Commercial Bank of Scotland (1810-1959)

Banknotes

In 1810 Commercial Banking Company of Scotland was founded in Edinburgh as a co partnership to provide banking facilities to commercial, industrial and agricultural businessmen of modest means - it was to be 'the bank of the citizens'. As a joint stock bank with substantial capitalisation and shareholding it presented a considerable challenge to the existing public banks which had tended to do business only with individuals or companies of substance. From the outset it issued its own notes and began to establish branches over a wide geographical area. By 1815 it had fourteen branches and had moved from the then suburban environs of Leith Walk into a head office in High Street, close to Edinburgh's commercial centre.

Commercial Banking Company grew rapidly acquiring the Caithness Banking Company (established 1812) of Wick in 1825. It finally secured a Royal Charter in December 1831 and changed its name to Commercial Bank of Scotland. By 1840 the bank boasted forty-five branches and, in 1844, took over the Arbroath Banking Company (established 1825), operating in Arbroath and Forfar.

In 1843 the bank acquired property in George Street where, four years later, it opened a magnificent, purpose-built head office designed by architect David Rhind in the style of a Greek temple decorated with pillars and pediment. By 1850 it had fifty-three branches, the second largest network of any Scottish bank. Despite its substantial presence in Glasgow, the bank was virtually unaffected by the failure of Western Bank in 1857 but in 1879, following the disastrous collapse of the City of Glasgow Bank, Commercial Bank registered under the Companies Act trading with limited liability from 1882.

In 1883, following the example of other Scottish banks, Commercial Bank opened an office in London and by 1900 had 138 branch banks. During the First World War one sixth of Commercial Bank's staff were killed on active service, but the businesses continued to thrive increasing the number of its branches to 240 in 1920. During the inter-war period it became the second largest bank in Scotland in terms of liabilities, deposits and advances.

Despite its success and large number of branches, Commercial Bank's capital resources were modest, its interests undiversified and its management aware of the acute need to find a suitable trading partner.

In 1951-2 desultory talks were held with the Bank of Scotland and Union Bank and later with Barclays Bank and British Linen Bank. However, in 1953, a new general manager, Ian Wilson Macdonald, determined to broaden the bank's interests.

He recognised that hire purchase companies were profiting from funds borrowed from bankers and in 1954 negotiated the purchase of Scottish Midland Guarantee Trust, the hire purchase subsidiary of Scottish Motor Traction.

Commercial Bank of Scotland thereby became the first British bank to take a direct financial interest in a hire purchase firm and the other banks were quick to follow. Later, in 1959, a merger agreement was reached with National Bank of Scotland (established 1825) to form National Commercial Bank of Scotland.