In 1772 Douglas Heron & Co, more popularly known as the Ayr Bank, after the town where its head office was located (aptly spelt “Air” in some contemporary documents), went spectacularly bust. It had been formed only three years before, backed by some of the largest landowners in Britain, and had used this seemingly solid foundation to expand rapidly. Using a mixture of discounted bills and cash borrowed from the London money markets, it quickly became one of the largest banks in the country. Its collapse bankrupted dozens of its shareholders and cast a black cloud over the Scottish economy for decades.
In 1857 the Western Bank of Scotland, which had ridden the industrial boom in Glasgow to expand its lending book aggressively — again using paper and borrowed money — was caught out by a downturn in the market that exposed the poor quality of its lending. In addition to the failure of its biggest customers at home, the bank had been caught up in the frenzy of the American railroad mania, investing in mortgages of dubious value. It was swamped by bad debts and brought destitution to many of its shareholders.
In 1878 the City of Glasgow Bank . . . but you get the picture by now. A seemingly solid bank, which had grown much faster than its rivals, suddenly failed, triggering a chain of bankruptcies among its shareholders and creditors. In 2008 the banks that went to the wall and had to be rescued by the taxpayer just months after posting seemingly healthy profit statements were RBS (now rebranded as NatWest Group) and HBOS, the unlovely conglomerate formed from the previously prudent Halifax and Bank of Scotland.