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Financial Crisis and the Swansea 'Branch Bank' of England, 1826    1

R O Roberts, National Library of Wales journal Vol XI/1 Summer 1959.

Extracted onto the pages of GENUKI with the kind permission of the National Library of Wales

This is a complete extract of this article [Gareth Hicks 2003]


An enabling clause in the Country Bankers Act passed on 26 May 1826 placed beyond doubt the right of the Bank of England to set up Branches in the provinces --- as had been proposed since the close of the previous century and earlier. 2 Their establishment after May 1826 was due to powerful suggestions made during the preceding six months by Ministers of the Crown and to action by the Bank itself. The Government pressure on the Bank was indubitably of great importance, but the usual view that the Bank in 1826 was very 'reluctant' to set up Branches does not seem well founded. 3

Informal discussions about the establishment of Branches appear to have taken place between Ministers and the Bank's Governors before 1826, but the Bank is reported to have 'always declined' the Branch Bank policy. 4  On 12 January 1826, however, 'recent events having shewn that an alteration in the system of Country Banks will be necessary', the Bank appointed a committee to consider 'how far it may be practicable to establish Branch Banks'. 5 The setting up of the committee was undoubtedly due very largely to the Bank's fears of 'strong measures' 6   by the Government which might seriously affect its monopoly of joint-stock banking in England and Wales. Indeed, on 13 January, when the committee commenced their deliberations, a memorandum was signed by the Prime Minister (Lord Liverpool) and the Chancellor of the Exchequer (F. J. Robinson) which discussed the current financial crisis and, among other things, 'stated bluntly that the Bank must either start Branches or relinquish its monopoly'. 7  Mr. Marston Acres, however, believed that the contents 'were not communicated to members ... [of the Branch Banks] Committee', 8  but it is highly probable that the senior members had been informed. 9  The Committee certainly were aware of dangers to the Bank from the direction of the Government, for they enjoined speed in the setting up of Branches lest there might be 'encroachments on its [the Bank of England's] circulation by the erection of other chartered Banks'. 10

The Committee, having considered reports from the Bank of Scotland and the Bank of Ireland about their branch organisations, on 18 January recommended the establishment of Branch Banks for a number of reasons additional to Government pressure. The policy, they said, 'would increase the circulation of Bank Notes, give the Bank more complete control than it now possesses over the whole paper circulation and enable it to prevent a recurrence of such a convulsion as we have lately seen'. It was expected to lead to a 'very large' growth in deposits and it would protect the Bank against the competition of 'large Banking Companies'. The public would gain---from a better and less fluctuating note circulation, from improved means of moving money from one town to another and from 'widespread places of perfectly safe deposit'. The establishment of Branches in 'the principal commercial towns', reported the Committee, would be 'for the benefit of the Bank as well as to the interest of the Public and the Government'. 1

This report favouring Branch Banks was considered and approved by the Court of Directors of the Bank on 20 January, when it also discussed Lord Liverpool's memorandum, which pointed a well-loaded pistol at 'the Old Lady'. There followed exchanges about the limitation of the Bank's monopoly of jointstock banking and, at the end of January, the Prime Minister and the Chancellor stated that, though 'the establishment of Branches would not of itself be sufficient to meet all the exigencies of the country', they were 'decidedly of opinion that the formation of them under proper regulations would be highly advantageous both to the Bank and the community'. 2  On 9 February the Court directed the Bank's Committee of Treasury and the Branch Banks Committee to make arrangements for the establishment of Branches. 3  On 20 April the Branch Banks Committee were requested 'to select and report to the Court places for the establishment of Branch Banks and the most expedient mode of conducting the same'. 4

According to Sir John Clapham 'the Bank was never so inert in the hands of ministers, so much ordered about, as in 1826'. 5 The tone of the Court Book minutes, however, the choice of sites for Branch Banks before the passing of the enabling legislation of May 1826, and the speed with which the Branches were afterwards established, suggests that the directorate of the 5 The tone of the Court Book minutes, however, the choice of sites for Branch Banks before the passing of the enabling legislation of May 1826, and the speed with which the Branches were afterwards established, suggests that the directorate of the Bank had become genuinely convinced of the desirability of the new policy. The speedy establishment of the Branch Banks, of course, might be explained by the Bank's wish to obey the injunction of its Committee on 18 January to forestall the possible establishment of chartered banks by the Government, but the seemingly complete lack of delaying tactics (which, up to a point, might have been consonant with placating the Government) does not accord with the view that the Bank in 1826 was reluctant to open Branches. Such delays as occurred appear to have been due to purely administrative causes. It is noteworthy also that on 4 May 1826, three weeks before the ......................

............... Country Bankers Act was passed, the Branch Banks Committee recommended the formation of a Branch at Birmingham, because of the large trade of the town 'and in order to shew the readiness of the Bank to meet the wants of a part of the country which is stated to be suffering considerable inconvenience ...' . 1

The Bank investigated carefully the merits of the places at which it was proposed to set up Branches; 2  and, as already seen, the motives for their establishment could be furtherance of the public interest and a desire to increase the Bank's profits. It has been argued that in the choice of centres the Bank was actuated primarily by its own interest and that it opened branches in towns where the banking system was sound, and where there was plenty of remunerative business;   3  but this view calls for qualification.

The Branch Banks Committee reported on 4 May 1826 'that the first attempts should be made in large Commercial and Manufacturing Towns, embracing also the Surrounding Agricultural Interests'; and they recommended that enquiries be made 'at Liverpool being the Second Commercial Town in Great Britain' and at Leeds, Birmingham and Gloucester. 4  Eleven of the 'Branch Banks' were established between July 1826 and December 1829. That at Swansea, with which this paper is especially concerned, was opened in October 1826 and was the third to be set up. It followed the Branch at Gloucester---- which had been created because of 'the peculiar state of distress existing in that neighbourhood'   5 ---and the one at Manchester; and it came before those of Birmingham, Liverpool, Bristol, Leeds, Exeter, Newcastle, Hull and Norwich.

Swansea, which was the only place in Wales to have a Branch of the Bank of England, was far from being a 'large Commercial and Manufacturing Town' of the type favoured by the Branch Banks Committee. Indeed, in 1832, John Parry Wilkins, the Brecon banker who for a time was agent of the Swansea Branch, described Swansea as 'a small place' though it was 'surrounded by a large manufacturing district'. 6 , In 1826 the population of the town was about 12,000: it was a market centre, a port, a seaside resort and in its vicinity there were metal works and collieries.

As already shown, the immediate occasion for the establishment of the Bank of England Branches was the financial crisis of 1825-26; and that was due to a number of causes. 7  The Government and the Bank of England had co-operated in reflationary measures from 1822 onwards. When over-hopeful expectations ......................

........................ were disappointed and credit conditions became difficult, the financial policies of the Government, the Bank of England and the country banks were so weak that they allowed the crisis to spread. The boom had caused a sharp rise in prices and, in 1824-25, the passive balance of trade resulted in a reduction in the Bank's reserve of gold. In 1825 considerable assets became tied up abroad, especially in South America; and discussions in Parliament of an issue involving the Castle in prices and, in 1824-25, the passive balance of trade resulted in a reduction in the Bank's reserve of gold. In 1825 considerable assets became tied up abroad, especially in South America; and discussions in Parliament of an issue involving the Castle Bank, Bristol, increased the nervousness among bankers by showing that they should be prepared to pay gold (and not merely Bank of England notes) on demand. From July 1825 onwards the Bank of England and other banks reduced credit, but the first serious alarm came through stoppages in the cotton trade of Liverpool in August 1825. There followed a number of country bank failures, and at the end of October the stoppage of payment by a leading house in the American trade brought nervousness to Liverpool, Manchester and Birmingham. Monetary stringency increased in November and December but the panic of mid-December was probably precipitated by the contraction resulting from quarterly tax moneys having to be paid by banks to the Government in advance of its disbursements of interest on Government stock, etc., and 'by the hasty determination of the Bank of England to restrain rather than extend its discounts'. 1 When three London banks stopped payment a large number of correspondent banks (together with their banker neighbours) were seriously affected and, on December 14, the City and many towns were stricken by panic. Within a few days most areas were involved. Lewis Weston Dillwyn, F.R.S.---naturalist, head of the Cambrian Pottery at Swansea, estate owner and public-spirited citizen-stated: 'The sum abruptly locked up from our circulating medium is about 240,000 and it threatens the whole country with ruin'. He added that 'The Bank of England, surrounded with guards, was kept open to assist in relieving the panic all day' and on December 26 he mentioned that Sir Humphrey Davey, coming to stay with him near Swansea, had 'been detained two days on the road by the want of horses and the crowded state of coaches occasioned by the extraordinary panic'. 2  Bank failures continued and there were sixty of them in the harvest year (July-June) 1825-26.

The Bank of England did not institute strong remedial measures until December 1825 when its reserves were affected and when the crisis was spreading catastrophically. Then, however, it took effective steps by releasing notes, and acting clearly as a 'lender of last resort'---though only about one-eighth of the loans it allowed in the spring of 1826 had to be taken up. 3 And thereafter, with .....................

................ considerable assistance from its Branches, it participated in the improvement of British banking which followed the difficulties of 1825-26.

The way in which the banking crisis spread to Swansea has been explained by Dr. Pressnell, who bases his account on the papers of a Banbury Bank. 1   It came to the town via Birmingham, which was severely affected in the late autumn of 1825 by the failure of an important firm (Samuel Williams and Co.) engaged in American trade. The direct financial link between Swansea and Birmingham at that time was the inter-locking of the banks of Gibbins, Smith and Goode of Birmingham, and Gibbins and Eaton, Swansea. A strong connection between Birmingham and Swansea had developed in the eighteenth century through the supply of copper from the am at that time was the inter-locking of the banks of Gibbins, Smith and Goode of Birmingham, and Gibbins and Eaton, Swansea. A strong connection between Birmingham and Swansea had developed in the eighteenth century through the supply of copper from the latter to the former; and in the 1790's a number of Midland users of copper came to occupy smelting works in the Swansea area. One such firm was the Rose Company which operated near Swansea from 1797 until about 1820, 2 and undoubtedly it was through his share in that enterprise that Joseph Gibbins of Birmingham became involved in banking in Swansea and Neath. 3  He had entered banking in Birmingham in 1804  4 and, just before his death in 1811, he joined Robert Eaton (the son of a former Jamaican slave-owner who had settled in Swansea and become a Quaker) 5  to set up the bank of Gibbins and Eaton---otherwise known as the 'Swansea Old Bank'. 6  One of his sons, also a Joseph Gibbins and a Quaker, took over and extended the banking interests of his father; he succeeded to the Swansea and Neath bank in 1811, to Gibbins, Smith and Goode, Birmingham in 1818 and in 1822 he was allowed 6  One of his sons, also a Joseph Gibbins and a Quaker, took over and extended the banking interests of his father; he succeeded to the Swansea and Neath bank in 1811, to Gibbins, Smith and Goode, Birmingham in 1818 and in 1822 he was allowed to join J. R. Gillett and Henry Tawney in the Banbury Bank. This has been described as 'a unique attempt to defeat the localization of banking by means of interlocking partnerships, and to short-circuit the London money market---Gibbins was now strung across the west Midlands into South Wales, and made use of Banbury funds to discount Birmingham and Swansea bills'. 7

Severe pressure was felt in November and December 1825 by Gibbins, Smith and Goode, Birmingham, who had financed merchants operating in the Latin-American trade. The first major trouble affecting the Gibbins group, however, came to the Banbury Bank, whose bills were refused discount by their London bank, Robarts, Curtis and Co.---who, like others, were much disturbed by the failure of the bank of Pole and Co., of London. In addition, failure to recover 24,000 owed it by the Birmingham bank and then to discount 40,000 of bills supplied by the latter, mounting panic and the demand for cash due to the holding of a fair in the town caused the Banbury bank to suspend payments on ................

........................ December 16. 1  On December 17 the Birmingham bank 'was compelled to stop payment after a heavy run, said to have been stimulated by the failure of a customer who owed the bank 70,000'. 2  At the time of its closure Gibbins, Smith and Goode owed 32,786 10s. 6d. to Gibbins and Eaton, Swansea and Neath and this is presumed to be the result of re-discounting with the latter. 3  On 20 December the bank of Gibbins and Eaton had to close following 'a severe run which continued throughout the day'. 4  There was an immediate run on the neighbouring banks of Haynes, Day, Haynes and Lawrence (of Swansea, Llandeilo and Hay) 5 and Walters and Son (of Swansea) causing the former to close its doors. Messrs. Walters by luck or foresight managed to remain open, and, as 'Swansea's own especial bank', earned the eulogies of the local newspaper. 6  Public meetings immediately after the failure expressed confidence in the bank of Haynes and Co., and by December 24  'a few gentlemen' and 'The Trade of the Town' of Swansea gave guarantees totalling 35,000 for it---though eventually it paid only 7s. 2d. in the compared with the 20s. by Gibbins and Eaton . 7  Monthly and Half-Yearly Meetings of the Society of Friends in Carmarthen and Glamorgan investigated the affairs of Robert Eaton and Joseph Gibbins because, through them, 'reproach has fallen on our religious society'. They found Eaton to be of the strictest integrity but advised his withdrawal from the positions of elder and overseer. Gibbins's conduct, however, was found to be unwarrantable, but in March 1827 the Monthly Meeting pronounced that it had to act charitably towards him, and in of the strictest integrity but advised his withdrawal from the positions of elder and overseer. Gibbins's conduct, however, was found to be unwarrantable, but in March 1827 the Monthly Meeting pronounced that it had to act charitably towards him, and in August he was willing to submit his assets to an impartial committee of Quakers to effect a liquidation. 8

The failure of the two banks in Swansea 'threw the whole town and neighbourhood into a state of indescribable Consternation and distress ... and our alarm is increased by the crash of Banks both in London and throughout the country'. 9  By the middle of February 1826 L. W. Dillwyn had been called on to settle about two hundred disputes resulting from the failure of masters to pay their workmen; and such difficulties continued until April and later. 10 The copper smelting firm of Daniell, Nevill and Company of Llanelly, for example, was among the firms experiencing difficulty in making payments. 'The entire stoppage of all Circulation owing to the failure of the Banks of Swansea and this place', said ................

.................. R. J. Nevill on 23 January 1826, 'is the immediate cause of our difficulties and I fear they will continue for some considerable time ...' 1  The rural areas of Carmarthenshire and Pembrokeshire were badly affected, 2  and it is probable that the situation there had been aggravated by the dangerously speculative and expansive activities of dealers from the English Midlands who appeared in these counties and in Cardiganshire. 3  (They came for the numerous fairs of November 1826, calling at Brecon to exchange Midland country-bank and Bank of England notes of 20, 10 and 5 for Wilkins's notes---'chiefly small notes'. Their coming on such a large scale was a new development, due to the especially large profits then to be made in the cattle trade, for 'the drovers are generally natives of the country'. 'New people' were still appearing in the cattle trade after 1830.) 4 The Brecon Bank, whose policy in 1825 was said to have been 'very cautious' experienced a run and lost 10,000 through being forced to sell Government securities. 5  Many iron works in East Glamorganshire and in  Monmouthshire found it difficult to obtain day-to-day capital. 6

The most serious hardships in South Wales, however, were of fairly short duration; and they may have been less serious than those experienced elsewhere, for in May and June 1826 such bodies as the Swansea Commercial Society, the workers of the Neath Abbey Iron Company and the parishoners of Llandaff were contributing to reduce the distress of 'manufacturers' or workers in other places, particularly in the North of England. 7  By June 1826 the iron works of the Merthyr area were reported to be active, and in September at Liverpool, Bristol and other ports recovery was 'becoming very apparent'. 8 Nevertheless difficulties persisted, as shown by Dillwyn's entry on 21 December 1826 that he had attended a 'Meeting of the Creditors of the Neath Bank in which several of my Ynysygerwn tenants are much distressed'. 9

Following the bank failures, public meetings were held in the centres affected. At the first of such meetings held in Swansea in December 1825 'Sir John Morris, J. H. Vivian, C. Berry Davies---the Collector, H. Sockett, Dr. Grove' and L. W.............

................ Dillwyn 'were appointed to act as occasion might require'. 1  A deputation which was sent to London returned with a report that 'neither Government nor Bank of England can grant us the assistance we require', 2  and it was not until May 1826 that 3,000 in silver was sent 'by the Government' to the Collector of Excise in Swansea 'a supply which will happily remove the great inconvenience felt from the scarcity of that circulating medium in the town and neighbourhood'. 3

On May 26, 1826 L. W. Dillwyn, who had been fairly continuously engaged in arrangements arising out of the failure of the two Swansea banks, 'went to Grays Inn and afterwards to attend a meeting of the Bank [of England] Directors to plead for the establishment of a Branch for South Wales in Swansea', and on May 31 he was 'engaged in interviews with Mr. Manning at the Bank'. 4  He had, therefore, already been engaged in discussions at the Bank when, also on May 31, a meeting of some of the principal business men of the Swansea area 'unanimously resolved to memorialize the Bank of England to establish a Branch Bank at Swansea and appointed a deputation to wait upon the Directors'. The delegates were L. W. Dillwyn, Sir John Morris, J. H. Vivian and the Duke of Beaufort; and they were conveyed to the Bank in the latter's coach on June 5. Dillwyn added that he 'remained afterwards in private conversation with some of the Directors and have no doubt as to our success'.--- Dillwyn was engaged in further meetings at Threadneedle Street on 14 and 17 June, and the Court of Directors of the Bank resolved on July 13 to instruct the Branch Banks Committee to make enquiries for an agent, sub-agents and clerks for five towns including Swansea. 7  This information immediately reached Swansea where The Cambrian reported that the Directors of the Bank of England were 'laudably active' in seeking to assist manufacturing districts and that they had decided to establish Branches at 'Swansea, Birmingham and Manchester'. 8  It was August, however, when Dillwyn wrote that the establishment of a Branch Bank in Swansea had been decided upon; and that 'Mr. Parry Wilkins, who has received his appointment as Director, arrived to expedite the arrangements for opening the Concern'. 9  On August 19 Dillwyn met a surveyor sent by the Bank of England to consider alternative locations for the Branch. 10  Dillwyn considered one possibility, Burrows Lodge, to be 'not eligible with regard either to safety or convenience', and it was the premises of.........

...................... the 'Old Bank' of Gibbins and Eaton that were chosen. 1  It is interesting that a little over a year later there was a petition to the portreeve, aldermen and burgesses of Swansea to have the proposed market built on 'Ground opposite the Branch Bank ... very eligible for the purpose ... in the most central part of the Town and nearly adjoining the Principal Streets of business and Thoroughfares'. 2  This has some significance in view of the statement that in many places 'the inconvenient situation of the premises' was a main cause of the failure of the Branch Banks to attract sufficient business. 3

The Cambrian, after mentioning on July 22 the decision to establish Bank of England Branches at Manchester, Swansea and Birmingham, referred on 5 August and 16 September to the opposition in certain quarters to the Branch Bank proposals. It was

The Cambrian, after mentioning on July 22 the decision to establish Bank of England Branches at Manchester, Swansea and Birmingham, referred on 5 August and 16 September to the opposition in certain quarters to the Branch Bank proposals. It was not until the end of September that it announced that the Old Bank premises were being repaired and would be opened as a Bank of England Branch under John Parry Wilkins of Brecon. 'We hitherto abstained', it rather incorrectly stated, 'from noticing the reports in circulation respecting the establishment of a Branch of the Bank of England at Swansea, fearful of giving publicity to statements that might not be realized'. 4  Wilkins as agent and Robert Morris as sub-agent were to receive 'wages' of 1,000 and 500 respectively per annum, 5  and they were to be assisted by two clerks and a porter. 6

The Branch Bank at Swansea was opened for business on 23 October 1826. 7  A correspondent in The Cambrian wrote: 'We have seen some of their notes, which are in every respect the same as those of the Parent Establishment, except being dated at Swansea and made payable here and in London.' 8   On 28 November L. W. Dillwyn 'drove in the afternoon in the close Carriage to Swansea and dined with a large Party with Mr. Parry Wilkins at the Bank of England'. 9

The above account shows that the establishment of a Branch Bank in Swansea, as in a number of other places, 10  followed immediately upon the petitions of influential business people in the locality. It is easy to agree with Mr. Marston Acres that 'without such petitions it is doubtful whether the Directors of the Bank would ..................

............... ever have considered establishing a Branch in Wales'. 1  And it is interesting to find a suggestion that officials of the Bank later attached some importance to having a Welsh Branch, for, when the removal of the Branch from Swansea was contemplated in 1842, the agent there wrote of the city which is now the capital of the Principality that 'it is in Wales' . 2

In the original deliberations about the proper place for a Branch in South Wales, Swansea did not gain undisputed approval. Indeed, the Branch Banks Committee of the Bank also considered Cardiff, Newport and Merthyr, and 'after conference with Thompson & Foreman and Wm. Routh (Crawshay & Co.) fixed on Swansea' . 3   Of the three towns competing against it Merthyr alone had a larger population than Swansea. And it is noteworthy that, comparing 1826 with 1825, merchants dealing in products such as those made in the Swansea area---'copper merchants', 'coal factors, merchants and shipowners' and 'iron merchants and ironmongers'---increased their demands for discounts from the Bank of England; whereas others, notably bankers, overseas traders, textile merchants and 'tea dealers, grocers and sugar refiners' reduced considerably their demand for such discounts. 4  It may well be also that, following the loss of its monoply of joint-stock banking outside London, the Bank regarded Swansea as a good place in which to forestall any joint-stock banks that might appear in South Wales. As might be expected, the Branch Banks Committee turned down a proposal made by 'Deputation and letter' that a Branch be established in Haverfordwest, because 'the commerce of the place is far too limited'. 5  The Committee and the Court of Directors of the Bank, representing as they were a private banking corporation, seem quite naturally to have decided that public service could best be rendered in the places where the opportunities of reward were greatest.

 

R. O. ROBERTS.

University College of Swansea.


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