Manx Banking

By PILCHER G. RALFE.

The following article, dealing with the general history of Banking in the Isle of Man, and re-printed, by permission, from The Scottish Bankers Magazine, April 1917, should prove of interest to readers of this booklet. Such small additions and corrections as are necessary are included in the footnotes.

MANX Banking began more than a century ago¹. On 25th August 1793 The Manks Mercury, the Island's earliest newspaper, remarks, "It is confidently reported that some gentlemen of considerable rank and property have it in contemplation to erect a Bank here, which certainly would be of infinite advantage to the public at large." It appears, however, to have been in May 1802² that the earliest Bank commenced business, that of Messrs. M.H. & G. Quayle, J. Taubman, and J. Kelly. Its office was at Castletown, then the capital of the Island, and the large town house of the Quayles of Crogga, still existing, is said to have been built for its accommodation. This concern was called "the Isle of Man Bank," and carried on business until 1818, the partners being several times changed.³

A curious feature of Manx life at this time was the profusion of notes and cards in circulation, issued by tradesmen for various small amounts.⁴ In, 1816 a newspaper described the inconvenience of this currency as such as to "threaten the Island with general ruin." In 1817, the Legislature, in order to abate the uncertainty of this varied and often worthless currency, passed an Act regulating by licence (to cost £20) the issue of notes.

Five Bank licences were at once granted under this law, to J. Spittall & Co.,⁵ Edward Forbes,., H. & J. Holmes, L. M'Whannell,⁶ and Edward Gawne,⁷ with an authorised issue amounting to £33,400.⁸ These notes were for 20s., 21s., and various smaller sums, down to 1s. The Isle of Man Bank issued also penny and halfpenny copper tokens with the familiar device of the three legs.

The Banking firm of Wulff & Forbes,⁹ established in 1826, was in 1836 taken over by the Isle of Man joint Stock Banking Company, which had a capital of £50,000 in £5 shares.¹⁰ This undertaking ended disastrously in 1843. The cause was an extensive defalcation by a manager, whose method was the circulation of fraudulent bills. A bitter controversy on the management and the method of liquidation is reflected in the newspapers of the time. At the failure, the Bank was liable on notes £14,000 ; unpaid drafts, £6000 ; and deposits, £45,000. Its advances were £62,000, and securities lodged against notes £15,000.

Its greatest indebtedness seems to have been to its London agents, some £70,000 to £80,000. I gather these details from the papers above mentioned, where it is stated that a call of £10 per share on six thousand shares held by solvent shareholders would be sufficient to liquidate the Bank, but what these unfortunate persons eventually had to pay I have not been able to discover.

Holmes' Bank above referred to (called also Douglas and Isle of Man Bank) opened in 1815 and closed in 1853, on the death of the last surviving partner¹¹. The Holmes' were fish-curers, which business they carried on at Derbyhaven. They were also shipowners and merchants in many other branches, and owned extensive property in the Island and in England. Their banking business was, for the time, very, considerable. Seeing that the sole owner and manager was at the close a blind man of seventy-five, it does not seem surprising that a long and difficult liquidation followed his death, but it does appear astonishing that the Bank deposits then reached, it is said, £200,000.

A remarkable feature of this case was the discovery that notes largely exceeding the licence had come surreptitiously into circulation. Through such experiences, here as elsewhere, has the present severely regulated, inspected, and audited banking system been evolved.

In 1836 (the same year as the Joint-Stock Bank) another company, The Isle of Man and Liverpool Banking Co., commenced business at Douglas. It wound up in 1838, "from want of sufficient capital to carry on business in both places." 'the Isle of Man and Liverpool Bank was succeeded by yet another company, The Isle of Man Commercial Bank, which about 1849 merged in the City of Glasgow Bank, carrying on its insular business as the Bank of Mona. 'This was the first entrance of a large Bank on modern lines, and although the City of Glasgow Bank was an unfortunate example of a Scottish institution insular banking undoubtedly owes to its initiative much of the superior system, energy, and stability of the later financial concerns, whose methods have shown a distinctly Scottish, rather than English, character. Although its business was narrowed by the establishment of strong native Banks, it continued to the end to be the Bank of the Manx Government, and of many of the official and proprietary class. The story of its fall in 1878 is familiar to Scottish readers. The insular branch was honorably and efficiently managed, and the Isle of Man, as it had no share in the causes of its downfall, suffered only some slight temporary inconvenience from its stoppage, as there were no shareholders resident, and the depositors were soon paid in full.

The office of the Bank of Mona was in the handsome building on Prospect Hill, Douglas, now with additions used by the Manx Government and Legislature. It was the first Bank to carry on business in all the three other towns of the Island¹².

For nearly twenty years after the closing of the Bank of Mona, Manx banking was carried on entirely by three local companies. Several Companies' Acts had in the meantime been passed, that of 1865 admitting the principle of limited liability.¹³ They are summed up in the Companies (Consolidated) Act, 1 George V.1910. This period witnessed an extraordinary development of banking business in the Island, the ever-increasing deposits marking the growing wealth of the people, and their confidence in these peculiarly national institutions.¹⁴

The private Bank of Dumbell, Son, & Howard, established in 1853, when Holmes' closed, became in 1874 Dumbell's Banking Co., Ltd., with a paid-up capital of £50,000. Its founder, George William Dumbell, a lawyer, was long a conspicuous figure in insular finance and politics, and died at an advanced age in 1887. After 1880 this Bank, leaving the path of legitimate banking, entered upon a career of adventure, initiating and financing speculative companies and combines, whose growth was encouraged by the remarkable development of the Island, and especially of Douglas, as a holiday resort. Thus associated with the newer and more risky features of Manx life, but managed with characteristic energy, it built up a very large business, and its deposits were finally quoted as £1,300,000.¹⁵ Although it had the custom of many Manx mercantile companies, of large Douglas tradesmen, and (under security) of the insular government, it can hardly be said that, even at the height of its popularity, it obtained that confidence which should be enjoyed by, a first-class financial institution. Yet to all but a few the news of its stoppage on 3rd February 1900 was an utter surprise.

It is still, perhaps, too early, for a Manxman to write freely on the details of the calamity. The evils which destroyed the Bank may be summed up under two heads: its encouragement, as above indicated, of speculative adventure; and the practical control of its resources by one or two men, unchecked by efficient and independent audit. At the end its liquid assets had almost completely disappeared, and its own notes, included as cash in hand, somewhat concealed the inadequacy, of the latter amount.

The ruin of the Bank was followed by that of many concerns which for years had existed only on its credit ; yet the worst anticipations of the time were far from being realised. What was healthy in Manx trade rapidly recovered from the shock, and by careful management the assets of the Bank have already realised sufficient to pay dividends of 12s. 1d. in the £¹⁶.

A month after the failure, the uneasiness of the public mind culminated in a run on the surviving local Banks. Though of short duration and easily met, it tended to increase the tension, and was peculiarly unwelcome, as it came at a time when the price of the High-class securities, with which the Banks must part to meet the demand, was unusually low. A more permanent effect of the crisis was the replacement of Bank deposits by investments on the part of many of the Manx public, especially as a large amount of various kinds of property was within the next few years thrown upon the market through Dumbell's liquidation.

The goodwill of Dumbell's business was purchased by Parr's Bank, Ltd., which has a district manager at Douglas, and branches at Ramsey, Castletown, Peel, Port S. Mary, and Laxey .

Immediately upon the principle of limited liability being in 1865 recognised by Manx Act, the Isle of Man Banking Co., Ltd., was registered. It has ever since been familiarly known as "The Limited," though for thirty years all Banks on the Island have been limited.

With its influential body of shareholders, its success was from the first issued, and the directorate has from time to time been served by men of the highest position in the Island. The subscribed capital is £150,000 of which £30,000 has been paid. The Bank has three offices in Douglas, with branches at Castletown, Peel, Ramsey, Port S. Mary, and Laxey, and a sub-branch at Port Erin.

Though apparently for a time distanced by the enterprise of Dumbell's Bank, its greater restraint in the dangerous time of inflation enabled it to outlive its rival, retain the public confidence, and receive an accession of business which has in fact made it the predominant financial concern of the Isle of Man. In 1899 its deposits stood at £1,056,000; by 1906 they had fallen to £790,000, for from the accumulations in the hands of this Bank a very large proportion of the sum required in the liquidation of Dumbell's had to be drawn. The deposits have now again risen to £856,000,

In 1882 the Manx Bank, Ltd., commenced business with a paid-up capital of £25,000. This Bank was perhaps started too late, when the other two local institutions had already everywhere established their connections. Nevertheless, having a well -distributed body of shareholders, it became popular, especially amongst country people and tradesmen, to a considerable)e extent justifying its name as pre-eminently a native Bank. In 1900 it was taken over on favourable terms by the Mercantile Bank of Lancashire (now amalgamated with the Lancashire and Yorkshire Bank).

This Bank's deposits at the time of its extinction had risen to £200,000. Its branches were at the four towns and Port Erin, to which the Lancashire and Yorkshire Bank has added Onchan in the suburbs of Douglas.

In 1897 the Liverpool Union Bank opened an office at Douglas being the first English Bank to invade the Island. It was soon afterwards (in 1900) acquired by Lloyd's Bank, and the Island was thus introduced to the largest of the immense combinations of modern times. Branches have since been opened at Ramsey and Peel.

In 1900, when last it was possible to sum up nearly the entire Banking figures of the Island, deposits stood at two and a-half millions,¹⁷ and advances at one and a-half millions. Three of the Banks now merge their figures in English balance-sheets, but considering the large sums of deposited money locked up in the liquidation of Dumbell's Bank, the popularisation of investments, especially of municipal loans, and the lowering of interest rates, it can hardly be that the present amount approaches that of 1900.

The Banks in the Isle of Man are closely connected with the daily life of all classes of its inhabitants. Their twenty-four offices employ about eighty officials. The English Institute of Bankers has many members in the Isle of Man, and its examinations are held annually in all the towns. Banking facilities are given to the public with a fulness and care which perhaps can hardly be excelled even in the much-banked land whose mountains look over to our own across the twenty miles of sea. It is rarely that a farmer or a tradesman, however small his holding or his business, is without a Bank account, and the use of the unstamped cheques has become universal, no doubt seriously reducing the note issue¹⁸.

Although only one Bank still retains its native proprietary, the English Banks utilise in general the services of officials trained on the Island, and for the present at least there is, superficially viewed, little difference to be observed in their methods of dealing with Manx Customers. All except Lloyd's issue £l notes.¹⁹ The Isle of Man Bank has also £5 notes. (The Bank of Mona is the only other Manx Bank which has ever issued a £5 note.) Manx notes are as well secured as any in the world, full approved security for the issue being lodged with the insular Government, and vested in the names of its nominees.²⁰

Bank Holidays, according to the latest Act (1910), are New Year's Day, Good Friday, Easter Monday, Whit Monday, 5th July (Tynwald Day, the specially Manx festival), first Monday in August, 9th November,²¹ and 25th and 26th December. Bills due either on Sundays or holidays are payable next day. The weekly half holiday, established about twenty-five years, is Thursday.

Limited Banks registered under Manx law must twice a year publish lists of their shareholders, and must exhibit lists of transfers in two places in each of their offices. Abstract statements of liabilities and assets must also be exhibited as in England. Two-thirds of the nominal capital of a limited Bank must remain as reserve liability in case of winding-up.

Trade bills are naturally rare in a community with so little industrial life. Joint and several promissory notes, usually for the accommodation of one party,were abundant in early years, but are now little encouraged. From a public point of view their disappearance is not to be regretted. At sales of stock, which usually take place in November, before the date of quitting farms, two months' credit is often given to buyers on promissory notes. This paper, which has generally two names, is left with a Bank for collection and credit, and forms in ease of need an excellent security.

By a law enacted in 1649, and confirmed in 1687, the highest rate of interest permitted on mortgages was 10 per cent. In 1691 a further Act reduced this rate on all future contracts to a maximum of 6 per cent, all contracts exceeding this rate to be void, and any one offending to forfeit three times the value of the things bargained !

This severe but salutary, law is still in force. Consequently 6 per cent is the limit of a Bank's interest, irrespective) of what "Bank Rate" may rise to : 6 per cent is also "legal interest" in the Island.

By arrangement among the Banks, uniform rates of 2 per cent and 2½ per cent are allowed on current accounts and deposits respectively. Thirty-five years ago the Bank of Mona was allowing as high as 4 per cent on deposit, and a little earlier Holmes' Bank 4½ per cent. For many years deposit interest stood at 3 per cent with all the existing local Banks, and Dumbell's allowed the same rate on current account until its failure. Commission on current accounts other than overdrawn is of comparatively recent introduction.

In the Isle of Man, as in Scotland, the old time Bank agent was frequently his customer's financial factotum. The shrewd and somewhat suspicious Manxman still reposes in him a touching confidence, and the association, perhaps lifelong, involves no small amount of mutual regard and affection. Much might be said about the humours of Manx Banking, of the types of customers and transactions ; but the Manxman is not tolerant towards discussion of his peculiarities, nor perhaps would even the most generous of editors afford me space for such details !

That new local Banking concerns will in future be formed seems very unlikely, nor does it appear probable that there is room for the further division of the narrow profit by the establishment of more branches from the mainland. The principle of the Island's local currency and financial isolation seems firmly fixed and justified by experience. On the whole, we need not expect in the near future much change in Manx Banking, but we may confidently look to the existing concerns, by their existing methods. to continue to fulfil a very important and useful function in our little community.

Footnotes

1" Much information about early Banks is borrowed from Clay's 'Currency of the Isle of Man,' Manx Soc, Vol. 17.

2, 1 have seen an unsigned and unnumbered £5 note, dated 1st January 1788, which bears the name of "Taubman and Kennedys Isle of Man Bank." I cannot learn that this Bank ever carried on business.

3. An Isle of Man Insurance Company was for a time carried on in connection with this early Bank. Another was founded in the eighties, and after a period of considerable success, sold its business to an English office.

4. Forgeries, even of Bank of England notes, were also abundant, and counterfeit copper money was plentiful, In 1812 Thomas Young, convicted of passing forged notes to the value of 5s., was sentenced to six months' imprisonment and a hundred lashes at Ramsey Cross.

5. Seems to have closed about 1819.

6. At Ramsey. Open as early as 1810. Closed perhaps about 1829.

7.1816 to 1837. Mr. Gawne was a brewer and landowner, and carried on his business at Mount Gawne (near Port S. Mary), of which place his note bears a view.

8. 1827 £32,000, 1836 £45,000; 1847 £31,850; 1868 £77,000.

9. The eminent naturalist, Edward Forbes. was of this family.

10. It had 146 shareholders, and gave a bonus of £2,500 for the transfer of the business.

11. The original partners were Henry,John, & James Holmes.

12 The growth of the town population at the expense of that of the country has been very marked during the past sixty years. Especially noticeable is the increase of Douglas, which with its suburbs holds nearly half the insular population. and is largely an English town. The three other towns are Ramsey, Peel, and Castletown, Port Erin, Port S. Mary- and Onchan may now almost claim that rank, also Laxey, though the last-named picturesque, locality is rather a collection of hainicts. All these have now separate municipal goverment.
The Manx Bank was the first Bank at Port Erin, the Isle of Man Bank at Port St. Mary , Dumbell's Bank at Laxey, and the Lancashire and Yorkshire Bank at Onchan.

13 Some fifty years ago Mining companies especially were formed in great numbers most of them hopeless failures. Deserted mine buildings, with their high stacks and ruined sheds, are a very, frequent feature in the Manx landscape.

14 Deposits: 1870, £41,000; 1878. £889,000; 1882, £ 770,000; 1885, £884,000 , 1890, £1,324,000; 1895. £1,942,000: 31st December 1899, £2,580,000 (for Dumbell'. Bank the figures are those of.30th June 1899).

15. It was, however, proved after the failure that this figure must be materially reduced by the amount of large borrowings treated as deposits from other Banks.

16. A final dividend of 6d in the £ was paid, 1922, making a total of 12/7

17. Without the, amount of the Liverpool Union Bank's deposits, which is not separately obtainable. but which, as the Bank had but recently commenced business. can hardly have been large. The sum equalled about £50 per head of the population. In Scotland at the same time the proportion was about £25.

18. The total amount of the Manx note issue was in 1900 over £50,000; in 1913 £36 000. (1926 about £130,000)

19. Lloyds, and the recently established Barclay's Bank, now also issue £1 notes.

20 A peculiar feature about Manx notes is that they are payable at all the branches of the Bank.

21 Probably our legislature meant the birthday of the reigning sovereign, but 9th November was enacted, and it was still kept in 1912.(since altered to 3rd June).