THE collapse of the City of Glasgow Bank in October 1878 was a massive scandal leading to a well-publicised court case as well as the imprisonment of several of the bank’s directors.

The financial fortunes of many unsuspecting shareholders and their families were ruined by the affair.

Initially, the bank was considered as one of Glasgow’s success stories. Established in 1839, it was one of many Scottish banks formed around that period due to the rise of trade, industry, and wealth.

From the start, the City of Glasgow Bank focused on small savers and businesses. Like many other banks, there was some speculation in North America and, more unusually, in the Far East.

Despite large loans to a small number of more privileged firms and individuals, all seemed fine. The number of branches grew rapidly and by the mid-1870s, the bank had the third largest branch network in the UK, with more than 130 branches.

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So, shareholders were shocked when, on October 2, 1878, the bank unexpectedly went into liquidation.

Glasgow Times:

Not only had shareholders lost their investments - in some cases, their life savings - but as was normal practice then, they shared liability for paying the bank’s losses, which amounted to £6 million (around £500 million in today’s money). Of 1200 shareholders, only around 250 were still solvent following the bank’s collapse.

Very quickly a national relief fund was set up to help the shareholders, involving the Lord Provosts of several Scottish cities, including Glasgow’s Sir William Collins.

The relief fund committee was based in Glasgow, and here at the City Archives we’re fortunate to hold their minutes and finance ledger.

The first meeting’s records state that it was ‘numerously and influentially attended’ showing many wished to help (and, in the case of some politicians, wanted to be seen as helping).

Glasgow Times:

Any available assets left were swiftly sold, and the relief fund set up a public subscription service.

Subscribers from all over Scotland, and even some from New Zealand, America, and Australia, donated cash, raising £400,000 in total.

The relief fund’s ledger carefully records payments over several years to the stricken shareholders based throughout Scotland.

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In some cases, payments continued to deceased shareholders’ widows and children, indicating the legacy of the financial crisis within many families. In the relief fund’s final report of 1888, it stated that 1039 cases had received assistance.

During the High Court trial in February 1879, the ‘creative accounting’ by the bank’s manager Robert Stronach, and directors Lewis Potter and others, were blamed for the bank’s crash.

Balance sheets had been intentionally falsified.

Stronach and Potter were each imprisoned for 18 months, and five other directors imprisoned for eight months for their part in the fraud.