the world of private banking

78
THE WORLD OF PRIVAtE BANKING
acceleration in the corporate banks’ rise to total ascendancy, if only because there
was a contemporary consensus that England remained ‘underbanked’ during the
early 1860s. 29 Indeed, eight new limited joint-stock banks were established during
1861 and 1862, that is, before the law specifically regulating the creation of such
institutions was totally reformed by the 1862 Companies Act (which only became
operative from November 1862). However, there was some surprise within the
banking profession at the very number of new corporate institutions put before the
investing public during the mid-1860s flotation boom.
It was recognized that, if successful, the limited banks would bear hardest upon
the remaining private houses. Indeed, as during the 1830s, many were conversions
of private banks. The continuing absorption of private country banking houses
by joint-stock banks was joined in 1858 by the availability of limited liability for
banks. This soon led investors in established unlimited institutions to consider
their positions. They responded negatively, with 2,510 of ‘the most substantial
men’ liquidating their holdings over 1863/4 in 48 unlimited banks established
before 1857. 30 Furthermore, as the boom set in, general sentiment began to change,
The Economist commenting that ‘A country is badly off which has too few banks
– it is almost as unfortunate if it has too many’. 31
As pointed out earlier, the mid-1860s boom was marked by ‘fits and starts’
so that bank investors had a ‘bumpy ride’ before the crisis of 1866. Bank share
prices fell abruptly in December 1863, when Bank rate went to eight per cent, and
there was another Stock Exchange convulsion during early May 1864 in which the
calling-up of capital by new companies played a part. The monetary stringency of
autumn 1864 again had adverse effects, heightened by the collapse of the Leeds
Bank in October, which caused investors to doubt the solidity of any banking
enterprise. Nonetheless, ‘bulls’ had sufficient optimism to drive the market up
again though only for a few months. Prices of bank shares fell in late January
1865, and they never regained dynamism as the autumnal monetary stringency of
1865 finally extinguished ‘bull’ speculative interest.
Some of the new institutions were small, local affairs, comparable to their
joint-stock predecessors of the 1830s, like, for instance, the Leeds & County Bank
Ltd. of 1862, itself a reformation of the Joint Stock Banking Co. of Pontefract,
Wakefield & Goole formed a year earlier. Other Yorkshire corporate banks had
even humbler beginnings, as with the Exchange & Discount Bank Ltd. of 1866.
This had begun in 1860 with a capital of £8,000 as the personal enterprise of John
29
B.L. Anderson and P.L. Cottrell, ‘Another Victorian Capital Market: a Study of Banking
and Bank Investors on Merseyside’, in Economic History Review, 2nd ser., vol. 28, 1975.
30
Bankers’ Magazine (1864), p. 328; and see, in general, P.L. Cottrell, ‘Credit,
Morals and Sunspots: the Financial Boom of the 1860s and Trade Cycle Theory’, in P.L.
Cottrell and D.E. Moggridge (eds), Money and Power: Essays in Honour of L. S. Pressnell
(Houndmills/London, 1988), pp. 45–53.
31
Commercial History and Review of 1863 [supplement to The Economist (20 Feb.
1864)], pp. 3–4.