In his final reflections on why Scottish banks last, or at any rate have lasted, so long, Richard Saville puts it all down to a many-sided ability to meet and beat the competition. Yet at various crucial junctures in the past, including most recently the scare over the destination of Standard Life's stake in the Bank of Scotland, other pressures have come into play.
It was always odd that the Scots should have been such precocious bankers. The other countries where banks emerged early, Italy and Holland, were the richest in Europe, whereas Scotland was among the poorest. They had a surplus of gold and silver to set the tills ringing, but in Scotland the very opposite, the normal absence of hard cash, produced the same effect. It shows the effect of being put on your mettle.
The finest sections of Saville's book come in the first half, where the history of banking merges into the general history of the country. He gives a superb account of how a nation of fighting men and religious fanatics suddenly found itself forced, if it was to survive, to concentrate on the intricacies of commerce.
Some of its sons had seen enough of the world to spell out the options. Scotland was at that time an independent state, if not one in especially good working order. The idea of a central bank as an arm of the state, in anything like the modern sense, would have been a joke. But the idea of a chartered company, where public functions were delegated under privilege to private individuals, gave in this case just the right combination of security and initiative to make the thing take off, and indeed survive the disappearance of the state which had created it.
Still, if privilege could be granted once it could be granted twice. The Bank of Scotland resisted immediate absorption into the spoils system under which the country was ruled after the Union but it found itself 20 years later with a rival, the Royal Bank. Snarls and tussles between the two were frequent till, at the end of the 18th century, when Henry Dundas united Scottish banking interests as he united all other Scottish interests.
There then followed the golden age of the old Scottish banking system. Saville adds to our knowledge of it, showing how closely the two big chartered banks co-operated to control the whole. Yet it was not a system that stifled enterprise. On the contrary, it provided a stable environment for the first stage of the industrial revolution, which produced such monetary chaos in England.
And it was conducted neither with a statutory framework, nor with the reserves of gold elsewhere thought essential for every banking system. It was what liberal economists call a spontaneous order, and as such it has attracted the approbation of such heavyweights as the late Nobel laureate Friedrich von Hayek. To this aspect, though, Saville pays no attention whatever.
It came to an end with Sir Robert Peel's Scottish Banking Act of 1845, after which the history loses a good deal of its intrinsic interest. The Bank of Scotland, along with the rest, cartelised and fossilised itself, while in every other sector Scottish entrepreneurs were conquering the world.
It was in such frozen form, rather than as ferocious competitors, that the Scottish banks lasted till the late 20th century. Now they, along with the whole financial system of the United Kingdom, have been thrown open to the pressures of the global market. So far they have survived, but as much by political support as by competition.
Saville again adds to our knowledge of the crisis over the Royal Bank in 1982, showing how the Bank of Scotland weighed in on the side of continued independence for its old rival.
It seems to me that Scottish banks have been acting in concert for 200 years, sometimes as a closed cartel, sometimes in a relatively liberal way. It remains to be seen how long into the 21st century this cosy arrangement can last.