Georgian banking blunders

Vickery’s testimony and the many others given to the Bank of England’s Committee of Inspection during a year-long inquiry in 1783 and 1784 offer a detailed insight into the world of late 18th-century banking. They also provide a timely echo of the current Parliamentary Inquiry into Banking Standards.

The 1783 committee was appointed during a time of rising state indebtedness and unease about political and economic corruption. Then, the War of American Independence had devastated the public finances, and financiers found themselves accused not of ruining the economy through incompetence but of taking advantage of the country’s financial predicament to line their own pockets. In 1783 then, bankers were no more popular than they are today. And many of our current concerns about the way banking is managed can be seen from the Committee of Inspection’s report to have long precedent.

Taking advantage

The problems presented by bankers having opportunities to maximise personal gain were high on the agenda. In 1783 bonuses were less of a concern than today but behaviour calculated to elicit the biggest tips from well-to-do customers was a worry. Some men denied taking gratuities. Mr Payne, the chief cashier, said “that there were not any whatsoever received by him from the Publick; that some trifling ones have now & then been offered, but he has allways refused them, conceiving it totally inconsistent with his Station”.

But men working in the departments that had the greatest customer contact talked about tips amounting to several hundreds of pounds a year. And the inspectors found that those tips caused “dissatisfaction & heart-burnings amongst the Clerks themselves, from the unequal distributions in some of the Offices; & what is a matter of much more serious consequence… partialities & unjust preferences, towards the Publick”.

The security of customers’ personal details was also a key concern. The inspectors were quick to condemn the practice of leaving ledgers out and open on desks all night, and immediately ordered the replacement of the poorly constructed lockers in which many of the Bank’s books were kept. They were shocked to find how many of the clerks had access to vaults in which bills and notes worth millions of pounds were kept and they lamented that the “Chief Officers of this house… [are not] obliged to give their personal attendance every day untill the business is closed, & the keys of so great a trust are properly secured”.

Other security measures highlight the complexities of the business of banking prior to the advent of computing technology. In 1783 numerous clerks were employed in making duplicates of every ledger and record relating to business with the government and with private customers. Precautions against loss of records were also a concern. The Bank stored all its ledgers in wheeled carts so they could be removed quickly in case of fire and it kept its own fire engines in order to respond quickly to any blaze.

While the inspectors were chiefly concerned with ensuring the efficacy of working practices and the integrity of security procedures, they did also pay great attention to the personal qualities of the men employed by the Bank, and unsurprisingly observed character defects in some. Mr Bridges, principal of the dividend warrants, was condemned as “a chattering fellow, not fit to be placed in any more conspicuous light”.Mr Kingdon was reported as having been rather rude to the public and not well qualified for his role due to “natural defects”. Mr Gandon appeared to be a “sulky young man”, Mr Crockford was deemed to be “very rough” and Mr Wilde was noted as having ability but apparently he “drinks & then [gets] muddled & lost”.

The greatest censure, however, was reserved for some of the senior men, who were failing to exercise proper control over their departments. The inspectors demanded greater diligence and attention for the future, asserting that those at the top would, and should, “be held accountable for the conduct of those immediately under them”.

Not all the Bank’s employees were criticised. Many were found to be highly competent. Often they worked long hours and frequently they asserted a strong sense of duty. Few, however, could have surpassed Daniel Race who, in the Bank’s memorial of him, was judged to be “in no way associated with the depravity of the times” but rather he was “eminently distinguished by his extraordinary virtues and abilities… the clearest ideas and the soundest judgment, most unblemished integrity, singular, diligent, attention and regularity in every branch of his department”.

Ready to serve

One of the strongest themes in the committee’s report was attempts by the men who worked for the Bank and those who conducted the inspection to distance themselves from the “depravity of the times” and assert the Bank’s duty to its customers and willingness to serve the needs of the public.

Equally, the inspectors expected general acceptance of the “immense importance of the Bank of England not only to the City of London, in points highly essential to the promotion and extension of its Commerce, but to the Nation at large, as the grand Palladium of Public Credit”. They continued: “We cannot but be thoroughly persuaded that an Object so great in itself and so interesting to all Ranks of the Community, must necessarily excite care & solicitude in every breast.” There must be few operating in the banking industry today confident that they can rely quite so heavily on the care of all ranks of the community.

The committee’s report produced several outcomes. Working practices were changed – especially in the problematic 3 per cent Consols office – security was tightened and offices were remodelled to improve efficiency.

Perhaps the most important outcome, however, was the acknowledgement that the committee must continue to monitor the Bank. In the years that followed, it reconvened regularly with the aim of reviewing rules and regulations, updating working practices and maintaining the standards of those who worked for the Bank.

And what of the very forthright Mr Vickery? Eventually what a number of the Bank’s men had been saying quietly in 1783 became common knowledge: when it came to tardiness, absenteeism and speculating on the stock market during working hours, Vickery himself was by far the worst offender in the 3 per cent Consols office. After receiving several warnings about his behaviour, he was fired in 1796. No doubt few of his colleagues were sad to see him go.

Anne Murphy is senior lecturer in history at the University of Hertfordshire. She is the author of The Origins of English Financial Markets: Investment and Speculation Before the South Sea Bubble (Cambridge, 2009)

This article was first published in the January 2013 issue of BBC History Magazine