the world of private banking

70
THE WORLD OF PRIVAtE BANKING
established over the years to 1857 when the Act remained on the statute book. 10
British-based corporate overseas banks could also be founded before the mid-
1850s liberalization of company law, but only by the time-consuming and costly
process of gaining a royal charter through approaches to the Board of Trade and
the Treasury.
The provisions of the legislation of 1855 and 1856, which so radically changed
English company law, did not apply to banking. Banks only began to be assimilated
into the new permissive code through Lowe’s 1857 Act. This largely repealed the
1844 legislation (although not the requirement of a minimum share denomination
of £100), on the grounds that Peel’s statute had not addressed the problem of
banking mismanagement while having placed significant barriers in the way of
establishing new banks. Lowe’s Act also allowed private banks to have a maximum
of ten partners rather than six, which had been determined by the Bank of England’s
corporate privileges dating from 1707 and 1711. 11 The continuing question of
whether joint-stock banks should equally enjoy the privilege of limited liability was
only resolved as a result of Headlam’s activities in the Commons during 1858. 12 Yet
it was not until the first consolidating Companies Act of 1862 that the last vestiges
of Peel’s 1844 regulatory bank formation code were repealed.
The responses of promoters of corporate financial enterprises are displayed in
figure 4.6. 13 Its trace displays clear cyclical fluctuations, marking out the booms of
the mid-1860s, of the early 1870s and of the opening years of the 1880s. However,
it is distorted to some extent by post-crisis reconstitutions, especially after 1866,
making for something of a false picture of promotional activity waxing and waning
almost in symmetry. Furthermore, the numbers of domestic banks are buoyed up
to a degree by some existing joint-stock institutions that took advantage of the
legislation from 1858 in order to acquire the privilege of limited liability for their
shareholders. This motivation particularly came to the fore after the 1878 City of
Glasgow Bank crash, which led to a specific statute in 1879 that enabled existing
unlimited joint-stock banks to acquire reserve liability. Moreover, although figure
4.6 is of ‘effective’ registrations, thus omitting abortive and small companies, it
aggregates public and private companies. The important difference between these
two types of corporate undertakings was not to be recognized legally until 1907,
despite private company formation having been evident from the general coming
of limited liability in 1855.
The importance of corporate financial enterprises as publicly established
companies, especially during the mid-1860s flotation boom, only becomes evident
when Spackman’s contemporary annual censuses of public company formation are
10
K.S. Toft, ‘A Mid-Nineteenth Century Attempt at Banking Control’, in Revue
Internationale d’Histoire de la Banque, vol. 3, 1970.
11
H. Thring, Joint Stock Companies Acts 1857 (London, 1858).
12
Bankers’ Magazine (1858), pp. 209–13.
13
Data drawn from H.A. Shannon, ‘The Limited Companies of 1866–1883’, in
Economic History Review, vol. 7, 1933, Table C, pp. 312–13.