How to blow up a bank

Hubris: How HBOS wrecked the best bank in Britain, by Ray Perman (Birlinn Publishers, Edinburgh 2012)

It seems strange to think of it now, but there was a time when that vast pile at the top of Edinburgh’s Mound was a bank – a real live bank with a queue of people inside, waiting to pay real money into their bank accounts.  I was one of them, and when I started my life at the Scottish Bar on Edinburgh’s High Street, the tradition was to open three accounts with the Bank of Scotland just round the corner on the Mound: a current account, a tax account and a VAT account, all of which I duly did.  You didn’t need to explain to the manager at the Bank what an advocate was, or why it was that I didn’t have a penny to my name but might have in a few years: because the manager knew all about that.  You see, they had been opening accounts with fresh faced advocates for over three hundred years.  It was relationship banking, though I doubt the manager would have used that term in those days.

Crossing the Royal Mile from Parliament Square and making the short walk to the Mound used to fill me with awe – here was the Bank, cheek by jowl with Scotland’s law courts, across from the Kirk at St Giles and just down from the Castle; and when I went through the doors and across the ornately tiled floors of the busy teller room, the windows on a bright day gave a breath-taking view right across Princes Street and all the way to the glittering Firth of Forth beyond.  The sound of bagpipes drifted in, while bank clerks quietly and politely dealt with each customer in turn.  This wasn’t just a bank building, it was a statement of national identity.

I had, in fact, been a customer of the Bank of Scotland since I was 7 and I opened my Super Squirrel saver account on Princes Street in Port Glasgow.  It never entered into my head to open an account with the Royal, because my father was with the Bank (though I daresay the opposite was equally true, and generations of Scots were tuned in to the Royal Bank).  I even remember signing up a friend from primary school, and getting one whole pound added to my Super Squirrel account book for having won them this new business.  That was the Bank: canny, thrifty and secure.

That branch was of course just like every other in towns and villages all across Scotland, places which shared certain key characteristics: there would be a kirk, a short high street or cross road and a branch of both the Bank and the Royal Bank close-by.  Association with one or other bank was almost tribal, and there was always a whiff of the Jacobites about the Bank, which I suppose is why I ended up on their books.  Adverts in the ’80s and ’90s would emphasise the close relationship between the Bank and its customers, with a bank bus typically winding through Highland scenery to the jingo: “The Bank of Scotland, a friend for life.”  The Bank was as Scottish as Irn Bru, Haggis or Oor Wullie.

And then came a shotgun marriage with the Halifax, following a heated bid by both the Bank and the Royal Bank to take over London’s enormous National Westminster Bank; a bid the Royal Bank won, and which was rather like watching a fly swallow an elephant.  Somehow the Bank, our Bank, which became HBOS, was never the same again.  Then came the hurricanes of the financial crisis; then silence.

Is the Bank of Scotland really gone?  Well, we still see its signs on our streets every day, but the sad fact is that the United Kingdom’s oldest bank, founded in 1695, is now just a minor limb of the Lloyds Group based in London.  The building on the Mound is an office now, converted on the whim of HBOS executives because they thought it would make a nice place to hold corporate dinners.  Now, aptly enough, the only part of it open to the public is a small museum to the history of Scottish money.

It’s hard to take in, and with a real sense of injured national pride we might ask: how did this ruination of the Bank happen?

‘Hubris: How HBOS wrecked the best bank in Britain’, by Ray Perman is the first book in the aftermath of the global financial collapse to look specifically at the Bank of Scotland and how its demise came about.  Veteran journalist Ray Perman is excellently placed to write on the subject, having followed the Bank’s fortunes since the 1970s when he was with the Financial Times. It’s clear from his writing that he really cares about the subject and feels strongly that the Bank’s demise should not have happened and could have been avoided.  He pulls few punches in a withering assessment, and brings home the clear message that without the Bank, Scotland is a far poorer place in many respects, beyond mere money.  The reason, he asserts, is that ‘Bank of Scotland was destroyed in seven years by men who were intelligent, hard-working and meant well, but focused only on growth.  Everything else was subordinated, with the result that they lost sight of the simple rules of banking, which had not changed since 1695.’

Before the financial crisis Scotland had, in the Bank, an organic financial institution which serviced the local needs of small and medium sized businesses, and which understood their particular business challenges.  This has been swept away now, and those left poorer are the ordinary people of Scotland.  It is a very sad tale, but one that has to be told; and as if to underline the importance of the topic, the excellent foreword to the book has been written by Alistair Darling, who was of course both Chancellor of the Exchequer and Member of Parliament for Edinburgh South West when the financial crisis unfolded, and therefore quite literally in a unique position to comment on how events impacted upon the Bank.

If you are involved in the financial industry in Scotland, or advise those who are, Ray Perman’s book is essential reading; but I think the book would also be of interest to those with a more general interest in Scottish history and society.  As for the future?  Well, I thought it particularly interesting to note that this year’s fireworks to mark the end of the Edinburgh Festival – an event which was always sponsored by the Bank of Scotland, whose headquarters would be lit up in the afterglow – is now sponsored by Virgin Money.

Let the boom times roll!

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2 Responses to How to blow up a bank

  1. rabbyrob says:

    It is, as the years gently pass by, odd how what seemed too recent to be old, but not so present to be news, can now become history that begins after 5 short years. However, your anecdotal style reaches far Stephen, as I too want to complete total withdrawal from the dear old Bank of Scotland towards a service that serves ( and pays interest) but am stuck, lingering with the bank of my childhood.

    I look forward to reading the book on my tattie holidays!

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