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The winding-up of the Ayr Bank, 1772–1827

Published online by Cambridge University Press:  17 July 2014

Paul Kosmetatos
Paul Kosmetatos*
Affiliation:
University of Cambridge
*
Paul Kosmetatos, Darwin College, University of Cambridge, [email protected].
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Abstract

The collapse of the ambitious and experimental Ayr Bank (Douglas, Heron & Co.) was the central episode of the 1772–3 British credit crisis and served as a direct influence on Adam Smith's monetary analysis in the Wealth of Nations. This article identifies the issuance of redeemable annuities in response to the bank's stop of payments in June 1772 and the distressed nature of its asset liquidations afterwards as the main reasons behind the size of its losses. It furthermore uses primary manuscript evidence to reconstruct and extend the existing narrative of this famous episode, from the planning stages in 1773 while the bank was still fighting for its survival, to the retirement of its banknotes by the Edinburgh public banks in 1773–4, the legal and political manoeuvring behind the redemption of the annuities by Act of Parliament in 1774, and the over 40 years of asset unwinding that followed.

Keywords

financial crisisbank failureScotlandeighteenth centuryeconomic history

JEL classification

E51: Money Supply • Credit • Money Multipliers B12: Classical (includes Adam Smith) B15: Historical • Institutional • Evolutionary G21: Banks • Depository Institutions • Micro Finance Institutions • Mortgages G01: Financial Crises N23: Europe: Pre-1913
Type
Articles
Information
Financial History Review , Volume 21 , Issue 2 , August 2014 , pp. 165 - 190
Copyright
Copyright © European Association for Banking and Financial History e.V. 2014 

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References

Sources

Bank of England Archives, London

Minutes of the Court of Directors: G4

Banking Department General Ledger: ADM

Barclays Group Archives, Manchester: BGA

Coutts Bank Archives, London: COU

Lloyds Group Archives, Edinburgh:

Aberdeen Bank papers: ABC

Bank of Scotland papers (Secretary's letterbook, Bond Book): BOS

Melville papers: MEL

The National Archives, Kew, London: Bankruptcy Commission Files, B3

The National Archives of Scotland, Edinburgh

Carruthers papers: GD207

Buccleuch Papers: GD224

Ogilivie-Grant Papers: GD248

Home-Robertson papers: GD267

Court of Session papers: CS237, CS181, CS44

The Royal Bank of Scotland Archives, Edinburgh

Glyn Mills papers: GM

Bristol Bank papers: MCB

Prescott Grote papers: PRE

Royal Bank of Scotland papers: RB

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