The move to limited liability banking in Scotland and the introduction of bank regulation*
The modern free bankers argue that the Scottish banking system up until 1845 was relatively free from government regulation, this explaining the stability of the system. In 1882, the private banks moved to a limited liability status, and from then, the stability of the Scottish banking system was underwritten by the Bank of England. Starting with the Commercial in 1810, unlimited liability joint-stock banks were established in Scotland. By 1845, there were only three provincial banking companies remaining and most banking services were provided by twelve joint-stock banks and the three public banks. In 1862, ‘both in Scotland and England, it was supposed that for a prominent concern to register as a limited company would be a suggestion of weakness that might impair its credit’. In Scotland, the Committee of General Managers essentially operated a cartel which prohibited price competition.