Bank of Scotland

Bank of Scotland

Infobox Company
company_name = Bank of Scotland plc
company_type = Public limited company
company_slogan = Always giving you extra
foundation = 1695
location = North Bank Street, Edinburgh, Scotland
num_employees = 20,000
industry = Finance and insurance
products = Financial services
owner = HBOS plc
homepage = []
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to remain in existence. It was also the first bank in Europe to print its own banknotes, a function it still performs today.

Since 10 September 2001 the Bank of Scotland has formed part of HBOS plc, following the merger with the Halifax Bank (formerly the Halifax Building Society). This was due to the Halifax insistence that they would only accept merger proposals if their name 'Halifax' was included in bank name after mergerFact|date=March 2008. Halifax said it would be prepared to accept a much lower takeover bid from an American bank if this criterion was not fulfilledFact|date=March 2008. Bank of Scotland owns a 50% stake in Sainsbury's Bank - the other 50% being owned by J Sainsbury plc.

On 17 September 2007 The Governor and Company of the Bank of Scotland became Bank of Scotland plc, as part of the HBOS Group Reorganisation Act 2006.

On 18 September 2008 the terms of a recommended offer for HBOS plc by Lloyds TSB plc were announced - a deal worth 12.2 billion pounds. It is expected that the acquisition will be completed by the end of 2008 or early 2009.



The Governor and Company of the Bank of Scotland was established by an Act of the Parliament of Scotland on 17 July 1695, the Act for erecting a Bank in Scotland, opening for business in February 1696. Although established soon after the Bank of England (1694), the Bank of Scotland was a very different institution. Where the Bank of England was established specifically to finance defence spending by the English government, the Bank of Scotland was established by the Scottish government to support Scottish business, and was prohibited from lending to the government without parliamentary approval [] . The founding Act granted the bank a monopoly on public banking in Scotland for 21 years, permitted the bank's directors to raise a nominal capital of £1,200,000 Pound Scots (£100,000 Pound Sterling), gave the Proprietors (shareholders) limited liability, and in the final clause (repealed only in 1920) made all foreign-born Proprietors naturalised Scotsmen "to all Intents and Purposes whatsoever". John Holland an Englishman was one of the bank's founders. Its first chief accountant was George Watson.

18th and 19th centuries

The Bank of Scotland was instrumental in the raising of money for the first Jacobite Rising in 1715.Fact|date=May 2008 As a result the Bank's monopoly ended in 1716, and its first rival, the Royal Bank of Scotland was formed by Royal Charter in 1727. This led to a period of great competition between the two banks as they set to drive each other out of business. Although the "Bank Wars" ended in around 1740, competition soon arose from other sources, as other Scottish banks were founded throughout the country. In response, the Bank of Scotland themselves began to open branches throughout Scotland. The first branch in London opened in 1865.

The bank also took the lead in establishing the security and stability of the entire Scottish banking system, which became more important after the collapse of the Ayr Bank in 1772. The Western Bank collapsed in 1857, and the Bank of Scotland stepped in with the other Scottish banks to ensure that all Western Bank's notes were paid.

20th century

In the 1950s, the Bank of Scotland was involved in several mergers and acquisitions with different banks. In 1955, the Bank merged with the Union Bank of Scotland. The Bank also expanded into consumer credit with the purchase of Chester based, North West Securities (now Capital Bank). In 1971, the Bank agreed to merge with the British Linen Bank, owned by Barclays Bank. The merger saw Barclays Bank acquire a 35% stake in the Bank of Scotland, a stake it retained until the 1990s. The merchant banking division of the Bank of Scotland was relaunched as British Linen Bank (now known as HBOS Treasury Services).

In 1959 Bank of Scotland became the first bank in the UK to install a computer to process accounts centrally. At 11 am on 25 January 1985 the Bank introduced HOBS (Home and Office Banking Services), an early application of remote access technology being made available to banking customers. This followed a small-scale service operated jointly with the Nottingham Building Society for two years but developed by Bank of Scotland. The new HOBS service enabled customers to access their accounts directly on a television screen, using the Prestel telephone network.

International expansion

The arrival of North Sea Oil to Scotland in the 1970s, allowed the Bank of Scotland to expand into the energy sector. The Bank later used this expertise in energy finance to expand internationally. The first international office opened in Houston, Texas, followed by more in the United States, Moscow and Singapore. In 1987, the Bank acquired Countrywide Bank of New Zealand (later sold to Lloyds TSB in 1998). The Bank later expanded into the Australian market by acquiring the Perth based Bank of Western Australia.

A controversial period in the Bank's history was the attempt to enter the United States retail banking market via a joint venture with evangelist Pat Robertson. The move was met with criticism from civil rights groups in the UK due to Robertson's controversial views on homosexuality. The Bank was forced to cancel the deal when Robertson described Scotland as a "dark land overrun by homosexuals". []


In the late 1990s, the UK financial sector market underwent a period of consolidation on a large scale. Many of the large building societies were demutualising and becoming banks in their own right or merging with existing banks. For instance Lloyds Bank and TSB Bank merged in 1995 to create Lloyds TSB. In 1999, the Bank of Scotland made a takeover bid for the NatWest Bank. Since the Bank of Scotland was significantly smaller than the English-based NatWest, the move was seen as an audacious and risky move. However, the Royal Bank of Scotland tabled a rival offer, and a bitter takeover battle ensued, with the Royal Bank the victor.

The Bank of Scotland was now the centre of other merger opportunities. A proposal to merge with the Abbey National was explored, but later rejected. In 2001, the Bank of Scotland and the Halifax agreed a merger to form HBOS ("Halifax Bank of Scotland"). The headquarters was to stay in Edinburgh, and both bank's brands would continue to be used.

Since then HBOS has grown to become the fourth largest bank in the UK by market value, and the UK's largest mortgage lender. In Scotland, all of the Halifax's branches have been amalgamated with the Bank of Scotland, with the Halifax brand only used for mortgages and savings products. Halifax branches in England have used the Bank of Scotland brand for business purposes.

HBOS Group Reorganisation Act 2006

In 2006, HBOS secured the passing of the HBOS Group Reorganisation Act 2006, a private Act of Parliament that would allow the group to operate in a more simplified structure. The Act allowed HBOS to make the Governor and Company of the Bank of Scotland a public limited company, Bank of Scotland plc, which is now the principal banking subsidiary of HBOS. Halifax plc, and another HBOS subsidiary, Capital Bank plc transferred their assets and liabilities to Bank of Scotland plc, although the brand name Halifax will be retained.

Merger with Lloyds TSB

On 17 September 2008, Lloyds TSB and HBOS agreed takeover terms whereby Lloyds TSB would buy HBOS for 232p per share. This was after shares in HBOS had suffered a loss in value of 80% over a year amid speculation and short selling. On 18 September 2008, Lloyds TSB plc officially announced that it was going to take over in a deal worth 12.2 billion pounds however there is still a chance for another bider to enter and buy the Bank of Scotland. Lloyds stated it will continue to use 'The Mound' as its Scottish headquarters and will continue the issue of Scottish bank notes.

Although the 18 September 2008 announcement confirmed agreement to be taken over by Lloyds TSB, two main steps are required for this to take place:
*Three quarters of HBOS shareholder votes in agreement with the board's actions; [cite web |url=http://|title=Recommended acquisition of HBOS plc by Lloyds TSB Group plc|publisher=Lloyds TSB|date=2008-09-17 |accessdate=2008-09-18]
*UK government dispensation with respect to competition law.As most of the shareholding votes with HBOS are in the hands of institutional investors, it is unlikely there will be sufficient shareholder protest to the takeover, and as Gordon Brown personally brokered the deal with Lloyds TSB [cite web |url=
title=Gordon Brown steps in to secure HBOS rescue||date=2008-09-17 |accessdate=2008-09-18
] , the dispensation should be a formality. The only event which could hold up these steps is a criminal investigation by the Serious Fraud Office over the circumstances of the short selling, as has been initiated by New York's Attorney General into similar events on the NYSE. [cite web |url=,0,7431880.story?track=rss |title=AG Cuomo announces probe into short-selling ||date=2008-09-18 |accessdate=2008-09-19] However, the SFO has not indicated it is conducting such an enquiry.

The Lloyds TSB board have stated that troubled banks Merrill Lynch and Morgan Stanley were amongst the advisors recommending the takeover.

Bank notes

The Bank of Scotland was the first bank in Europe to successfully issue paper currency redeemable for cash on demand (which was an extremely useful facility given the poor state of the Scottish coinage at the end of the seventeenth century). The right to issue banknotes has been maintained to the present day, but extended to other banks after 1716 when the Bank's monopoly was allowed to lapse. Following the Acts of Union in 1707, the bank supervised the reminting of the old Scottish coinage into Sterling.

In 1826, there was outrage in Scotland at the attempt of the United Kingdom Parliament to prevent the production of banknotes of less than five pounds face value. Sir Walter Scott wrote a series of letters to the "Edinburgh Weekly Journal" under the pseudonym "Malachi Malagrowther" which provoked such a response that the government was forced to relent and allow the Scottish banks to continue printing £1 notes. For this reason Sir Walter still appears on all Bank of Scotland notes.

Current issue

Bank of Scotland's current note issue feature Sir Walter Scott on the front, and on the back- representations of industries that Scotland excels in:

* 5 pound note featuring a vignette of oil and energy
* 10 pound note featuring a vignette of distilling and brewing
* 20 pound note featuring a vignette of education and research
* 50 pound note featuring a vignette of arts and culture
* 100 pound note featuring a vignette of leisure and tourism.

New 2007 series

Bank of Scotland began issuing a new series of banknotes in the Autumn of 2007, which feature the common theme of Scottish bridges. It will take at least three years for the current issue of Bank of Scotland notes to be phased out of circulation.

While the colours and sizes of all of the new notes are the same as previous designs, text on the notes is larger than before. The raised, large denomination also acts as an aid for the partially sighted. 'Cornerstones' have been added to the new notes. These are watermark patterns on all corners of the notes, which will improve their durability.

Some new security features have also been added to the new design. These include a metallic security thread embedded in every banknote, which contains the numerical value of the note and the note's bridge image. A new hologram and foil patch has been introduced on the front of the £20, £50 and £100 notes, which features the Bank of Scotland logo and the numerical value of the note.

* £5 note features Brig o' Doon
* £10 note features Glenfinnan Viaduct
* £20 note features Forth Bridge (railway)
* £50 note features Falkirk Wheel
* £100 note features Kessock Bridge

Gaelic policy

Although it had a presence in every major Gaelic community, the Bank of Scotland was still operating exclusively in English in the early 1970s. In 1972, Gaelic activist Iain Noble persuaded the bank to issue him with its first Gaelic (actually bilingual) cheque-book. These have since become popular, and the Royal Bank soon followed suit. Today the bank advertises itself in the Highlands and Hebrides under the Gaelic title "Banca na h-Alba", although the forthcoming new issue of notes does not include any Gaelicweasel-inline

Corporate structure

The Bank has several subsidiaries and brands:

* Halifax (England, Wales and Northern Ireland, used for mortgages and savings in Scotland)
* Banco Halifax Hispania
* Birmingham Midshires
* Intelligent Finance
* Sainsbury's Bank (50%)
*Bank of Scotland Corporate (including Capital Bank)
*Bank of Scotland Investment Services
*Bank of Scotland Private Banking
*HBOS Financial Services Ltd
*HBOS Insurance & Investment Group Ltd
*HBOS Treasury Services plc
*Bank of Scotland (Ireland)
*Bank of Scotland (Netherlands)

List of Governors of the Bank of Scotland

# John Holland 1696-1697
# David Melville, 3rd Earl of Leven 1697-1728
# Alexander Hume, 2nd Earl of Marchmont 1728-1740
# Charles Hope, 1st Earl of Hopetoun 1740-1742
# Colonel John Stratton 1742
# John Hay, 4th Marquess of Tweeddale 1742-1762
# Hugh Hume, 3rd Earl of Marchmont 1763-1790
# Henry Dundas, 1st Viscount Melville 1790-1811
# Robert Dundas, 2nd Viscount Meville 1812-1851
# James Alexander, 10th Earl of Dalhousie 1851-1860
# John Campbell, 2nd Marquess of Breadalbane 1861-1862
# George Hamilton-Baillie, 11th Earl of Haddington 1863-1870
# John Hamilton Dalrymple, 10th Earl of Stair 1870-1903
# Alexander Hugh Bruce, 6th Baron Balfour of Burleigh 1904-1921
# William John Mure 1921-1924
# Sidney Herbert, 16th Baron Elphinstone 1924-1955
# Sir John Craig 1955-1957
# Steven Bilsland, 1st Baron Bilsland 1957-1966
# Henry Alexander Hepburne-Scott, 10th Lord Polwarth 1966-1972
# Ronald John Bilsland Colville, 2nd Baron Clydesmuir 1972-1981
# Sir Thomas Neilson Risk 1981-1991
# Sir David Bruce Pattullo 1991-1998
# Sir Matthew Alistair Grant 1998-1999
# Sir John Shaw 1999-2001
# Sir Peter Burt 2001-2003
# George Mitchell 2003-2006
# Dennis Stevenson, Lord Stevenson of Coddenham 2006- 2007

Football sponsorship

Bank of Scotland sponsored the Scottish Premier League from its inception in 1998 to season 2006/2007 when it declined to renew the deal in favour of investing in grassroots sport instead.


See also

*British banknotes
*List of banks
*Royal Bank of Scotland
*William Paterson (banker)

External links

* [ Bank of Scotland]
* [ history] , from the HBOS website
* [] Official page of the company's museum
* [] A website dedicated to those who have complaints with Bank of Scotland.

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