One of the reasons why joint-stock banks were allowed to be formed in this country was in consequence of the failure of many private bankers. Thus in 1793 one hundred stopped payment, the same number in 1810, a greater number in 1812, and in 1814, 1815 and 1816 about 360, making a total of nearly 1000 from 1791 to 1818. However, the first joint-stock banks formed were not more successful than their rivals. Again it was thought that banking was a very profitable business.

It was also discovered that the Bank of England's Charter stated "only borrowing or owing money on their bills or notes" was prevented, and therefore it was quite possible for a joint-stock bank to be formed to receive money on deposit.

Mr. Joplin stated in 1823 : "That public banks have not hitherto existed, more especially in London and Lancashire, seems to have risen from the want of a proper knowledge of the principle of banking rather than from the Charter of the Bank of England, which I find does not prevent public banks for the deposit of capital from being established".

An attempt was made to induce the Bank of England to give up its monopoly of exclusive banking, but that institution would not, however, agree to the proposition. The Government, nevertheless, in 1826 passed an Act allowing joint-stock banks to be formed beyond sixty-five miles of London.

The statute states: (1) "That banks of an unlimited number of partners may be formed, provided that they shall not have any house of business in London or at any place within sixty-five miles thereof.

(2) "No such banking company was to issue or reissue either directly or indirectly within the prescribed distance any bill or note payable to bearer on demand or any bank post bill, nor draw upon its London agents any bill of exchange payable on demand, or for any less sum than £50, but they might draw any bill for any sum of £50 and upwards in London or elsewhere at any period after date or after sight.

(3) "Banks of an unlimited number of partners may issue notes, but they must deliver at the Stamp Office an account containing the names of the firm, etc.

(4) "Co-partnerships may sue or be sued in the names of their public officers.

(5) "The Governor and Company of the Bank of England may empower agents to carry on banking business at any place in England."

Banks were very soon formed in various parts of the country; thus in 1826 there were joint-stock establishments at Liverpool.

Manchester, and two branches.

Manchester and Liverpool, and nine branches.

Birmingham.

Wolverhampton.

Sheffield.

Barnsley.

Bradford.

Halifax.

Huddersfield.

Knaresboro'.

York.

Darlington.

Lancaster, and three branches.

Whitehaven.

Carlisle, and seven branches.

Leicester.

Norwich, and nine branches.

Stamford.

Spalding.

Gloucester.

Langport, and fourteen branches.

Plymouth.

Devonport.

Unfortunately the supply of joint-stock banks was far greater than the demand. A few years later a large number of them failed through lending money in a reckless manner.

People began to look upon them with distrust. Lord Overstone observed in 1832: "I think the joint-stock banks are deficient in everything requisite for the conduct of banking business except extended responsibility. The banking business requires peculiarly persons attentive to all its details, constantly, daily, hourly watchful of every transaction, much more than mercantile or trading business. Joint-stock banking, of course, obliges to act through agents and not by a principal, and therefore under the restraint of general rules cannot be guided by so nice a reference to degrees of difference in the character of responsibility of parties, nor can they undertake to regulate the assistance to be granted to concerns under temporary embarrassments by so accurate a reference to the circumstances favourable or unfavourable of each case."

These remarks of Lord Overstone were no doubt quite correct with reference to loans on personal security, but when banks were formed in London it was impossible to carry on business on these principles, consequent on the rapid development of trade in the Metropolis. A London banker cannot study and know the position and standing of each individual to the same extent as the country banker.

In the year 1833 banks were allowed to issue notes above £50 payable on demand in London. They were required by this Act to keep a weekly account of their notes in circulation and make a return to the Commissioner of Stamps. On the renewal of the Charter of the Bank of England in 1833, the Government would not alter it, so as to prevent joint-stock banks being formed in London. They therefore inserted a clause allowing joint-stock banks in London provided they did not borrow or take up in England any sum or sums of money on their bills or notes payable on demand or at any less time than six months from the borrowing thereof. No partnership that exceeds six persons shall make or issue in London or within sixty-five miles thereof any bill of exchange or promissory note or engagement for the payment of money on demand or upon which any person holding the same may obtain payment on demand.

This Act also stated that an account of the bullion, notes in circulation and deposits in the Bank of England shall be transmitted weekly to the Chancellor of the Exchequer. Joint-stock banks were soon formed in London after the passing of this Act. The London and Westminster began business in 1836, the Union Bank in 1839, the London and County in 1839, and the Commercial Bank of London in 1840.

The London and Westminster Bank in its prospectus stated that it would receive current accounts on the same terms as other London bankers. No interest would be allowed on any current account. Deposit receipts would be issued for sums from £10 to £1000 bearing interest at the rate of 2 per cent, per annum, but if the amount should be withdrawn within three months, no interest would be allowed. Parties respectably introduced not having an account at the bank might nevertheless have their bills discounted or loans granted them on approved securities. The bank would act as agent to joint-stock banks, private bankers, and other parties residing at a distance. Persons who should require letters of credit to any part of the United Kingdom, the Continent of Europe, or other parts of the world, might obtain them.