DURING THE early years of the 19th century, an amusing story about the vagaries of Irish banking spread through the London clubs: A gentleman had accumulated notes amounting to 15 shillings and nine pence halfpenny drawn on the Killarney bank, while holidaying in Co Kerry.
At the end of his stay, he went to the office of the bank, an equestrian goods shop, to exchange them for cash and there he found the eminent proprietor, Patrick Foley, stitching a saddle.(In those times, army officers were gallant, barristers, as now, were learned, and bankers were, for some unknown reason, “eminent”!).
“Cash! plaze your honour, what is that? Is it something in the leather line?” Foley asked. But despite this unpromising start, negotiations proceeded and the gentleman eventually accepted “an illigant bridle, not matched in Yoorup, Aishy, Afriky, or Merikey”, allegedly worth 15 and six pence halfpenny, and two pence halfpenny in lieu of a note that promised to pay the bearer three pence.
Others who dealt with Irish private banks and who lost some or all of their wealth would not have seen the humour in the story, or in the equally dubious tale about the shopkeeper cum banker in Youghal who issued notes promising to pay the bearer various sums “when convenient”! Private banks originated in the early 18th century and were mainly located in Munster and Leinster. They received precious metal and coin, made payments on behalf of customers, and advanced funds to buy land. Most of them issued notes redeemable on demand and generally they didn’t keep liquid assets to meet short-term liabilities. As a result, they were vulnerable when for any reason a collapse in confidence caused a “run”.
Major runs occurred in 1720, in 1745, triggered by fears about the possible success of Charles Stewart in Scotland, in 1760, and in 1770.
The Great Crash of 1760 wiped out almost all of the banks and a deputation of merchants told Parliament that the “low state to which the public credit has been reduced has caused the loss of foreign trade, the diminution of His Majesty’s revenues, and the decay of manufacture”.
Something had to be done and in 1783 the government issued a charter for a joint stock bank to be known as the Bank of Ireland. It would have initial capital of £600,000 and would be forbidden to lend more than this amount. It would be given a monopoly on the issue of notes in Dublin and within a range of 50 miles of the city and no other bank with more than six partners would be allowed.
The new bank would, it was hoped, remedy the situation described by Sir Lucius O’Brien, the MP for Clare in 1784, where “every man who has occasion to borrow feels the difficulty of getting a loan and where formerly it was to be had at four or five per cent, it was not now to be had at all”.
Ironically, the establishment of the Bank of Ireland did not put an end to private banks. On the contrary, despite the lessons of history, they continued to be set up and to flourish until they invariably failed.
In 1804, there were more than 50 in the country. By 1812, 30 had disappeared but 14 others had opened. Fifty banks failed between 1780 and 1820 including 11 in that year alone. These included the Bank of Limerick which redeemed notes only between 10am and 2pm, and never on Fridays; Cliffe Co, later Colclough Co, in New Ross, which failed after one of the partners was killed in a duel; Williams Finn of Kilkenny and later of Dublin which issued notes for £300,000 backed by capital of only £1,000; and the Bank of Fermoy whose Scots born proprietor, John Anderson, was a major benefactor of the town until it failed in 1816.
Anderson, who built the town square and a bridge over the Blackwater and provided land for a large army barracks, was so well regarded that his creditors passed a resolution regretting his misfortune and declaring that the demise of the bank, which had been caused by a sudden, unforeseen, and unexpected fall in the value of landed property, did not lessen their respect for his character.
James Scully’s bank in Tipperary overcame a run in 1825 when the eponymous owner brought two butter firkins apparently filled to the brim with guineas to the front steps of his building and sat between them, cheerfully redeeming notes until his customers’ confidence returned. When he closed down some years later, his premises were taken over by the Tipperary Joint Stock Bank which failed in 1856 after being defrauded by one of its partners, John Sadleir.
Only two private banks survived for more than a century. One, established by Edmund and Joseph Hoare, the sons of a Cromwellian captain who had been given 3,500 acres in west Cork, was carried on by their descendants and, with minor interruptions, by their relatives, the Pike family, until it was wound up in 1825. (It had no connection with the London bank, C Hoare Co.).
The other was the famous bank of David La Touche Son, founded around 1700, which had a strong customer base among the gentry. It was purchased by the Munster Bank in 1870. That bank failed 15 years later and its business was taken over by the Munster Leinster Bank which became part of Allied Irish Banks in 1966.
The Bank of Ireland’s monopoly of joint stock banking ended in 1825 and within 10 years the Northern Banking Company, the Provincial Bank of Ireland, the Hibernian Bank, the Royal Bank, and the Ulster Bank had been established. The era of the private banks was over although a few of them lingered. Ball Co, the last one, was bought by the Northern Banking Company in 1888.