Country bankers

The private goldsmith bankers and the Bank of England were confined to London but, running parallel in development, in the eighteenth century a separate system of banking was developing in the provinces.

The London goldsmiths had made no attempt to expand outside London since trade was flourishing and comfortable compared to midland and northern regions, where transport and communications were not developed.
However, outside London the beginnings of the Industrial Revolution were taking place, which created the need for monetary services. Traders in the north and midlands needed capital for expansion and since in the absence of its supply by London private bankers or the Bank of England, it was left to business men to meet their own needs. The bankers of the country were industrialists, traders, and local revenue collectors; men already experienced in financial transactions.

A great impetus for country banking came in 1797, when the Bank of England suspended cash payments, England being threatened by war. Parliament authorized the Bank of England and country bankers to issue notes of low denomination.

The industrialist banker could assist his own industry since he did not only provide a local means of payment but accepted deposits. Here we have a parallel with the early goldsmith banking.

For the country banks to give an efficient service there was a need for direct links with London to effect payment and avoid the transporting of coin. London held great importance for the country bankers as a money market and an investment center for their surplus income. All bills of exchange and bank drafts were drawn on London, so too were the "London Bill", a form of paper credit, effecting payment between the counties and London.

Important country bankers all had their agents in London.

From 1784 to 1890 the number of banks outside London rose from 119 to 800. In the early 1800's Abingdon with only 4,500 people had three banks; Boston with 7,000 people had six banks and Exeter with a population of 18,000 had seven banks.

The aftermath of the Napoleonic wars at the turn of the century caused uncertainty and depression in the industry, leading to the failure of many banks and rationalization of the system, leaving on the large and more prosperous ones in business.