By Roger Outing

Provincial private banks have a poor historical reputation, which is to a great extent quite undeserved.  Many banking histories originate from or were commissioned by the later joint stock banking companies.  It may be the case that they had a vested interest in emphasising their own illustrious contribution and then minimising the innovations and achievements of the private banks.

Provincial private banks performed an invaluable function in supporting the commencement of the English industrial revolution. They did so at a time when the Bank of England never stirred itself from the confines of Threadneedle Street and when London private Banks were completely focussed on London. 

Provincial private banks developed banking practices and procedures and familiarised the emerging business community with what we would today refer to as ‘financial services’.  The subsequent failures of private banks, of which there were plenty, was a consequence of the fact that they were operating at the very edge of economic and commercial innovation and their size was limited to six partners in order to protect the Bank of England from competition. The provincial private banks were inventing and creating the business of banking and doing so under artificial constraints.  Failures in these circumstances should not be a surprise. 

Whilst there were plenty of failures it can be easily overlooked that a great many private banks did prosper for long periods. They often went on to provide the foundation upon which joint stock banks could subsequently build and become successful.  Private banks were the essential precursors to joint stock banks.  Private banks and joint stock banks should be regarded as sequential developments within a single system of banking that developed over a 200-year period.

The Original ‘Big Five’

The term ‘Big Five’ normally refers to Barclays, Lloyds, Midland, National Provincial, and Westminster Banks who, after 1900, came to collectively dominate English banking. Table 1 lists an ‘Original Big Five’ - namely the first five provincial private banks to establish themselves.

Table 1.  The Original Big Five

Table 1 tells a quite remarkable story in that none of these five innovators failed.  They all maintained their commercial viability and independence for at least 100 years, sometimes longer.  These private banks then became part of the joint stock movement in the latter half of the nineteenth century and so established themselves within the modern banking institutions with which we are familiar.  Table 1 illustrates that these private banks were an essential part of the origins of the modern banking system and should not be regarded merely as a failed relic of past economic development.

Each of the ‘Original Big Five’ issued their own banknotes and provided account facilities serviced by the use of cheques.  Their early banknotes or cheques rarely become available to collectors although 19^th century examples can be located.   

The subsequent growth in provincial private banks can be summarised as follows:

                        1750 - 12 provincial banks established.

                        1797 - 230 provincial banks established.

                        1810 - 721 provincial banks established.  

Newcastle Exchange Bank

Fig 1 shows a £5 note, dated 3^rd March 1803, from the firm of Surtees, Burdon & Brandling of the Newcastle Exchange Bank.  This Bank was established by Aubone Surtees and Rowland Burdon in 1768 and progressed through 35 years of successful trading before failing in 1803.  Notes of £1,  £5 and £10 are known for the whole trading period although it is the later issues, as illustrated, which are more readily available.

This £5 note has a vignette of The Exchange Building, Newcastle and the intertwined counterfoil printing at the extreme left margin is printed in blue.  Handwritten elements, date etc., are also in blue ink. This makes it a two-colour banknote, which was unusual at the time.  It is hand signed by the principal partner, “John Surtees”.  It will be noted that the name of the bank, the Newcastle Exchange Bank, is not printed on the banknote. However it will be found in the watermark that reads, “The Newcastle Exchange Bank, Surtees B & B”.  This combined use of high quality vignette, two colours and watermarking makes this note a more technically sophisticated product that Bank of England notes of the same period. 

The banks demise illustrates an inherent weakness of private banks based upon a family partnership.  In 1800 Aubone Surtees, original founder of the bank had died in his ninetieth year.  His two sons, Aubone and John, carried on the partnership and were joined by John Brandling.  When the original founder of a bank departs it often seems that the experience and wisdom that made the bank successful is also lost.  This seems to the case here for 3 years later the Exchange Bank failed.  Debts of £234,000 were announced in 1811 and total repayments were just 8/1d in the pound.  The final 8d was not paid until 1832.

An interesting footnote is that notes of the Exchange Bank, to a face value of over £200,000, were auctioned off in Durham in 1807. This auction was a matter of business speculation and not an indication of collector interest. There is no record of the prices realised.

Whilst competently managed by the original founder the Newcastle Exchange Bank did successfully provide a banking service to local businesses.  The subsequent partners were entirely honourable but apparently did not have the expertise necessary to maintain the trading viability of the business. 

Faversham Bank

Fig. 2 shows a £5 note dated 1^st October 1887, from the firm of Hilton, Rigden & Rigden of the Faversham Bank (also known as Faversham Commercial Bank).  This note has an additional feature that became standard during the 19^th century namely a reference to a London banker, which in this case was, “Prescott, Cave, Buxton & Co.”  Most private banks had London a banker acting as agent and this was usually indicated on the banknote issues.  Also this note is ‘cut cancelled’ with the signature being cut out of the note as a form of cancellation.  Many notes can be found with this form of cancellation.

In Victorian England when banknotes passed through a commercial or retail firm they were often hand stamped with that firms name.  Consequently this Faversham £5 note carries two faint hand stamps (not visible in illustration) of “Bartlett, Baker & Confectioner, Market Place, Faversham” and  “London County Banking Co, Knightsbridge”. This gives some indication of the both local and the more distant travels that this individual note has actually made.  Many banknotes of the period carry such hand stamps. Other banknotes can be found which carry bankruptcy hand stamps that record the final travails of a failed bank.

Provincial banknotes that are ‘cut cancelled’ carry retail or bankruptcy hand stamps are all quite collectable.  Collectors who insist on ‘uncirculated’ notes may be missing the point that collecting English Provincial banknotes is rather more about preserving social history than accumulating a complete ‘set’ of something or other.   

The Faversham Bank illustrated was taken over by Prescott’s in 1892, which then passed to the Union of London & Smiths in 1903, which then passed to the National Provincial in 1918, and so to National Westminster in 1968.  An example of a private bank being independently successful for almost 100 years before becoming part of the national banking structure that is with us today.

The provincial private banks also began to develop and spread the habit of using cheques.  Provincial Clearing Houses were often established to support the efficient exchange of cheques in a manner duplicating the London experience. 

Ipswich Cheque

The demise of private banks was achieved in stages that encompassed almost 100 years.  Firstly, legislation in 1826 allowed joint stock banks, other than the Bank of England, for the first time.  Secondly, the Bank Charter Act 1844 placed restrictive prohibitions on the issue of banknotes.  Finally, company law in 1858 allowed limited liability to be applied to banks.  The accumulative effect of this legislation, and the amalgamation process which it triggered off, will be considered in more detail next month when the history of joint stock banking is dealt with

By 1900 the banknote issues of the private banks were a minor amount of the total money supply.  The very last private bank of issue was the firm of Fox, Fowler and Co. who had conducted a banking business at Wellington, Somerset, since 1787.  This longstanding private bank finally relinquished its independent existence and its banknote issue when it amalgamated with Lloyds Bank in 1921.  These final banknote issues are highly prized by collectors today.

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