THE Royal Bank of Scotland has led the way in
the issue of banknotes and, finds Brian Ferguson,
that history is about to be celebrated as part of
the Queen’s Diamond Jubilee celebrations
An industrial estate in west Edinburgh is not the most obvious place to trace the development of the nation – with the help of the humble banknote. But the earliest notes and documents held there by the Royal Bank of Scotland date from one of our most turbulent times. It was an era during which Scotland was still scarred by the debacle of the ill-fated Darien Venture and coming to terms with a new union with England – but was also witnessing a remarkable boom in business and enterprise.
When the most fragile of notes held in RBS’s tightly protected archives at the Gyle rolled off the presses at its first office off the Royal Mile almost 300 years ago, they marked the start of centuries of rivalry with the Bank of Scotland. No fewer than six different kinds of notes were produced in the first batch to be produced on 8 December 1727 – heralding the start of the so-called “note wars” between the so-called “new bank” and the “old bank”.
RBS can claim a string of honours in the pioneering use of its banknotes, the history of which is about to be celebrated with a major charity auction expected to draw interest from collectors around the UK. Although exact details of the lots being assembled from the collections in the bank’s cash centre are being kept under wraps for now, they are expected to offer enthusiasts the chance to acquire special commemorative and other rare notes, dating as far back as 1939.
The event, to be held later this year in aid of the Queen Elizabeth Diamond Jubilee Trust, will offer a rare chance to secure banknotes adorned by the royals, as well as the likes of writer Robert Louis Stevenson, Alexander Graham Bell, the inventor of the telephone – and even golfing great Jack Nicklaus. The bank’s royal connections go right back to the original note, the first to feature a British monarch, George I, who had agreed the royal charter which founded the institution in 1727.
It was a direct result of the ill-fated attempts of a group of investors to set up a Scottish trading colony at Darien in Central America in 1695 which almost bankrupted the nation and became a major contributory factor in Scotland agreeing to political union with England in 1707.
The terms of the deal included compensation to Scots for the huge sums lost in the Darien disaster. But a group of fund managers formed to control the payments discovered they had money to spare and decided to create their own bank to rival the Bank of Scotland, which had been set up in July 1695.
By then, coins had gone into short supply in Scotland, the growth of trade was being severely hampered and merchants seeking a more convenient way of settling accounts were among the strongest supporters of an alternative. The Royal Bank of Scotland wasted no time in issuing notes and a shade more than 100 years later the Clydesdale Bank, on its opening day of business, did exactly the same.
The early years of the rivalry between Bank of Scotland and Royal Bank of Scotland were marked by a series of financial skirmishes as each tried to bankrupt the other by hoarding, then presenting for payment, large quantities of the other’s notes, but neither managed to inflict the fatal blow.
Ruth Reed, head archivist for RBS, said: “We still have the original charter which formed the bank, the first volume of board minutes, which date back to the formation in 1727, and we are also lucky enough to have what is believed to be the only surviving note from the first batch.
“That very first note was very unusual at the time as it depicted the king, and this had not been done for any previous British banknote. The Bank of England didn’t have a portrait of the monarch on their banknotes until 1960.”
That very first note was printed on a “taille-douce,” a rolling press invented in the 1540s, which forced dampened paper into lines engraved in copper plates. A large furnace was needed to heat the plates to ensure the ink remained fluid, and RBS’s printing presses could produce up to 1,400 notes a day.
Completed notes were bound into cheque book-style bundles. Each note’s unique number was written on the counterfoil as well as on the note itself. At the time of issue, notes were cut out of the book in a wavy line so that when presented for payment, the clerk could check them against the counterfoil to be sure the note was genuine.
Ms Reed said: “All of the major developments with banknotes were designed to prevent counterfeiting. RBS was the first bank in Europe to issue multicoloured notes, in 1777, when the king’s head was printed red, and was also the first British bank to issue a double-sided note, in 1826.
“At that time, notes had started being printed using steel plates and the £1 note RBS introduced in 1826 was produced at a time when other banks in England had stopped printing notes under £5 on the orders of the government.
“There was a lot of opposition in Scotland, with people writing to the newspapers of the time, including Sir Walter Scott, to retain £1 notes and it proved successful. The note RBS produced afterwards was the last to depict a reigning monarch until 2002, when a commemorative note was produced for the Queen’s Golden Jubilee.”
One little-known quirk of Britain’s banking system is that although Scottish banks have the right to print their own notes, they are not officially legal tender in either Scotland or England.
However, the concept of legal tender is often misunderstood. Contrary to popular opinion, it is not a means of payment that must be accepted, but a legally defined means of payment that should not be refused by a creditor in satisfaction of a debt.
Instead, Scottish banknotes carry a promise to pay which means the bank will promise to exchange it at their headquarters for an equal amount of legal tender.
Ms Reed added: “Most people don’t realise that no-one is actually obliged to accept a banknote under Scots law. They are legal currency but not legal tender. Traditionally, Scottish banks have always accepted old notes at face value, even well after they’ve gone out of circulation. Banks will take them.
“But collecting banknotes has become increasingly popular in recent years, with many becoming real collectors’ items, especially the Jack Nicklaus one that we produced in 2005, which was the first British banknote to feature a non-royal who was living at the time.”
Banknote collector Iain Harrison, a retired RBS worker, now living in Millport, said: “I’ve been collecting notes from all the Scottish banks since I started with RBS in 1974.
“At that time there very few collectors, but there has been huge growth in the last few years, and that is probably down to the internet and sites like eBay. I remember a few days after the Jack Nicklaus note came out there were 1,200 lots on eBay from people trying to sell them.”
The Royal Bank’s longest-used note was the £1, which hardly changed while in circulation from 1832 until 1968, apart from its shape, which shrunk and became more letter-boxed.
By the second half of the 20th century, it had become much more difficult to create forgeries, thanks to the advent of modern technology and banking machines.
But closer inspection of one of the more recent notes at the RBS archives throws up one of the most intriguing tales from the bank’s history.
Ms Reed said: “An American actor, WH Egan, came into our head office in St Andrew Square in 1989 and explained to the staff there that he had been working as an apprentice at an engraver’s firm in Edinburgh in 1956.
“He was involved in engraving a new plate for the £1 note and claimed he had incorporated his signature into it. He had written it backwards, but on closer inspection you could see he had written ‘WH EGAN’. No member of staff or any banknote collector had ever spotted it before.”
By the 1960s, the majority of RBS’s banknotes had hardly changed for the best part of a century. The £5 note produced that year was a dramatic transformation for the bank, being printed in five colours, and it could easily pass for a modern-day note. A new security measure was again added – a steel strip incorporated into the paper.
While earlier RBS notes had featured images of George I and George II, or some other royal regalia, to reflect the formation of the bank, the tradition was broken with the 1965 £5 note which featured an image of David Dale, the joint cashier of the bank’s first Glasgow office when it opened in 1783, who became one of the pioneers of the industrial revolution in Scotland.
Perhaps surprisingly, the first commemorative note issued anywhere in the European Union was only back in 1992, by RBS, to mark the European summit held in the city at the end of the year, featuring an engraving of Holyrood Palace, where the summit was held, as well as a colour version of the EU flag.
The most recent by RBS, printed in 2005, was issued to mark the opening of its global headquarters at Gogarburn in Edinburgh, by the queen, although it was the building that was featured on the £50 note, not the monarch.
Mr Harrison added: “It’s not so much the commemorative notes that are of interest to many collectors, as these have only been produced relatively recently, but older notes that are extremely rare, such as £100 notes from the 1940s and 1950s which would have been enough to buy you a car at the time.”