The origins of banking in Britain lie with the goldsmiths of 17th century London. They began branching out from their traditional business to offer their customers very simple banking services. Over time, they invented many of the fundamental tools of finance, such as banknotes and cheques. Among this first generation of goldsmith-bankers was our constituent Child & Co, which traces its origins back to the 1580s.
Outside London, other businessmen and merchants imitated the goldsmiths, and began setting up banks of their own. Thomas Smith of Nottingham is usually credited as the first English provincial banker. His bank grew out of his cloth merchant’s business from the 1650s onwards. After centuries of trading independently, it eventually became what is today known as Nottingham Smiths branch of NatWest.
In Scotland, meanwhile, other business developments were taking place, starting a chain of events that would soon lead to the foundation of the Royal Bank of Scotland. In 1695, a group of investors tried to set up a Scottish trading colony at Darien in Central America. The terrible failure of their venture cost Scotland 2,000 lives and a quarter of her entire liquid wealth. It also became a major contributing factor in Scotland’s acceptance of political union with England to form Great Britain in 1707.
The terms of the 1707 Union between England and Scotland included compensation to be paid to Scots for the money they had lost in the Darien disaster of the 1690s. A company was formed to manage the payments, and it soon found that it had spare money to invest. Its directors had the idea of starting a bank, and petitioned the king for his approval. In 1727 a royal charter was granted, establishing the Royal Bank of Scotland.
Scotland already had one bank – Bank of Scotland – but the trading monopoly it had been granted at foundation had lapsed, creating an opportunity for the new bank’s promoters. The situation was very different in England, where the Bank of England’s monopoly held firm. This meant that other banking businesses were only allowed to be small local partnerships; they could not become the kind of large shareholder-owned enterprise that might increase competition in the sector. This was the beginning of England and Scotland developing very different banking systems from each other.
The middle years of the 1700s were tense times in Scotland, putting significant strain on the fledgling Royal Bank of Scotland, not least in the Jacobite rising of 1745. Nonetheless, the Bank pulled through, and later decades saw less open conflict. Scotland’s prosperity grew, and Edinburgh became a hotspot of the European Enlightenment. Local luminaries such as Adam Smith, David Hume, Henry Raeburn and James Hutton led Enlightenment thought in their respective fields, and all were friends or customers of the Royal Bank of Scotland.
In England, meanwhile, different laws governing the banking sector still required all banks other than the Bank of England to be small, local enterprises with no more than six partners. In many cases it was these banks that went on to become part of NatWest, and therefore represent our earliest origins in towns and cities such as Bath, Bristol, Derby, Leeds, Lincoln and York.
Until 1783 the Royal Bank of Scotland traded only from Edinburgh, but in that year it opened its first branch-office, in the fast-growing city of Glasgow. Already a major port city, Glasgow was poised to become a key centre of manufacturing too. The Royal Bank’s new branch helped to provide the finance needed by businesses to maintain trade and fund capital investments. Within two decades, the Glasgow branch was conducting more business than head office in Edinburgh.
In other cities, too, the industrial revolution was transforming trade, business and ordinary life for thousands of people. Industrial cities began to grow, fuelled by local banks that eventually became part of our banking family, such as Heywood Brothers of Manchester and Sheffield & Rotherham Bank. Among their customers were many important local entrepreneurs, including inventors and cotton spinners like Richard Arkwright and Robert Owen.
New banks were being founded in towns and cities all over England and Wales. Under the terms of the Bank of England’s continuing monopoly, they were limited to no more than six owning partners, usually local businessmen. This made them much more vulnerable in difficult times than Scotland’s big shareholder-owned banks, particularly because the partners were often in the same industry as each other. The economy was volatile in this period, with many slumps as well as booms, and although some partnership-banks weathered these storms and survived for generations, others existed for only a few years before collapsing.
In the early years of the 19th century England suffered a succession of financial crises, the most devastating of which, in 1825, ruined 60 banks. In an effort to increase stability, the government changed the law to permit the formation of so-called ‘joint stock banks’; larger shareholder-owned banks like those that already existed in Scotland. The first sizeable example of the new banks was Lancaster Joint Stock Banking Company, established in 1826 and later to become part of NatWest. Within a decade, there were almost 100 such banks in towns and cities across England, Wales and Ireland. Among them were Ulster Bank (established 1836), as well as National Provincial Bank of England (1833) and Westminster Bank (1836), which would eventually merge ‘Nat’ and ‘West’ to become NatWest.
By the mid-1840s, the contrast between the banking systems in different parts of Britain and Ireland was already well-established, but the gulf was widened by legislation in 1844 and 1845. In England and Wales, the new law was destined to bring a gradual end to banks other than the Bank of England issuing their own paper currency. In Scotland and Ireland, however, the new law had different terms, which made it easier for banks to retain their banknote issues. The Royal Bank of Scotland and Ulster Bank have continued to do so to this day.
In 1864 the Royal Bank of Scotland made its first acquisition, buying Dundee Banking Co. A decade later it made its first move into London, increasingly a key centre of international business and finance. Its first office there opened in 1874.
The bank also began expanding its branch network more enthusiastically, catching up with other Scottish banks that had always aspired to large, widespread branch networks. By 1890, the Royal Bank had 134 branches across Scotland.
Our English banks’ branch networks were growing too. In 1890 the two biggest had around 165 branches each. Our family tree also includes around another 80 smaller banks that were still independent in 1890, but eventually became part of NatWest or the Royal Bank of Scotland.
In many towns and cities, this is the period in which banks built smart, imposing premises. These were often among the most striking buildings on the high street; bricks-and-mortar statements of permanence and prosperity. Today, many of these buildings remain precious parts of our shared built heritage.
This is also the period in which Scottish bankers developed a worldwide reputation for hard work, diligence and excellent knowledge, and many were recruited to work in banks in America, Canada, Australasia and across the English-speaking world. Most Scottish banks developed a habit of training many more apprentices than they needed for their own business, knowing that these young men would be in demand elsewhere. As a result, banking across the globe developed a distinctly Scottish accent; in Canada, for example, two thirds of all bank employees in 1912 were Scottish-born.
By the end of the 19th century and the dawn of the 20th, the emergence of bigger banks, with large branch networks and sizeable capital, was making small local banks less viable. Many merged with larger competitors, leading (in England and Wales) to the emergence of the 'Big Five' dominant names, two of which eventually became part of NatWest. Meanwhile, supporting international trade became a greater concern for banks.
The outbreak of the First World War in 1914 brought new challenges. Banks were called upon to sell and support government war loans and comply with wartime trading controls, and also had to cope with staff shortages. To keep banks running while men were away on active service, women were employed in large numbers for the first time. Although many of them left after the armistice, banking would never again be an all-male profession.
Another workplace revolution was taking place at the same time. Machines were arriving in offices everywhere. In banks, typewriters and adding machines became popular, permitting machine-accounting, the systematic generation of bank statements and the handling of ever-growing numbers of accounts without needing a simultaneous increase in staffing.
By the 1920s competition for customers was becoming more intense. Banks, particularly in England, had previously focussed on attracting relatively well-off customers, but now they began to court smaller savers. They introduced ‘home safe’ accounts with special savings boxes aimed at children and other small savers who could only afford to save a few coins at a time. For many people, this was their first experience of dealing with a bank, and of having easy access to savings services.
The outbreak of the Second World War in 1939 – just like the First World War a generation earlier – brought many new problems and responsibilities for banks, including supporting the war effort and keeping the economy running as smoothly as possible, while simultaneously coping with staff shortages as men went away to fight. In addition, many bank branches were damaged or destroyed by enemy bombs.
Austerity and economic hardship persisted for years after the end of the war in 1945, but Britain and its banks gradually returned to prosperity.
In the 1950s and 1960s new services were introduced, including mobile and drive-in banks, personal loans, innovative savings schemes and the earliest forms of cash machine.
In 1969 The Royal Bank of Scotland merged with another of Scotland’s biggest banks: National Commercial Bank of Scotland. A new holding company was created to manage the merged company's numerous bank brands, and in 1970 the businesses trading in England and Wales were united to form Williams & Glyn's Bank. One of the most visible outcomes of the reorganisation was the introduction of the daisy wheel brand which still represents the Royal Bank of Scotland today.
Meanwhile, change was also afoot among the English banks. In 1970, three of the best-known names – Westminster Bank, National Provincial Bank and its subsidiary District Bank – merged to create NatWest. It, too, introduced a new brand mark that continues to represent NatWest today.
Before 1980, the technological revolution in banking had largely been in back offices, changing the way account information was held and processed. In the last two decades of the century, however, the revolution became customer-facing, with the introduction of telephone banking in the late 1980s and internet banking in the late 1990s.
Banks became more focused on tailoring services to specific customer needs, with the introduction of accounts aimed at specific markets, for example students or children. Perhaps the most famous example of the latter was NatWest’s phenomenally popular piggies savings account for children, launched in 1983.
In 1985 Williams & Glyn's Bank and the Royal Bank of Scotland, both already part of the same banking Group, were fully merged under the Royal Bank name, creating Britain's first truly nationwide high street bank.
In the early 1990s the corporate structure of the Royal Bank underwent a major reorganisation. The bank refocused on its core business of retail banking and set about building a platform for future growth. In 1993 it acquired the Edinburgh-based private bank Adam & Company.
In 2000 RBS Group announced the acquisition of NatWest, in a £21bn deal – at that time the largest in British banking history. The combined Group continued to operate a number of separate banking brands, including the Royal Bank of Scotland, NatWest and Ulster Bank.
In the years after NatWest joined RBS in 2000, the Group grew rapidly. In 2007 it was part of a consortium which acquired the Dutch bank ABN AMRO. Soon afterwards, a crisis in global financial markets and deteriorating economic conditions across the world weakened many financial services organisations. This situation was made worse for RBS by strategic decisions that were subsequently shown to be bad mistakes. RBS became highly vulnerable to the downturn and as a consequence became part owned by the government in 2008.
Since that time the Group has worked to rebuild resilience, trust and shareholder value. The business has been extensively reshaped to focus on serving our customers, championing potential today and for the future. In 2020 the Group’s name was changed to NatWest.