141:, was completed in August 1777 and published in 1778. Key reasons for the Bank's collapse included excessive granting of credit, and a lack of central control. Each branch was effectively independent of head office and had its own board of directors. The report also cited gross misconduct: "open disregard, not only of the principles of the Copartnery, but of the express and positive rules and regulations laid down for the conduct of Managers".
121:, which collapsed in the crisis of 1772. Heavily in debt and unable to meet demands for cash on its banknotes, the bank was forced to close on 25 June 1772. The Dukes of Queensberry and Buccleuch, along with the Earl of Douglas and the Earl of Heron approached the Bank of England to try to secure loans on the security of their lands. The Bank of England offered £300,000, but the terms were considered extortionate. Subsequent approaches to the
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209:: "the design was generous, but the execution was imprudent, and the nature and causes of the distress which it meant to relieve were not, perhaps, well understood. This bank was far more liberal than any other had been, both in granting cash accounts, and in discounting bills of exchange" (II.ii.73). The Duke of Buccleuch was Smith's patron and former pupil.
157:
The bank took twenty years to be wound up, starting in 1773 (some say it took 60 years). The partners' lands were sold to meet the bank's huge losses. The collapse of the bank was thus a major blow to the great
Scottish landowning families. Those who could not cover their debts went to prison. Among
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The essential errors of the Ayr Bank were trading beyond their means; divided control by permitting branches to act independently; forcing the circulation of their notes; giving credit too easily; ignorance of the principles of business; and carelessness or iniquity of
129:, which had recently lent £22,000 and £10,000, respectively, were rejected. The bank managed to reopen for a brief period between September 1772 and August 1773, but a general meeting of the partners held on 12 August decided to dissolve the Company permanently.
113:
The bank granted many loans to favoured customers and soon had to issue bank notes to cover its position. By June 1772 the bank had issued £1.2 million through advances and bills of exchange, around two thirds of the currency of
Scotland.
85:
The nominal capital of the company was £150,000 or £160,000, of which £96,000 was immediately subscribed. However, no more than 80% of the capital was ever subscribed. There were 131 original partners, including
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The impacts also filtered to the common people and the disastrous results of the "spirit of overtrading" resulted in widespread poverty which in turn led to civil unrest such as the
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In July 1776, the partners of the Ayr Bank met to form a committee to conduct an inquiry into the company's failure. Their report,
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Precipitation and Fall of Messrs
Douglas, Heron and Company, Late Bankers in Air with the Causes of their Distress and Ruin
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228:. They were "still in the vaults" when John Buchanan compiled his list of Scottish banks in 1862, but were later lost.
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444:"States of the affairs of Messrs Douglas, Heron, and company, at August 1773, when they finally gave up business"
110:. This made the bank seem very secure, because its deposits were backed by the partners' land as collateral.
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Sheridan, Richard B. (1960). "The
British credit crisis of 1772 and the American colonies".
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Legislating
Instability: Adam Smith, Free Banking, and the Financial Crisis of 1722
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376:"Robert Burns Country: The Burns Encyclopedia: Douglas, Heron & Company"
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Douglas, Heron & Company relied for credit on the London bank
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Once the bank was wound up, its records were transferred to the
94:. Many of the partners were substantial landowners, such as the
267:
Hamilton, Henry (1956). "The
Failure of the Ayr Bank, 1772".
73:. It opened in November 1769 and folded in 1772 during the
512:(2nd ed.). London: A. & C. Black. p.
42:
34:
26:
196:John Carruthers, 12th Laird and 8th Baron Holmains
181:Sir John Whitefoord of Ballochmyle and Blairquhan
90:, the Earl of Dumfries, the Earl of March, and
252:. Cambridge, Mass.: Harvard University Press.
8:
19:
402:"Douglas, Heron and Company - Archives Hub"
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294:. Edinburgh: Edinburgh University Press.
607:British companies disestablished in 1772
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106:, so the partners were not protected by
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241:, Ayrshire Archaeological Society, 1973
483:The Rise and Fall of the City of Money
292:Bank of Scotland: A History, 1695–1995
602:British companies established in 1769
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100:Archibald Douglas, 1st Baron Douglas
555:The Tayside Meal Riots, S G E Lythe
102:. The bank was established under a
582:1772 disestablishments in Scotland
239:So Fast to Ruin The Ayr Bank Crssh
162:partially or totally ruined were:
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577:1769 establishments in Scotland
178:Archibald Craufurd of Ardmillan
98:, the Duke of Queensberry, and
92:Sir Adam Fergusson of Kilkerran
509:History of Banking in Scotland
184:John Christian of Kinning Park
146:History of Banking in Scotland
1:
506:Kerr, Andrew William (1908).
119:Neal, James, Fordyce and Down
88:Patrick Heron of Kirroughtree
69:bank with its head office at
597:Banks disestablished in 1772
532:www.carothers-carruthers.com
448:National Library of Scotland
423:National Library of Scotland
419:"Memoirs of a banking house"
203:mentions the failed bank in
59:Douglas, Heron & Company
20:Douglas, Heron & Company
312:Journal of Economic History
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166:Patrick Douglas of Cumnock
592:Banks established in 1769
572:Defunct banks of Scotland
325:10.1017/s0022050700110411
290:Saville, Richard (1996).
193:Mr. Cunningham of Dalfram
175:Robert Kennedy of Pinmore
172:William Logan of Camlarg
485:. Birlinn. p. 88.
270:Economic History Review
190:David McLure of Shawood
187:George McCrae of Pitcon
104:contract of co-partnery
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127:Royal Bank of Scotland
246:Goodspeed, Tyler Beck
226:British Linen Company
206:The Wealth of Nations
150:
148:, William Kerr says:
16:Defunct Scottish bank
528:"Douglas Heron Bank"
481:Perman, Ray (2019).
61:, also known as the
169:Hugh Logan of Logan
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216:of 1772 and 1773.
214:Tayside Meal Riots
133:Legacy of collapse
378:. Robertburns.org
108:limited liability
96:Duke of Buccleuch
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458:2018-01-21
429:2018-01-21
382:2013-09-04
341:References
301:0748607579
201:Adam Smith
153:officers.
248:(2016).
125:and the
67:Scottish
65:, was a
63:Ayr Bank
51:Scotland
22:Ayr Bank
333:2114853
283:2598492
273:. n.s.
220:Records
144:In his
81:History
35:Defunct
27:Founded
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160:lairds
329:JSTOR
279:JSTOR
487:ISBN
296:ISBN
254:ISBN
158:the
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30:1769
587:Ayr
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321:doi
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