It is difficult to imagine the economic life of any city without its various commercial institutions. After all, they are the ones that set the tone for the proper circulation of money in a given area. And, of course, thanks to them, the local population can safely invest their funds. Next on edinburgh1.one.
It is generally believed that the longer a particular institution has been in existence, the more it can be trusted. It is as if, over its years of operation, the quality of its services and its integrity towards its clients have been thoroughly proven.
In Edinburgh, one such long-standing and trusted institution is undoubtedly The Royal Bank of Scotland Public Limited Company. It is Scotland’s largest commercial bank.Â
How It All Began
The story of this institution begins with the Society of the Subscribed Equivalent Debt. This organisation was founded by investors in the failed Company of Scotland Trading to Africa and the Indies.
Then, on 21 November 1724, the Society of the Subscribed Equivalent Debt, or the Equivalent Society, became The Equivalent Company. The newly formed company’s objective was to move into banking.
At the time, the British government looked favourably upon this ambition. The existing Bank of Scotland (the “Old Bank”) was suspected of having Jacobite sympathies. Therefore, on 31 May 1727, a “New Bank” was established by Royal Charter, receiving the name The Royal Bank of Scotland.
A Battle for Supremacy
And soon, the most interesting part began. The Old and New Banks entered into a period of fierce competition, which largely revolved around the issuing of banknotes.
The Royal Bank of Scotland did everything it could to push out the Bank of Scotland. To this end, the institution managed to accumulate vast quantities of its competitor’s banknotes. It acquired them in exchange for its own notes, but then suddenly presented them to the Old Bank for payment.
In an attempt to redeem these notes, the Bank of Scotland was forced to call in its loans. As a consequence, in the spring of 1728, it had to suspend payments.
This turn of events, of course, played right into the hands of The Royal Bank of Scotland and allowed it to expand its business considerably.
A Long-Awaited Truce
Rumours then began to circulate that the two institutions would merge. However, at that time, The Royal Bank of Scotland lacked the necessary funds to carry out such a deal.
By September 1728, the Bank of Scotland was able to successfully begin buying back its banknotes with interest. This allowed it to resume lending in March 1729.
This time, however, the institution decided to protect itself from future troubles. It obtained the right to include an “option clause” on its notes, allowing it to make them interest-bearing and defer payment for six months. The Royal Bank of Scotland, appreciating its competitor’s tactic, decided to implement the same mechanism itself.
Over time, however, both banks realised that such policies were mutually destructive. It was therefore decided to call a truce, though they still refused to accept each other’s banknotes. The banks would not take that step until 1751.
Further Changes
From 1783, The Royal Bank of Scotland began to open branches outside of Edinburgh.
In 1821, the institution changed its location, moving from its original office in the Old Town to the New Town.
Furthermore, the late 19th century saw The Royal Bank of Scotland engaged in mergers with other Scottish banks, mainly due to the failure of these rival institutions. For instance, 1857 was marked by the acquisition of the assets and liabilities of the Western Bank. As a result, by 1910, The Royal Bank of Scotland had expanded to the extent that it had 158 branches and, of course, a huge staff.
Another Merger
By 1969, it became clear that the situation in the banking sector had become even more complex. Therefore, The Royal Bank of Scotland merged with the National Commercial Bank of Scotland. The result of this merger was a new holding company: The National and Commercial Banking Group.
In 1979, it was renamed, and thus The Royal Bank of Scotland Group came into being. This name existed for quite a long time, only changing again in 2020 to NatWest Group.
Relations with English Banks
When London gained the status of the world’s largest financial centre in the second half of the 19th century, Scottish banks naturally began to expand southwards into England. The first London branch of The Royal Bank of Scotland was opened in 1874.
Interestingly, however, English banks began to take active measures to prevent the expansion of their Scottish competitors. An agreement was even reached, stipulating that English banking institutions would not open branches in Scotland, and their Scottish counterparts would follow the same example in England.
A Return to Original Plans
It was only after the First World War that The Royal Bank of Scotland decided to resume its expansion in England. It was then that the institution acquired several small local banks.
Of course, all that has been described above is far from an exhaustive history of an organisation as large as The Royal Bank of Scotland. Rather, it is merely an account of the beginning and the gradual strengthening of this institution’s operations. In the years that followed, the bank went through equally interesting periods of development, which invariably included their own share of difficulties.
However, you would surely agree that it is the initial stages that typically set the course for future events. Thus, it depends on them whether a particular institution has a great future ahead. This is especially true when it concerns systems as complex as banks.