The Royal Bank of Scotland (1727-)
Banknotes
The Royal Bank of Scotland was founded in 1727. Originally opened with a staff
of just eight, our first premises were in the Old Town of Edinburgh. For more
than half a century, we traded solely from the Scottish capital, but in 1783 we
opened our first branch in the fast-growing trading city of Glasgow. This new
office was soon conducting over half of the Bank's entire business. Spurred on
by this success, many more branches opened across Scotland and then, in 1874,
our first office opened in London.
1727 to 1745
In the 1690s a group of investors tried to set up a Scottish trading colony at
Darien (modern day Panama). The venture was a terrible failure, costing Scotland
2,000 lives and a quarter of her entire liquid wealth. Partly because of these
losses, Scotland accepted political union with England to form Great Britain in
1707.
One of the terms of the Acts of Union called for compensation to be paid to
Scots for the money they had lost. A company was formed to manage the payments,
and it soon found that it had spare money to invest. Its directors had the idea
of starting a bank, and petitioned King George I for his approval. In 1727 a
royal charter was granted, establishing The Royal Bank of Scotland. Early
rivalry
In our early years, we were in fierce competition with our older rival Bank of
Scotland. Each tried to bankrupt the other by hoarding and then presenting for
payment large quantities of its opponent's banknotes. Neither succeeded in
inflicting a fatal blow, however, and eventually both sides had to accept the
permanent presence of competition.
Greater threats faced us in 1745, when an armed Jacobite uprising challenged
King George II's right to the throne. The Jacobites - who believed Bonnie Prince
Charlie was the rightful King - gathered together to form an army and attempt to
take the throne by force. On their march southwards, they occupied the city of
Edinburgh. Anticipating a time of danger and upheaval, we moved our money and
most precious records into Edinburgh Castle for safekeeping.
When the Jacobites arrived in the city, Bonnie Prince Charlie demanded payment
from us for a large quantity of Royal Bank notes. This money funded the
Jacobites' march on into England until they were turned back at Derby in the
English Midlands. From there, they retreated back to their Scottish heartland,
where their rising came to a bloody end on the battlefield at Culloden. A
dangerous episode in our early history was over.
1746 to 1830
In 1783 we opened our first branch outside Edinburgh, in Glasgow. Already a
major port city, Glasgow was poised to become a key centre of manufacturing too,
but businesses needed external finance to maintain trade and fund new mills and
factories. Our branch met this need and the relationship between the bank and
the city brought advantages to both. Within two decades of its opening, the
Glasgow branch was already conducting more business than head office in
Edinburgh.
Back in Edinburgh, meanwhile, we were anxious to move away from our cramped,
awkward premises in the heart of the city's Old Town. In 1821 we became one of
the first major businesses to move to the elegant new district on the north side
of the city, still known two centuries later as the New Town. Today, our
registered office remains in St Andrew Square, in a magnificent Georgian
townhouse.
1831 to 1938
In the 1830s we began to establish a wider branch network and in 1864 negotiated
our very first acquisition, buying Dundee Banking Co. As the 19th century
progressed, it became increasingly obvious that the City of London was fast
becoming a major centre of international business and finance, so in 1874 we
opened an office in Bishopsgate, at the heart of the City.
By 1910 we had a network of 158 branches and employed 900 staff, but the
outbreak of the First World War in 1914 brought new challenges. Banks became
involved in government war loans and trading controls, and also had to cope with
staff shortages. To keep banks running while male staff were away on active
service, women were employed in large numbers for the first time.
In the years after the return of peace in 1918, there was a series of major bank
mergers and acquisitions in Britain. This environment helped us to pursue a
strategy of growth in England. We acquired the long-established Drummonds Bank
in London in 1924 and Williams Deacon's Bank, with its large network of branches
in the north-west of England, in 1930.
1939 to 1970
In 1939, with the world once again on the brink of war, we negotiated the
purchase of Glyn, Mills & Co, which also owned Child & Co. Both Glyn, Mills and
our existing English constituent Williams Deacon's Bank continued to trade as
separate entities and, together with The Royal Bank of Scotland itself, became
known as The Three Banks Group.
During the Second World War, many of the problems of the 1914-18 conflict had to
be faced once again. After peace returned in 1945, however, we were eager to
continue developing services for customers. In the late 1950s and 1960s branch
networks grew and mobile and drive-in banks were introduced. We launched
personal loans; a pioneering savings stamp scheme; and a pre-paid form of
cash-dispensing machine, forerunner of the ATM. It was also during these years
that we established our first direct presence overseas by opening a
representative office in New York in 1960.
In 1969 The Royal Bank of Scotland merged with
National Commercial Bank of
Scotland. This merger created a much bigger, more complicated and diverse
business, and a major reorganisation was required. A new holding company was
created and the Group's numerous bank brands - including The Royal Bank of
Scotland itself - became subsidiaries. In 1970 the major Group brands trading in
England and Wales were united to form Williams & Glyn's Bank.
For customers, one of the most visible outcomes of the merger and subsequent
reorganisation was the introduction of the distinctive daisy wheel brand which
remains central to our corporate identity today.
1971 to 1990
During the 1970s The Royal Bank of Scotland flourished. We played a leading role
in lending to the new breed of businesses bringing oil and gas ashore from under
the North Sea. In 1972 we became the first British clearing bank to offer a
house purchase loan scheme to customers.
In 1973 RBS was the first Scottish bank to have all branches linked online to a
head office computer. In 1977 our fixed-amount cash machines were replaced by
Cashline, a network of more modern-style ATMs. New products and services for
customers
South of the border our English constituent Williams & Glyn's Bank was equally
enterprising, launching a new kind of savings plan and insurance scheme and
introducing free banking for personal customers whose accounts remained in
credit. In 1974, it opened a branch in Piraeus, Greece - now a hub for our
significant ship finance operation.
In 1985 the Group merged Williams & Glyn's Bank with The Royal Bank of Scotland
to create Britain's first truly nationwide high street bank. We also saw the
need to broaden our activities and boldly backed a novel proposal to sell motor
insurance over the telephone. Launched in early 1985, Direct Line became a major
success, recognised throughout Britain thanks to its adverts featuring a red
telephone on wheels.
Determined to reduce our dependence on the performance of the UK economy and the
strength of sterling, we bought an American bank in 1988 - Citizens Financial
Group. Meanwhile, in Europe, we announced a pioneering alliance with Banco
Santander of Spain, and at home launched a new joint venture life assurance
company, Royal Scottish Assurance. With our growth strategy rebalanced and
strengths diversified, RBS had built a springboard for further expansion.
1991 to 2000
In the early 1990s we undertook a major reorganisation of our corporate
structure. We refocused on our core business of retail banking, and set about
building a platform for future growth. In 1993 we acquired the Edinburgh-based
private bank Adam & Company.
At the same time we reassessed how best to serve the needs of our customers. We
opened new-look branches and expanded our Cashline network to include non-branch
locations such as superstores, cinemas and railway stations. In 1994 we
established Direct Banking, which quickly became Britain's fastest growing
24-hour telephone banking service. We announced Britain's first fully-fledged
internet banking system in 1997.
Meanwhile a transformational event was just around the corner. In 2000 RBS
announced the acquisition of National Westminster Bank, in a £21bn deal - the
largest takeover in British banking history. Through the acquisition of NatWest
we achieved new scale and prominence in the financial sector.
In the US, Citizens - following our acquisition in 1988 - continued to show
strong growth. A succession of acquisitions expanded its footprint, and Citizens
became New England's second largest bank with a strong commercial presence and
more than $30 billion in assets.
2001 to Present
In the first three years after the
acquisition of NatWest, we focused on the enormous task of
integrating the IT systems of the two banks while retaining both
the NatWest and Royal Bank of Scotland brands. This was the
largest project of its kind ever attempted. Although it held
enormous technical and human challenges, it was completed
successfully, well ahead of target.
We faced new challenges as we sought to enter
emerging international markets. Globalisation meant that the
power balance of worldwide economies was changing.
In 2007, the opportunity arose for us to
deepen and widen our international reach, when the Dutch bank
ABN AMRO announced that it was in merger talks with another
major UK bank. We moved quickly to assemble a consortium with a
rival bid, and by October 2007 the offer of £48bn was declared
unconditional.
We have recently entered an exceptionally
difficult period of our history. The crisis in global financial
markets and deteriorating economic conditions across the world
has weakened many financial services organisations. This
situation was made worse, for us, as some of our major strategic
decisions were subsequently shown to be bad mistakes, making us
more vulnerable than we would have been otherwise.
Our disappointing performance in 2008 masked
strong underlying performance, and profitability, in all but one
of our businesses. It will be these core businesses across the
world, but anchored in the UK, which will be the focus for us as
we strive to rebuild shareholder value.