The first definite rumour of the bank being in extremis came from the London Stock Exchange, on the 25th of September. Then followed rumours of all descriptions, embracing some to the effect that false gold returns and false balance-sheets, etc, had for long been systematically issued. These rumours also emanated from the Stock Exchange.
It was regarded at the time as being somewhat singular that certain members of the Stock Exchange should have such an intimate and exclusive knowledge of the private affairs of the bank, but the subsequent revelations rendered it less remarkable that the difficulties of the concern should have been first allowed to reach such a quarter.
When the rumours referred to first reached the ears of the other Scotch bankers they were greatly discredited, for, although the City Bank had for long been treated as a kind of pariah in Scotland, because of the imprudent business they were suspected of doing, it was believed that the directors were honourable men, and that the balance sheets were true. Assuming that the latter gave a true statement of the affairs of the bank, the other Scotch banks could see in them no corroboration of the rumours, and hence did not credit them. And so well was the secret kept, except in interested quarters, that it was not until the City Bank directors themselves came, during the last dav or two of September, to invoke the aid of the other banks, that the latter could bring themselves to believe in the truth of the reports.
Following upon this the other banks deputed Mr. Ge Auldjo Jamieson, accountant, in Edinburgh, to examine and report upon the state of the finances of the City Bank, with the view of giving that bank the necessary aid should such a course seem to be warranted and afford any hope of helping it through its difficulties. A cursory examination of the books showed Mr. Jamieson that no less a sum than nearly six millions of pounds had been lent to four firms, and that the bank's affairs were in such a hopeless condition that to advise that aid should be given was quite out of the question. The other banks, therefore, declined to interfere, and accordingly the City of Glasgow Bank stopped payment on Wednesday, the 2nd of October.
In Scotland and London the news was received quietly, coming, as it did, upon minds which had for tea days or so been prepared for the worst. It was well that the blow did not fall upon minds unprepared for it, for had it come suddenly, like the Collie failure in 1875, a banking panic of unexampled virulence would most probably have been the result. As it was, the short breathing time allowed enabled banks and financial institutions of all kinds to mature such arrangements as should secure themselves in the event of the worst coming. To be forewarned is to be forearmed, and to be forearmed is in a great measure to forestall and minimize the danger. Hence it was that when the blow fell, the public generally received the news with calmness, and forbore to run upon the other banks in any marked degree. It is true that the other two Glasgow banks had to sustain something in the nature of a run, although public distrust never, at any period during the crisis, amounted to more than might have been expected in the circumstances. The association of ideas in the public mind suggested the fact that the only two bank failures in Scotland in recent times, those of the Western Bank and the City Bank, were both Glasgow banks; hence the public, very unreasonably, looked somewhat askance at the two remaining Glasgow banks; but these institutions, as was to be expected from their prudent and able management, had no difficulty in meeting all the demands upon them, and speedily any distrust which may have arisen passed away.
When the City of Glasgow Bank stopped payment, the other Scotch banks immediately took steps to announce that the notes of that bank would be accepted as usual. And in addition to this they also speedily arranged a plan whereby immediate relief was given to such depositors of the failed bank as were hampered by the lock-up of their money by granting them advances on the security of their deposits. And no doubt it was due to such action that a panic, which might well in the circumstances have been considered inevitable in Scotland, was averted.
Directly the directors determined to stop payment they gave instructions to a firm of accountants in Glasgow, Messrs. Kerr, Andersons, Muir, and Main, and to a firm of solicitors there, Messrs. McGrigor, Donald, and Co., to prepare a balance sheet of the bank, as on the 1st October, 1878, the day preceding the stoppage, to be submitted to the shareholders on the earliest possible day. This investigation necessarily occupied a considerable time, and it was not until the 19th of the month that the investigators' report was in the hands of the shareholders. Then for the first time the public generally became aware of the appalling nature of the catastrophe, when it was seen that there was a total loss of £6,190,983, and that, to hide this deficiency, the balance sheets had been systematically falsified for years.
In addition to the money loss, the revelations made in the report with respect to the book-keeping, and other matters, were of a most astounding character, and showed mismanagement so gross and criminal as to be almost incredible. Indeed, so gross was the falsification that, immediately on the issue of the investigators' report on the 19th, warrants were issued for the apprehension of the directors and manager on a charge of fraud, and put in force the same evening.
The investigators' report was issued on the 19th of October, and on the 22nd a meeting of the shareholders was held to consider it, when a voluntary liquidation was resolved upon. The liquidators appointed were Mr. William Anderson, one of the investigators; Mr. Jamieson, who made the preliminary investigation on behalf of the other Scotch banks; Mr. John Cameron, formerly secretary of the Clydesdale Bank; and Mr. Jamieson's partner. Mr.