ the right to issue their own notes.

Answer 30

A distinctive feature of Scottish banking is the right of Scottish Banks to issue their own notes. The Bank Charter Act 1844, which gave the Bank of England an eventual monopoly of the note issue in England and Wales, did not apply to Scotland. Thus the Scottish joint stock banks retained the right to issue their own notes.

Question 31

What act meant that each bank in Scotland was granted an authorised circulation based on its average circulation for 1844; thereafter any notes issued above this figure were backed by gold.

Answer 31

The Bank Notes (Scotland) Act 1845

Question 32

Do Scottish banks have to cover the cost and security for their own notes?

Answer 32

Yes

Question 33

What are the benefits that the Scottish bank get from issuing there own notes.

Answer 33

The Banks appreciate the prestige, advertising and appeal to Scottish Patriotism. of issuing their own notes.

• Financial benefits- Scottish notes do not need to be covered until in circulation with the public; this reduces the cost of till money
• If Scottish notes were abolished, Scottish banks would have the expense of holding all their till money in the form of Bank of England notes for which a fee is payable