Bogus Banking: The Failure of the City of Glasgow Bank

Published on: Author: Harriet Gaston Leave a comment

A student post by Lorna Mackenzie, MSc Museum Studies student.

Few people in Glasgow today are aware that over 130 years ago a bank based in the city collapsed, changing banking forever and causing devastation to many investors. Its name was the City of Glasgow Bank and The Hunterian now looks after five banknotes it issued. Four of these were recently acquired by the museum in 2016 and these are part of the museum’s collection of significant Scottish banknotes.

The City of Glasgow Bank was established in 1839 and provided banking services across Scotland. All seemed well until, shockingly, the bank failed in October 1878. Soon after, investigators discovered that the bank was badly in debt and, even worse, the directors had been forging the records to disguise this.

£1 specimen banknote issued by the City of Glasgow Bank.
£1 specimen banknote issued by the City of Glasgow Bank, GLAHM;37650.

The bank was over 5 million pounds in debt. A massive amount which its shareholders had to pay back. They had invested in the bank with unlimited liability, which meant they were responsible, to an unlimited extent, for the bank’s debts. In total, for each £100 share, the shareholders now had to pay out £2750. This was well beyond the reach of most and, as a result, over 1500 of the 1800 shareholders were bankrupted.

Many people felt a great deal of sympathy for these shareholders. Newspapers were full of tragic stories of shareholders losing their businesses, being sent to the workhouse, and even committing suicide as a result of their debts. A group which attracted particular pity were the widows and spinsters who made up around 15% of the bank’s shareholders.

Walter Smith, a popular poet at the time, wrote a poem discussing the plight of these female shareholders. The Scotsman newspaper published this poem less than a month after the City of Glasgow Bank failed. It was called ‘The Cry of the Maiden Shareholders’ and told the story of five elderly sisters who feared for their future after losing their fortune due to the bank failure. Although, as far as we know, the sisters in the poem did not exist, it was certainly based on the real life experiences of many shareholders. This is a section of the poem:

‘Pity us, God! Must our little things go?
All – even our mother’s things cherished with care?
Must we leave the old home – the one home that we know?
But not for the Poorhouse – O surely not there?
Could they not wait a while? We will not keep them long;
We could live on so little, too, cheerful and brave.
But to leave the old house, where old memories throng,
For the Poorhouse! O rather the peace of the grave!
Pity us, pity, O God!’

This shows the impact of the bank’s failure on people in the 19th century and its importance to the social history of the period. Following the failure, banking law changed and shareholders were increasingly protected to prevent this happening again. The Hunterian’s banknotes, therefore, help tell the story of this important episode in Scotland’s history.

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