The E-Sylum:  Volume 8, Number 38, September 4, 2005, Article 15

POTENTIAL LOSS OF SCOTTISH BANKNOTES LAMENTED

An article in The Scotsman reviews the history of banknotes
in that country, in light of the latest proposal to eliminate
Scottish notes.

"IF HE were alive today, then Malachi Malagrowther – better
known as his alter ego Sir Walter Scott – would not be amused.
Despite his sterling efforts to save the historic right of Scotland's
banks to issue their own notes, that privilege has come under
renewed threat.

The Treasury is consulting on proposals to change the way
Scotland's commercial banks – the Clydesdale Bank, Royal Bank
of Scotland (RBS) and Halifax Bank of Scotland – back up their
notes with other assets. Along with banks in Northern Ireland,
they could face a collective bill of £80 million a year to continue
issuing their own banknotes.

If the proposal becomes law and the banks cannot come up with
funds to cover their notes, an icon to Scotland's identity and more
than three centuries of banking history could become extinct.

The Bank of Scotland was the first to issue notes, when it was
founded in 1695 – largely due to a shortage of coins – and the
RBS followed suit when it was established in 1727.

George Dalgleish, curator of Scottish history at the National
Museums of Scotland, says the banknotes were quickly accepted
by customers, partly because of convenience, and partly because
Scottish banks proved reliable. The right to issue banknotes was
jealously protected by the banks, he says, to the point where
they would step in to guarantee those issued by rivals who went
under."

"Scottish banks did quite well throughout the 18th and 19th century,
and that was the basis of the importance of the Scottish financial
sector of today," he says. "The issuing of banknotes was very
innovative and developed interesting ways of trying to combat
forgery; the Royal Bank was the first to print three-coloured notes."

But he adds that even today, Scottish banknotes are not legal
tender – which explains why you may find a London taxi driver
or a shopkeeper in Birmingham refusing the "foreign" currency.

"They are technically promissory notes. They say 'I promise to
pay the bearer.' People can refuse to take them. In England,
people used to offer you 19 shillings, six pence for a £1 note."

"Scotland's first bankers would have been amazed at how much
some of these early notes would be worth today. A rare £1 note
produced by the Glasgow Joint Stock Banking Company in
November 1840, featuring engravings of Neptune and a shipping
scene of the Clyde, is expected to fetch up to £4000 when it is
auctioned on 12 September."

To read the full article, see: Full Story

  Wayne Homren, Editor

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