Established by an Act of the Parliament of Scotland way back in 1695 (for the Carrying on and Managing of a Publick Bank), the Bank of Scotland gained considerable distinction as being the only Bank ever to be founded by an Act of the long-defunct Scots Parliament which is still trading to this day.
To say that the act was favorable to the Bank would be an understatement as the Bank was founded with a nominal amount capital of £100,000 Sterling, with the shareholders being granted limited liability and the banking a monopoly for the first 21 years of its trading. The only condition was that the Bank’s directors could only be Scottish, a clause that actually stayed in place for more than two hundred years. The Bank began with a team of no less than 172 directors, among the leading figures of Scottish commerce and industry of that time, who found the Bank’s trading terms and conditions much to their liking.
The Bank of Scotland, despite its obvious bias toward its owners and shareholders, was still no slouches in its field. They became the first European Bank to issue paper currency, a privilege that they enjoy to this day, despite the fact that the issue remains controversial within the inner circles of the “old lady of Threadneedle Street.”
The monopoly that was greatly enjoyed by the Bank of Scotland expired in 1716, and in 1728 their first and longest-lasting rival, the Royal Bank of Scotland, was formed. After the end of the Jacobite Rebellion of 1745, the industrial capital of Scotland, Glasgow, became the focus of economic development in Scotland. Towards the end of the eighteenth century, the Bank of Scotland began to expand outwards and opened a series of branches, reaching its peak of that era of operating 43 branches by the mid-nineteenth century, a number that had risen to 265 just before the outbreak of World War Two.
The Bank of Scotland also established a branch in London in 1860.
Despite the uncertain climate of the first half of the twentieth century, largely due to the two World Wars and the depression between them, the Bank of Scotland continued a path of measured expansion and consolidation and was in a very strong position to handle the post-war boom and the relative prosperity of the second half of the century. Consumer credit was very much on the upturn, and in 1958 the Bank of Scotland stated its intention to become a key player when it acquired North West Securities Limited, a specialist in this field.
With the discovery of oil on the North West coast of Scotland in the late nineteen sixties, the Bank of Scotland became principally involved in the industry’s financing and reaped a considerable share of the huge profits being earned there. Profits earned were re-invested in continuous global expansion, with an emphasis being placed on the oil industry. Ever an innovator, the Bank of Scotland was the first UK bank to embrace computer technology when they installed a computer to handle their account records.
A trend in World banking that gained considerable impetus during the last decade of the twentieth century was amalgamation. The Bank of Scotland, ever believers in this trend, swallowed up the Union Bank of Scotland in 1955 and the British Linen Bank in 1971. However, all of the acquisitions and mergers that took place beforehand faded into insignificance following the Bank’s merger with Halifax Group plc to form the HBOS plc in 2001.
During the current financial crisis or adjustment, as some people would prefer it to be known, Lloyds TSB announced in September 2008 that they would be acquiring the HBOS group for a sum of over 12 billion pounds. To keep in line with traditions established over three hundred years, Lloyd’s management announced that they would continue to operate from the Bank’s traditional headquarters on the Mound in Edinburgh as well as exercising their right to print their own Scottish banknotes.