Democratic Sentinel, Volume 2, Number 35, Rensselaer, Jasper County, 11 October 1878 — THE CITY OF GLASGOW BANK. [ARTICLE]

THE CITY OF GLASGOW BANK.

Reckless Gambling with Other People’s Money the Cause of the Great Failure* [From the Loudon Times. Oct. 4.] The City of Glasgow Bank had 133 branches. It has paid a progressively increasing dividend for several years past, until it reached 12 per cent. It would be incorrect, to say that the disaster was unexpected. On the contrary, it created in banking circles no surprise, for the bank had been losing credit gradually for ten years past, yet the Scotch banks in London were not in possession of information which showed that the end was actually near until Tuesday morning. Rumors of the bank being in difficulty had been so often circulated before, within strictly banking circles, that the repetition of them did not excite particular interest on this occasion. The business of the bank had been conducted, for years, upon very unsound principles, and, from the fact of the other Scotch banks having decided to let the bank stop, it is inferred that it is a very bad case. Operations upon an enormous scale had been indirectly entered into in Indian produce and Australian wool, some $14,000,000 of bills having been accepted for account of three firms. Very large advances had been made to firms in the iron trade in the North, and an utterly reckless support appears to have been given to builders. The immediate cause of the failure was the impossibility of any longer getting bills draw from India on the bank in Glasgow discounted in the London market—a circumstance which explains, to some extent, the feverish oscillations for some months past in the rates demanded for loans. These bills had been sold in India to the Indian banks, ostensibly against the shipment of product, and ultimately came upon the discount market. The terms demanded for negotiating them having steadily advanced, instructions were at length telegraphed to the Indian branches to take no more bills, and as soon as it was no longer possible to keep the open-credit system going and the paper afloat, the bank closed its doors. The liabilities of the bank are estimated at $50,000,000; acceptances, slightly below $15,000,000; deposits, $40,000,000. The unlimited liability of the shareholders may, perhaps, secure the depositors. The authorized note circulation was only £72,000, but, according to the last accounts, the issue was between £600,000 and £700,000, against nearly all of which the law compels the bank to have gold. We believe we are correct in saying this deplorable catastrophe is, with reference to the Scotch banks as a whole, entirely an exception, and that no other banking institution in Scotland is in any way mixed up with the City of Glasgow Bank, or has been engaged in business of the kind which led to this failure. Altogether the City of .Glasgow Bank lent £5,823,000 to four firms, the reputation of one or two Of WIIICII lias been anything but good for years past. The opinion expressed by the bank managers is that a more reckless course of gambling with other people's money has never been pursued by any body of managers or directors, and that such engagements as these could never have been entered into had there not been either the weakest or most willful sanction of the speculations of these four firms, coupled with a negligent system of supervision which is hardly short of criminal. The bank, it is estimated, will show a deficit of -some £3,000,000 sterling, which to the knowledge of the managers had been accumulating for years past, yet the dividends' had been increased.