The history of banking in Ireland

Preface

Most of the following* pages were written when I was a Manager of the Provincial Bank of Ireland, at Kilkenny, and at Waterford. They were intended to form a Section in my " History and Principles of Banking." I also wrote a Section upon the History of Banking in Scotland, and another upon the History of Banking in America. But I found my look was large enough without the addition of these Sections. I have now determined to publish this portion separately, partly because I think it may be read with interest by those who are connected with the banking establishments of Ireland, and partly because it will furnish to myself an agreeable memorial of my residence in that country.

J. W. G.

38, THROCJ.MORTON STllKKT.

May 28, 1836.

WORKS

PUBLISHED BY THE SAME AUTHOU.

1. The History and Principles of Banking.

Second Edition, price 9s.

" A work likely to be extensively useful at this period has just appeared, entitled, " The History and Principles of Banking." By James William Gilbart. The author's object has been not to advance any theories of his own, but to make the reader acquainted with the facts and jDrinciples of the question as deduced from the existing practice. In this, his long experience must make him a very competent guide. The numerous claims on our crowded columns prevent our giving a fuller notice of the work : the recommendation of which may be summed up in his own phrase — that it is a " Grammar of banking." — Times, Feb. 20, 1834.

" This work may be advantageously consulted for a practical knowledge of banking in all shapes from the bank of England down to loan banks, and the new law to faciUtate the purchase of small annuities. It should also be added that a variety of tables are contained in the volume, not niere transcripts from official documents, but intelligible recasts by a man of business. So far as we are able to judge by inspection, they seem to have the rare merit of containing what is wanted and nothing more." — Spectator, Feb. 15. 1S34.

VI

" Combining a clear appreciation of the science of banking with the best practical knowledge of his business, we have seen no work on this subject which better deserves to be consulted and studied than Mr. Gilbart's volume." — Literary Gazette, Feb. 22, 1834.

" Mr. Gilbart claims for his book that it contains both features (theorj' and practice), and is a scientific work written by a practical man. His claims appear to be fully borne out by the perspicuity of his views and the analytical spirit in which he treats the subject. He is fully master of the details, and ascends with equal ease to the examination of the elementary principles. His account of the nature of joint stock banks, of branch banks, of deposit, remittance, circulation, and discount, of cash credit, loan and savings banks, will be found by men of business to be of considerable value for TQierence:'— Atlas, Feb. 24, 1S34.

" We have been highly pleased with its agreeable and instructive character, and we think that no man connected with trade should be without this book." — Monthly Review, May, 1834.

" As the author most truly says in his preface, the aim of this book is to impart useful knowledge. Those who are ignorant of the art, or rather science of banking, (for banking may be considered as a science in political economy) will here obtain a knowledge of facts and principles which will sufficiently enlighten their minds on the subject, and they w'ill have the good fortune of not having jirinciplcs instilled which may lead them into error. The question of currency, cash payments, &c. which have been such a source of labyrinthic litigation are not mooted. It is a clear and well written work, and must have been written by a person endowed with a lucid head and an impartial mxnA." —Metropolitan Magazine, August, 1834.

" A more complete and accurate work with Icss irrelevant matter we never read." — Centlcman's Magazine, October, 1834.

Vll

" We have before us a most interesting work from the pen of Mr. Gilbart, entitled " The History and Principles of Banking." This subject, which is generally considered abstruse and recondite, has been, by the pen of Mr. Gilbart, rendered so plain, that the most ordinary capacity may easily comprehend it. It requires such a man as the manager of the London and Westminster Bank to produce this work. A speculative theorist, no matter how acute his intellect, must have failed in presenting us with those forcible details, which belong only to the practical man, whilst to the mere man of business, that power of combination and mastery of language must have been wanting, which the literary abilities of Mr. Gilbart have enabled him to bring to bear upon the subject. The peculiar interest which it possesses, is owing, as the author truly states in his preface, to the circumstance of its being a scientific work, written by a practical man. The subject of banking, at all times of such importance to a mercantile nation, possesses paramount claims to attention at the present moment, when two fresh bodies of Argentarii have come into the field to bear away whatever spoil may have escaped the hands of the veteran campaigners. " The History and Principles of Banking" should be in the hands of every man, who wishes to be acquainted with the manner in which the money transactions of this great country are carried on." -—Waterford Chronicle, June 9, 1835.

2. A Practical Treatise on Banking, Third Edition, Price Three Shillings.

" A valuable and useful little work." — Mr. M'Cullock's Smith's Wealth of Nations.

THE

HISTORY OF BANKING

IRELAND.

This work will be divided into Three Sections.

Section 1. — The History of Banking in Ireland previous to the establishment of the Bank of Ireland.

Section II. — The History of Banking in Ireland from the establishment of the Bank of Ireland to the establishment of the Provincial Bank of Ireland.

Section III. — The History of Banking in Ireland from the establishment of the Provincial Bank of Ireland to the present time.

Section I

The History of Banking in Ireland previous to the establishment of the Bank of Ireland.

The state of Banking in any country furnishes a criterion of the state of society which there exists. The following are the principal circumstances denoted by the formation of banks.

1. The establishment of a Bank indicates the security of private property.

Not only must the right of private property be recognised and established, but a form of government must be framed which is sufficiently strong and just to secure to each individual the possession of his right.

B iJ THE HISTORY OF

If the government be too feeble to protect one individual of the community against the rapacity of another; or be despotic and tyrannical, so as not to circumscribe its own claims within the limits of law and justice, few banks will be established. The former appears to have been the case with Europe under the feudal system, and is nov/ the case with all countries which are not far advanced in civilization. The latter is the case with the despotic governments of eastern countries. Here the possession of property is attended with danger. A rich man may be sacrificed by the government, and his wealth confiscated. In such a state, men who have property, will, if possible, conceal it. To place it in the hands of a banker would be to invite the government to take possession of it. Besides, who, in such a state, would carry on the business of a banker ? who would undertake the custody of other people's property, if by that means he endangered his head ? Little would the government care whether the property in the bankers' hands belonged to himself or to others. It would be quite sufficient to know in what place the treasure was to be found. Pretexts could easily be supplied, sufficient in the ruler's own judgment, to justify his beheading the culprit, and seizing on all the wealth in his possession. Hence we find few banks in such countries.

Nor do we find the banking flourished in this or any other country during the existence of the feudal system. Private property was not then sufficiently secure. The rapacity of the Barons, and the wars they often carried on against each otlier, woidd soon have dispersed the wealth that might have been accumulated. Persons who had money buried it in the earth. During the middle ages, the chief bank, was that of Venice. In that state the feudal system did not exist. Venice was an aristocratical republic. The nobles possessed all the power in th(» State ; but then they possessed that power in their collective, and not in their individual capacity. No individual nobleman had a right to oppress a citizen. He had no serfs or slaves to labour on his estate. He was amenable to the laws which were established by the Senate ; and these laws restrained as effectually the ambition of individual nobles as of private citizens. However inferior the government of Venice may have been to those of modern times, it was certainly far superior to any of the governments by which it was surrounded. Venice was a commercial state, and a state cannot long remain commercial unless the right of private property be well secured. Commerce and liberty gave rise to Banking.

2. The establishment of a Bank indicates some degree of internal trade.

Banks are established to grant facilities to trade ; and if there be no trade, there will be no banks. It is not the banks that give rise to the trade, it is the trade that gives rise to the bank ; though, after trade is established, the institution of a bank extends the trade. One branch of the banking business is to transmit money to distant places ; but for this there can be no occasion, if there be no trade between distant places. Banks grant pecuniary accommodation to the manufacturer. But manufactures must be too limited to need supplies from a bank if all the articles manufactured are consumed in the immediate neighbourhood. Such manufacturers can never be sufficiently wealthy to want a place of deposit for tlieir superfluous capital, nor can their business be sufficiently extensive to warrant the establishment of a bank for their accommodation.

The want of a free commercial intercourse between the different parts of the country, was a great obstacle to trade, and consequently to the establishment of banks under the feudal system. Each Baron was to a certain degree an absolute monarch on his own estate. He imposed what taxes he pleased on all goods removed from his territory, or which were even conveyed through his lands. The purchase and sale of goods was regulated at his pleasure; and as each Baron possessed the same power, all commercial intercourse between their respective estates was in a manner interdicted.

3. The establishment of a Bank indicates that the practice has been introduced of dealing upon credit.

A banker is a dealer in capital. He is the intermediate party between the borrower and the lender. He borrows of those who have money to lend, and he lends to those who want to borrow. But this cannot be done without credit. — On both sides there must be trust. The parties who lend must trust the banker, and he must trust those who borrow of him. But this will not be done until commerce is so far advanced that transactions of considerable importance are performed upon credit. In the infancy of commerce all trade is carried on with ready money. Before good roads are formed and posts are established, trade between distant places is carried on by merchants in a body, who associate together in considerable numbers, and meet at fixed times at particular places, whence they commence tljeir journey to the country with which they intend to traffic. — When arrived at the place where the market is held, they dispose of their goods for ready money. Tliey then lay out their money in the purchase of other goods witli which they return. Such was the practice with the merchants of the East who formed tlie immense caravans that formerly traded between Europe and India; and such is the practice of similar caravans that now trade between Egypt and Mecca. In these cases all the transactions are carried on by r(!ady money. The bankers (if such they may be called) are mere money-changers. They exchange the money of the country in which they live for the monies of other countries. Such was probably the business of the money-changers who were expelled from the temple of Jerusalem: such too was the busi-

BANKING IN IRELAND. O

ness of many persons in European countries in former times.

4. The establishment of a Bank indicates that capital has considerably accumulated.

Is a bank intended for a place of security? Who, before the accumulation of capital, has wealth he is anxious to secure? Is a bank intended as a place of deposit where those who have money may lend it upon interest? But who, before the accumulation of capital, has money to lend? Is a bank intended for a place where those who want to borrow money may go and obtain it? But where, before the accumulation of capital, can the bankers procure the treasure to advance? It is obvious that banking must be a poor business in a poor country — it is not until commerce, and wealth, and luxury have extended widely, that banking becomes a profitable occupation.

5. The establishment of a Bank indicates that it is not deemed unjust to take interest for the loan of money.

Nothing can be more consistent with the principles of natural equity than that he who borrows money with a view of making a profit by it, should give to the lender some portion of the profit which he makes. No doctrine could be more destructive to banking than that the taking of money for the loan of money was sinful; and as long as this practice was stigmatised with the name of usury little banking could exist. But as commerce increased this doctrine became obsolete. It was soon discovered that this sentiment was unjust and injurious, and that however well it might have been adapted to an Eastern agricultural nation, it was altogether inapplicable to the state of modern commerce.

The above observations appear to be equally applicable to all banks, whether public or private. Without the security of property — without trade, credit, capital, and interest, few banks can be established. And whenever a new bank is established in consequence of the additional wants of the neighbourhood, it shews tliat the trade, capital, and wealth of that place are on the increase, and the establishment of a bank will probably increase them to a still greater extent.

Some of the above remarks may serve to account for the slow progress that banking made in Ireland. To be enabled to trace that progress during the period to which this section refers, I have had recourse chiefly to the Acts of the Irish Parliament. These are, I believe, the principal public documents from which authentic information can be obtained.

1447. In this year an Act* was passed against clipped money, money called O'Reyle's money, and other unlawful money, and against gilt bridles, peytrells, and other gilt harness. The following are the words of the Act. " For that, that the clipping of the Kinff our Sovereig-n Lord's coin hath caused divers men in this land of Ireland to counterfeit the same coin to the great hurt and destruction of the said land, and the making of gilt bridles and peytrells hath also wasted and consumed the gold of the said land for the more part, and is likely to do more hereafter, if it be not specially remedied. Wherefore, it is ordained and agreed by authority of this present Parliament, that no money so clipped be received in any part of the said land from the first day of May next to come, nor the money called O'Reyley's money, or any other unlawful money, so that one coyner be ready at tlie same day to make the coyn. And also, tliat no man })e so hardy henceforward to use any gilt bridles, peytrells, nor any other gilt harness in no place of the said land, excepted knights and prelates of lioly churclies. And if any man be found with any sucli bridle, peytrell, or other harness, giltcd from the same day, that it be lawful to every man that will

* 25 Henry VI. c. C.

to take the said man, his horse and harness, and to possess the same as his own goods."

In the same year, an Act^' was passed levying a tax of twelve-pence per ounce on all silver bullion exported. The preamble states, That " this land of Ireland is greatly impoverished from day to day by the great deduction and carriage out of the said land into England of the silver plate, broken silver bullion, and wedges of silver, made of the great tonsure of the money of our Sovereign Lord the King, by his Irish enemies and English rebels, and Irish money called Reyles do increase from day to day." Lords and messengers to England upon public business were permitted to take their plate with them, " according to their beings and estates."

1457. Another Act was passed to restrain the exportation of silver. It enacts, that all merchant strangers shall pay custom at the rate of forty-pence per pound on all silver exported ; and inflicts a penalty of twenty shillings for every penny concealed. f

1463. An Act;}: was passed against clipped money. After stating that the " groat, the half-groat, and the penny, and other coins, are lost and destroyed by divers and many clippings," it enacts, that clipped money shall not be taken in pa^mient, nor accounted the King's coin after the feast of the Purification of our Lady next ensuing.

1634. An Act§ was passed to restrain usury. It limited the rate of interest to ten per cent, per annum. Persons receiving more were made liable to a penalty of three times the amount of the principal, and the agreement was void. " Scriveners, brokers, solicitors, and drivers of bargains for contracts," were not allowed to take more tlian five shillings for the procuring a loan of one hundred pounds for a year, nor to charge more than twelve-pence for the making

* 25 Henn' VI. c. 10. t 35 Henn' VI. c 2. : 5 Edward IV. c. 3. § 10 Charles I. c. 22.

the bond or the bill for the loan thereof. These persons were probably at that time the only bankers in the country.

1704. The legal interest of money reduced to eight per cent. The Act* states, that at that time there was a great abatement in the value of land and of merchandize, and that the high rate of interest made men unable to pay their debts ; that consequently they are forced to sell their lands and stocks at very low rates, to forsake the use of merchandize and trade, and to give over their leases and farms, and so become unprofitable members of the commonwealth.

1709. Was passed an " Actf for the better paymentof inland bills of exchange, and for making promissory notes more obligatory." Bills of exchange of £5 and upwards drawn in Ireland upon persons in Ireland, may be protested either for non-acceptance or nonpayment in the same way as foreign. And notice of such protest must be given within fourteen days afterwards to the party from whom such bills were received. Promissory notes were put on the same footing as inland bills of exchange. Notes issued by any "banker, goldsmith, merchant, or trader," whether payable to order or bearer, were rendered assignable and indorsable over as inland bills of exchange, and the indorsee might sustain an action thereon. Previous to the passing of the Act, it was considered doubtful whether promissory notes of any kind were legally transferable l)y indorsement. But such transfer were now declared legal as they had been a few years before in Eiigl;md.;j: I have not observed tliat the word " banker" occurs in any Act of the Parliament of Ireland previous to this. Fourteen days appear a long term for notice of a protested bill, but perhaps the obstructions to a rapid communication between different parts of the island were at that time considerable.

I See 9 and 10 William III. c. 17. 3 and 4 Anne, c. 9.

BANKING IN IRELAND. if

1721. The legal interest of money reduced to seven per cent.* The reasons assigned for this reduction is stated in the preamble of the Act to be, That " at this time there is a very great abatement in the value of divers merchandizes, wares, and commodities of this kingdom both at home and also in foreign parts whither they are transported."

In the same year an Act was passed for better securing the payment of bankers' notes.f It enacted that notes not paid on demand should bear interest ; that bankers should not fraudulently alienate any part of their property, and that after their death their real estates should be accountable for payment of their notes. This Act was repealed by 33 Geo. II. c. 14. From this Act it appears that at that time " the trade of this kingdom was partly carried on by the means of cash notes given by bankers," and that the " trade or calling of a banker" was followed, or exercised, by *' the keeping a public shop, house, or office for the receipt of the money of such persons as were willing to deposit the same in their custody ;" and tlie bankers gave or issued promissory notes for the payment of the money so deposited on demand or on a certain day. Hence, it is evident, that the bankers' notes in Ireland were like the goldsmiths' notes in England — RECEIPTS for money that had been lodged in their hands.

1729. The forging of bills of exchange, goldsmiths' or banker's notes above the value of £5 declared felony ; and the felon to be burnt in the hand or transported at the pleasure of the court. Criminals, who had stolen bills or notes, liable to the same punishment as though they had stolen goods of the same value. :|:

1731. The legal interest of money reduced to six per cent, where it still remains. The preamble to this Act will shew the opinions which were then entertained respecting the effects of a high rate of interest. They appear to be similar to those of Sir Josiah Child — " Whereas the reducing of interest to eight, and from thence to seven in the hundred, hath by experience been found to be very beneficial to the advancement of trade and improvement of lands ; and, whereas there is at this time a very great abatement in the value of divers merchandize, wares, and commodities of this kingdom, both at home and also in foreign parts whither they are transported ; which is in a great measure occasioned by foreign merchants being able to j)rocure money at less expense, and for less interest tlian the merchants in this kingdom, by which means they can give greater prices for their native commodities and manufactures, and sell them cheaper abroad by having a greater gain in proportion to their risk from their freight, cheaper by the lowness of interest. And, whereas the value of lands would rise at home, and the owners and occupiers of lands would be enabled to improve them by fencing, draining, manuring, and otherwise cultivating them ; and manufactures, and other useful arts and fisheries might be improved upon procuring money at an easy interest. And also, usurers and others who now live upon the interest of their money, would betake themselves to some useful art, calling, or trade, or become industrious improvers of the lands of this kingdom, which tliey cannot now do to any profit whilst the interest on loan continues at so Iiigh a rate as seven pounds in the hundred pounds for a year ; which mischiefs cannot ])e prevented, nor improvements made, witliout reducing interest to a nearer proportion with the interest allowed for money in foreign states, be it tlicrefore enacted," &c.

1733. An Act passed for the relief of the liank lately kept by Samuel Burton and Daniel Falkiner; and of the bank hitely kept by Benjamin Burton, Samuel Burton, and Daniel Falkiner ; and of the creditors of the bank lately kept by Benjamin Burton and Samuel Burton ; and tlie creditors of the bank lately kept by Benjamin Barton and Francis Harrison.

1735. An Act was passed to amend the above Act — This bank carried on business in Dublin from the year 1700 to 1733, and then failed. In the meantime some of the early partners had purchased estates with the money deposited in the bank ; and these Acts were passed to enable the creditors to sell those estates. The different names denote the changes which took place in the firm.

1737. The London Magazine of this year contains " some queries in relation to Ireland, from a piece called the Querist, published there." Among these queries are the following — " Whether it be not a notorious truth that our Irish ladies are on a foot as to dress with those of three times their fortune in England? Whether therefore a tax on all gold and silver in apparel, on all foreign laces and silks, may not raise a fund for a bank, and at the same time have other salutary effects on the public."

1751. An Act passed to amend the two Acts passed in 1733 and 1735.

1753. The following evidence respecting the state of Banking in this year was delivered by William Colville, Esq., Director of the Bank of Ireland, before a Parliamentary Committee in 1804.

" I remember perfectly well, that in 1753, the circulation of paper in Dublin from the private bankers was so general and extensive, that in receiving £1,000, there was not £10 of it in gold at that time. I remember that exchange was near three per cent, above par ; the consequence of which was, that the bankers of Dublin, of whom there were as many as at present, if not more, were in competition with one another to send their specie over to London, and to get bank bills at four per cent, above par, bringing a clear profit to that extent. The consequence of this shewed itself in the succeeding year ; all the banks failed except Messrs. Latouche's house, and Sir William Newcomen's, under the name at that time of Gleadowe and Co. ; and these two banks paid off their entire paper : there followed a total annihilation of bank paper in Ireland at that time, and I remember it was said with triumph, that Ulster, the great seat of our linen manufactorj', was safe, because she had no such thing as bank paper in that province. The consequences were, that exchange fell two or three per cent, under par, and the whole circulation of Ireland was turned from paper into gold ; but the result was, that multitudes of people were ruined ; the convulsion was exceedingly severe, many tenants threw up their lands, and there was no person connected with the three Southern provinces of Ireland that did not suffer either immediately or remotely."

1755. The following Acts were passed this year. By " an Act to promote public credit," the partners of a bank were required to insert all their names in every receipt or note they issued, and were prohibited trading as merchants. Cashiers or clerks of bankers embezzling money to the value of £50, were declared guilty of felony, without benefit of clergy.

An Act passed for the relief of the creditors of the bank lately kept by William Lennox and George French, of the city of Dublin. The above bank was carried on in Dublin from 1751 to 1755, when both the partners absconded. As their creditors were numerous, and the ordinary mode of legal settlement difficult and expensive, this Act was passed to afford a more speedy remedy.

An Act for the relief of the creditors of the bank lately kept by John Willcocks and John Dawson ; and of the creditors of the bank lately kept by Joseph Fade and John Willcocks ; and of the creditors of the bank lately kept by Joseph Fade, Isachar Willcocks, and John Willcocks ; and of the creditors of the bank lately kept by Joseph Fade ; and for raising out of the estates real and personal of Ricliard Brewer, late the cash-keeper of the said John Willcocks and John Dawson, the sum due by the said Ricliard Brewer to the said John Willcocks and John Dawson.

The al)ovc bank was carried on in Did)lin for several years by Richard Fade, who in 1728 took into partnership Isachar and Jolm Willcocks. The bank failed on March 3, 1755, through the dishonesty of tlie cashier, Richard Bi'ewer.

An Act for the relief of the creditors of the bank lately kept in the city of Dublin, by Theobald Dillon and Sons, by Thomas Dillon and Com])any, and by Thomas Dillon, Richard Farrell and Company. This bank stopt payment on March G, 1754.

1757. An Act passed to carry into more effectual execution the Acts passed in 1733 and 1735 relative to the bank of Burton and Falkiner.