Bank of Scotland
The Bank of Scotland plc 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 country. It was the first bank to be established in Scotland, and is the oldest operational bank in the country, the ninth oldest bank in continuous operation globally, as well as the longest continuous issuer of banknotes in the world.
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, it is the fifth-oldest extant bank in the United Kingdom. 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, 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. Bank of Scotland has been a subsidiary of Lloyds Banking Group since 19 January 2009, when HBOS was acquired by Lloyds TSB.
History
Establishment
During the 1690s, public finances and economic prospects of the country were largely uncertain, with credit proving difficult to gain and cash being in relative short supply. A group of merchants saw the establishment of a public bank as the solution to the financial issues facing the country at the time, with The Governor and Company of the Bank of Scotland being established by an act of the Parliament of Scotland on 17 July 1695, the Act for erecting a Bank in Scotland, opening for business in February 1696. Although established soon after the Bank of England, 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.File:ParliamentHouse18thcenturyEdinburgh.jpg|thumb|left|The bank was established by the Parliament of Scotland, the legislature of the Kingdom of Scotland in 1695.
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, gave the proprietors limited liability, and in the final clause made all foreign-born proprietors naturalised Scotsmen "to all Intents and Purposes whatsoever". John Holland was one of the bank's founders, and its first chief accountant was George Watson. Following the establishment of the Bank of Scotland, and the raising of capital funds, the bank was able to provide loans in order to stabilise Scottish businesses and the Scottish economy.
During its early days of operation, the Bank of Scotland acted as a means of public financial support during tough economic situations. The condition of harvest conditions leading to poor harvests and crops led to food shortages in Scotland during the 1700s, with the Bank of Scotland providing interest-free loans to help purchase meal and grain as a result of the lack of food due to harvest conditions. The bank was the first bank in Europe to produce banknotes. Until the development of banknotes, coinage was the only means of cash, but it was largely scarce and unreliable. The bank developed the idea of paper money, each with a set number of values. Banknotes were initially issued for £5, £10, £20, £50 and £100, all of which were issued from March 1696, with a £1 note being introduced into circulation later. The Bank of Scotland still produces its own banknotes, making the bank the longest continuous banknote issuer in the world.
18th and 19th centuries
The Bank of Scotland was suspected of Jacobite sympathies. Its first rival, the Royal Bank of Scotland, was formed by royal charter in 1727. This led to a period of great competition between the two banks as they tried to drive each other out of business. Although the "Bank Wars" ended in around 1751, competition soon arose from other sources, as other Scottish banks were founded throughout the country. 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. 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, 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. The bank was housed in the southern section of the Gourlay house on Melbourne Place before being moved to the customised bank building on the Mound in 1805.
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. The first branch in London opened in 1865.
20th century
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. The Bank also expanded into consumer credit with the purchase of Chester-based, North West Securities. In 1971, the Bank agreed to merge with the British Linen Bank, 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.In 1959, the Bank of Scotland became the first bank in the UK to install a computer to process accounts centrally. At 11:00 on 25 January 1985, the Bank of Scotland introduced HOBS, 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.
International expansion
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 of New Zealand. In 1995 the bank expanded into the Australian market by acquiring Perth based Bankwest.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".
HBOS
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. In 1999, the Bank of Scotland made a takeover bid for National Westminster Bank. 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.In 2000, the Bank of Scotland became the first bank in the United Kingdom to introduce the concept of mobile banking, using WAP mobile phones. A simple and basic concept, the system allowed customers to only access account information, but it has been credited since for paving the way for the advancement and increased usage of mobile banking. 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. In 2001, the Bank of Scotland and the Halifax agreed a merger to form HBOS.
In 2006, HBOS secured the passing of the HBOS Group Reorganisation Act 2006, a local 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. Capital Bank branding was phased out.
The provisions in the act were implemented on 17 September 2007. In 2008, HBOS Group agreed to be taken over by Lloyds TSB Group during the Great Recession.
Central Bank of Scotland
In the event of Scottish independence, the constitutional role the Bank of Scotland would play remains largely unclear, and whether the bank would become the central bank of Scotland following independence. One proposal in the event of Scottish independence would be for Scotland to establish a new currency, the Scottish pound, which would be printed by the Central Bank of Scotland. As the Bank of Scotland, along with the other two commercial banks in Scotland – the Royal Bank of Scotland and Clydesdale Bank – are permitted to issue their own banknotes of the Pound sterling, it would be likely that the Bank of Scotland would retain its ability to do so if it were not to become the central bank of the country. During campaigning ahead of the 2014 Scottish independence referendum, the Scottish Government campaigned for Scotland to retain the Pound sterling as its currency and establish a currency union with the United Kingdom.In subsequent government proposal papers regarding independence, the Scottish Government has confirmed that the government's preferred method would be that the Bank of Scotland would not become the Central Bank of Scotland, but rather, a new Scottish Reserve Bank would be established instead and assume the role of the central bank of the country. The Bank of Scotland would retain its status as a commercial and clearing bank.