The National Bank of Scotland (1825-1959)

Banknotes

Established as a co partnership in Edinburgh in March 1825, National Bank of Scotland had an authorised capital of £5 million and attracted more shareholders than any other bank in Britain. It opened thirteen branches in its first year and began to circulate notes through the offices of its provincial shareholders. It also acquired a number of houses occupied by a hotel on the corner of St Andrew Square, Edinburgh, a site which was to remain its home throughout its life and is now part of the head office of The Royal Bank of Scotland plc.

In August 1831 by selective, timely lobbying National Bank received a Royal Charter, albeit without limitation of liability, much to the annoyance of the older Commercial Bank which had been petitioning unsuccessfully for the same privilege for some time. In boisterous mood National Bank continued to expand, acquiring the Aberdeen Commercial Banking Company (established 1778) in 1833 and the Perth Union Banking Company (established 1810) in 1836. In 1843 a bid to take over the busy Glasgow & Ship Bank failed, leading National Bank to open its own Glasgow office later the same year. In 1844 it also acquired the short-lived Bank of Glasgow (established 1843), and thereby finally secured a strong-footing in the important Glasgow market. Twenty years later National Bank pioneered a Scottish breakthrough by opening an office in London where it began immediately to issue notes, to seek deposits by offering attractive rates of interest and to provide foreign services for the first time. English provincial banks had since 1826 been prohibited from issuing notes if they operated within a sixty-five mile radius of London and were vexed that a Scottish bank was exempt from the ruling.

In 1882, after the collapse of the City of Glasgow Bank, National Bank, like Commercial Bank, registered as a limited liability company. From 1881 until the outbreak of the First World War, in terms of liabilities, deposits and advances, National Bank was in Scotland second only to the Bank of Scotland. After the war a tendency toward banking amalgamations in England accelerated and the English banks became eager to extend their coverage into Scotland. In July 1918 National Bank and Lloyds Bank, building on an existing foreign exchange connection, reached an agreement by which Lloyds acquired the entire capital of National Bank. Both banks, apart from an exchange of directors, remained entirely separate.

National Bank continued to trade successfully during the inter-war years. Despite suffering from staff shortages and exchange control during the Second World War, a magnificent new head office building, commissioned in 1936, opened at 42 St Andrew Square in 1942. In 1946 the bank introduced Britain’s first mobile banking services on the Isle of Lewis, the forerunner of the travelling banks presently operated by The Royal Bank of Scotland. In 1959 Lloyds Bank made an unexpected approach to Commercial Bank of Scotland, which was seeking amalgamation with a larger partner, offering to surrender its ownership of National Bank for a stake in a new, merged bank. The proposal was readily accepted and resulted in the formation of National Commercial Bank of Scotland.