Wednesday, 22 May 2013

Free banking was robust and effective

In Scotland, unlike England, there was no officially chartered bank with public responsibility for the currency and a possible lender of last resort role. Instead you had free banking where the circulating medium consisted mainly of paper notes issued by private banks. One bank, the Bank of Scotland, had held a monopoly on note issue from its chartering in 1695 but this lapsed with its charter in 1716.  Initially there were just two banks, the Bank of Scotland and Royal Bank of Scotland but the number grew rapidly. By 1750 there were 14 firms, the number rose to 23 by 1765 and 32 in 1769.  Not all of these issued notes but a large number did. The notes were exchanged between banks through a clearing system and were convertible on demand (although until 1765 there was the additional option of fixed term delayed conversion with interest). In the entire history of the system there were only two failures due to overissuing of notes or credit – in marked contrast to the fragility of the English country banking system of the same period. There was also sustained competition and innovation with a move after 1810 to an extensive branching system (again unlike England).

Visibility: 
Main blog
Read the full blog post here

Source: http://www.iea.org.uk/blog/free-banking-was-robust-and-effective

uk state pension pension lump sum pension transfer retirement age uk retirement calculator

0 Comments:

Post a Comment

Subscribe to Post Comments [Atom]

<< Home