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Pre-Famine Ireland: Social Structure Copyright © 2000 by Desmond Keenan Hard copy of book available from and

Chapter Seven

                          Financial Institutions

Summary of chapter. All economies except the most primitive depend on an accepted and stable currency and currency of means of exchanged. In developed societies this usually takes the form of a papers currency and paper instruments. To develop and handle these banks were developed. The banking sector was not well developed at the start of the century, but with the introduction of joint-stock banks, it spread over the whole country. Savings banks and Loan Fund Societies helped the poorer people.               

(i) The Currency

(ii) Banks and Banking

(iii) Other Financial Institutions

(iv) Note on Coinage


i) The Currency 

            The Irish currency remained separate from that of Great Britain until 1826. By currency is here meant notes, coins, and tokens, used as a medium of exchange. (A money or credit system of a kind existed in crofter society in the form of 'obligations' to repay days of labour, creels of turf, baskets of potatoes, and such like.) 

            The Irish currency was based on the pound sterling but was only loosely connected with it. Irish notes and coins had the same denominations as their British counterparts, though their respective values fluctuated with the exchange rates. Currency transactions for an essential part of foreign trade, and the imposing Royal Exchange (now Dublin City Hall) was built to house them. English banknotes were not legal tender until 1836. British coins were widely used and were legal tender after 1816, the Lord Lieutenant, Talbot, clarifying the matter by proclamation in 1820.  He declared that the British sovereign, first minted in 1816 at the time of the general re-minting of the coinage, the British crown, the British half-crown, and the British shilling had the same value everywhere in the United Kingdom. 

            Up to 1826 the value of Irish notes and coins continued to fluctuate with the exchange rate, but that was not the only difference between the currencies. Irish coins had a nominal value of twelve thirteenths of the corresponding British coin. This came about in this way. The Irish penny had been long established by royal decree as being equal in value to one thirteenth of an English shilling instead of one twelfth. The Irish shilling consisted of twelve Irish pennies, and the other Irish coins, the half-crown, and the five and ten penny pieces were also based on the Irish penny. The Irish pound, at par, was therefore worth 18 shillings and 5½ pence in sterling, that being twelve thirteenths of the pound sterling. Ireland had no gold coins, nor any silver coin above the value of the half-crown (two shillings and sixpence, being an eighth of a pound). There was an Irish half-penny but no Irish farthing. Early in the eighteenth century, foreign coins were used to supply for the lack of higher denominations, but these had been replaced by British and Irish coins. Ireland, like Scotland, used paper money widely. Notes used instead of silver coins were called 'silver notes'.  Irish coins traditionally had a harp on the reverse side. Some new Irish coins were minted when George IV came to the throne, the last Irish coins to be minted for over a century.[Top] 

(ii) Banks and Banking 

            Banks have several advantages. They provide a usually safe place to keep money. From this flows the possibility that if two people have accounts in the same bank payments can be made by entries in a book, without having to move the money physically. Next, a man can settle accounts without going to the bank simply by writing notes  (cheques, checks) directing the bank to pay out so much to named persons, or the bearer of the note. This note can further be made over to a third or fourth party by endorsement, i.e. writing his name on the back. If there is more than one bank in a town they can tot up the credits and debits between themselves so that only the difference has to be carried between them in gold or notes. 

             The bank can also issue 'silver notes' at face value which are a promise to pay that sum in silver when it is presented.  

            The banker too can make money by lending out money at interest from his vaults. This he does by issuing notes representing loans from the bank at a discount, which have to be repaid in full on a specified date. These notes can be passed from hand to hand and can be counted as currency. The notes issued at a discount (loans) were the profitable part of the bank's operations. 

            The amount of loans issued by a bank exceed the amount of cash in hand by a considerable amount, it having been observed that on average only a fraction of the depositors are likely to withdraw their deposits from the bank at any given time. Just enough money is held by the bank to cover normal demands on it. Banks thus multiply the amount of savings that can be used for trading purposes or investment. The borrower had to give a security to the bank and this seems to have been invariably in the form of a mortgage on real property. 

            The whole system depends on the public having confidence that their money is safe in the bank. If all try to withdraw at the same time there is likely to be a loss of confidence in the bank. An attempt by most people to withdraw their money is called a 'run on the bank'. This is liable to be followed by a collapse of the bank, and all the notes issued by the bank are then worthless. A well-managed bank could have sufficient assets in property, cash reserves, and outstanding loans to meet all demands eventually, but still be unable to meet demands if there was a sudden run on it, and it could become bankrupt. In such a case, as with Newport’s Bank all depositors and creditors eventually get their money. 

            A sound banking system is an essential part of any developed economy. In parts of Ireland in the early nineteenth century the collapse of a bank could bring trade in an entire region to a standstill. So the development and maintenance to a sound banking system was very important for the Government. At the beginning of the century the system in Ireland was still quite imperfect. This state of affairs was largely due to a hostility in the Irish Parliament towards bankers. (Irish MPs seemed to have feared the excessive creation of credit which would destroy the currency and the economy; that one large bank would drive all the others out of business; and that a merchant who was also a banker could drive his competitors out of business.) 

            A charter had been granted to the Bank of England at the end of the seventeenth century (1694), and many people felt that a similar bank should be established in Ireland. The Irish Parliament however rejected the proposal in 1721. Banking was left to private individuals, and the Irish Parliament was determined that bankers should not form an important part in the economy. It therefore failed to enact laws to promote safe banking to develop trade and protect the public. 

            No merchant was allowed to establish a bank, and the number of partners who might join to form a bank was severely restricted. On the other hand, no laws were passed to regulate the business. Anyone with a shop-front and a few boxes could open a bank. In the eighteenth century a captain of dragoons with no money at all opened a bank and within two years had issued notes of credit (with the interest payable to himself) to the extent of £490,000.   The bank failed and all his depositors and all who held his worthless notes lost their money. 

            There was no provision in Irish law to protect creditors. The first person to demand his money filed a suit of bankruptcy in the courts to get it. The other creditors then filed suits as well. It was necessary to act speedily for those furthest down the list with their claims might get nothing.  

            If the bank could not meet all claims the proprietors were declared bankrupts by the court. They could not be imprisoned for debt, but suffered some civil disabilities. Creditors however usually tried to hold a meeting so that whatever assets the bank owned could be realised and shared out.  But the bank had to cease trading even if it had sufficient assets to pay all its debts. This happened in the case of Newport's bank in Waterford, owned by the family of Sir John Newport. It was one of the earliest of Irish banks, dating from the beginning of the eighteenth century, safely and conservatively managed by the family for over a century. It was declared bankrupt around 1820 because of a temporary inability to find ready cash for payments. A reform of Irish banking was clearly necessary. Some securities to enable banks to avoid closing their doors and consequently being declared bankrupt when there was a temporary run on the bank were required. 

            There was only one joint-stock bank. In 1784 a Bank of Ireland had been established by charter. It was of benefit to the merchants of Dublin and to the Government, but it failed to establish branches in the rest of Ireland, even though it was the only joint-stock bank allowed in the country. It acted as banker to the Irish government, managed its finances, received the taxes paid in, and made payments on behalf of the Government. It also managed the national debt and made loans to the Government. Its first charter was for ten years but was continually renewed. The debates in Parliament at the time of each renewal enabled Parliament to scrutinise Irish banking in general. (The exclusion of Catholics from directorships had no connection with banking as such. Catholics could be and were private bankers.) 

            The number of private banks fluctuated wildly, though the fact that a bank was wound up did not necessarily mean a loss to depositors. In 1800 there were 10 banks, in 1803 30, and in 1804 50 (Marmion). In that year when the Irish Government tried to restrict the excessive issue of notes by making banks register themselves 60 banks did so. By 1812 all but 19 of these had disappeared, though others had been founded. They were all small affairs, being owned and managed by an individual or a small number of partners. They were mostly confined to one town, though at one stage Ffrench's bank in Galway city had a branch. The larger towns and cities had more than one bank. The business of a particular bank could be extensive, and its notes could be used over an entire province.  

            Each person dealt only with his own bank. The banks were entirely independent of each other, and each local bank stood or fell by itself. There was no clearing scheme. The notes issued by a bank could only be dealt with by the bank that issued it. (This latter point remained true to some extent even after branch banking was developed.) There was no system of reserves. Nor was there any central reserve, or even an insurance scheme, from which a bank in difficulties could get assistance.  

            Nevertheless banking, in good times, was profitable The legal rate of interest was 6%, but the Bank of Ireland was restricted to 5% in most cases. Its large and secure loans to the Government were made at 3½%. The actual interest charged by private banks because of additions to cover contingencies was said to be 8%, or in some cases as much as 12% (DEP 30 Jan 1806) 

            The young Robert Peel arrived in Ireland about the time of the collapse of the bank of the Catholic Lord Ffrench and his brothers. This, at the time (1814), was the only bank in the whole of Connaught, and most of the commerce of the province was carried on by means of its notes. The whole of commercial activity in the province came to an abrupt halt when the bank was forced to close its doors. Distress was widespread. Peel was profoundly affected by the distress and developed an interest in sound banking. Later as chairman of a Parliamentary Committee on banking, as Home Secretary, and as Prime Minister, he was well placed to regulate the banks in Ireland as well as England and Scotland. 

            Peel became Home Secretary in 1822 and continued the reorganisation of Irish banking begun by the Irish Government under the Marquis Wellesley. He abolished the restriction on the number of partners who might join to run a banking business, and allowed banks to be joint-stock companies owned by an unlimited number of shareholders. The effect of this was to allow the amount of capital held by the banking company to increase vastly. Secondly, each bank was compelled to hold a considerable amount of money as reserves to deal with any reasonable crisis. There was no question of restricting loans to a one-for-one ratio: multiple loans could still be made against the bank's assets. All was required was that the reserve kept in the bank be adequate. Unlike in England, Peel did not require that the reserves be held in gold. Nor, again unlike in England, did he forbid the issue of 'silver notes' by the individual banks. A similar exemption was given to Scottish banks, and all the Irish and Scottish banks issue their own paper money to this day as a form of advertising. 

            A decade later, a third security for the bank's creditors was added by the Bank of Ireland when it took on the role of lender to the other banks, being prepared if necessary to import bullion in times of banking crises. Ireland thus acquired a very stable banking system. 

            Peel also dealt with the monopoly of joint-stock banking held by the Bank of Ireland. Since about 1820 the Irish Government had been having amicable discussions with the directors of the Bank of Ireland with regard to this, and the directors heartily concurred with the Government's proposals. The Bank's monopoly was to be restricted to an area within fifty Irish miles (sixty four statute miles) from Dublin. It was allowed to augment its capital to £3 million Irish, and payments to the Government could be made in its notes. An Act had been passed in 1821 to allow this but it was defectively worded, and an emending Act was passed in 1824, and it is from this latter date that joint stock banking in Ireland dates. The Bank of Ireland was to remain the Government's banker, though its responsibility for managing the National Debt had ended in 1817 with the merging of the Exchequers. It was allowed to open branch banks in towns within the fifty-mile limit. (Similar legislation was then passed for England and Scotland.) The note issue of the Bank of Ireland in 1803 was £2,600,000 but the directors argued that this was merely compensating for the enforced absence of gold coins.  In 1821 the note-issue was £5,182,600 

            The first joint-stock bank of issue (i.e. with the right to issue notes repayable on demand) to open its doors under the new system was the Northern Bank in Belfast which opened in 1824 immediately the Act was passed. Much more important for Irish banking was the opening of the head office of the Provincial Bank in London. It opened in London in order to attract capital and expertise in management but its intention was to open multiple branches in Ireland. The directors aimed from the start to acquire a working capital of one million pounds. The Provincial Bank therefore probably counts as the first major capitalist enterprise in Ireland. It is true that the canal companies collected large sums of money, but they tended to raise it piecemeal over twenty or thirty years, beginning with smaller sums and raising more when a return of previous investment was coming in. (A bank, the Hibernian Bank, was formed in Dublin by Catholic gentlemen many of whom were connected with the Catholic Association, apparently believing that it would be allowed to issue notes. It continued much as a private loan-issuing bank, and was very profitable.) 

            The branch system was itself conceived as a further security for the general public. It was being advocated at the time by Thomas Joplin (DNB) as the proper way to run banks. As conceived by him each branch was to be separate with its own local board of directors. Customers would still deal only with their own local branch to which they would belong, nor was any formal system of clearing between branches considered. (Though not strictly liable, in practice, branches paid out on notes issued by other branches.) Each branch would also maintain its own reserve. The local directors would supply local knowledge.  But the central board of directors in London would give advice on prudent banking, supervise the running of the branches, and provide a general reserve. As originally conceived it was more like franchising than branch banking as we know it, but the system developed over time. Most of the other Irish banks developed their own system of branching. All but two of the branches of the National Bank, those in Clonmel and Carrick-on-Suir, consolidated their stocks in 1837.   

The joint-stock banks spread rapidly, and though partnerships banks continued they sank to the level of moneylenders. For example, by 1834 the Bank of Ireland had established 14 branches within fifty miles of Dublin. The Provincial Bank by 1836 had 33 branches, while the National had 14. In that year there were 37 branches of banks in Ulster, twenty three in Munster, 17 in Leinster, and 12 in Connaught (DEP 19 Aug 1834, Marmion). 

            The management of Irish banks in the first half of the century was cautious, but not unnecessarily so. Of the several banking crises which hit England between 1825 and 1850 only that in 1836 had a major effect in Ireland, and in that case the Bank of Ireland moved to provide sufficient reserves. The Irish bankers shared a belief with the Government in 'sound money', and credit was arranged so that the money supply expanded with the needs of the economy. This discipline was necessary, as Ireland was not technically on the 'gold standard’; i.e. its note issue was not necessarily backed by gold. The value of money remained constant even as trade rapidly expanded. 

            There were some politically-inspired attempts to destabilise the banking system by organised runs on the banks. Daniel O’Connell proposed the first but he soon became convinced of the need for good banks and associated himself closely with the National Bank. In 1848 some revolutionaries tried to organise a run but only succeeded in closing down some of the savings banks in which the poorer people kept their savings. 

            In the 1840's Peel again returned to the question of banking, but few further regulations were needed for the Irish or Scottish banks. The fifty-mile limit was abolished thus allowing the joint-stock banks to open branches in Dublin where their provincial customers could do business when in the capital. Joint-stock banks were allowed to continue issuing silver notes but this was henceforth forbidden to the partnership banks. The issue of notes was however limited to what had been issued in the thirteen lunar months before 1846. It amounted to £6,354,000. All notes in excess of that had to be backed by gold. A decade later it was being complained that this limitation was excessively restrictive. The banks as part of their reserves normally hoarded whatever gold was in the country. 

            In 1850 there were 165 branch banks in Irish towns, and by 1910 there were 809 banks. Deposits and cash balances held by the banks amounted to £5½ millions in 1840 and to ten times that amount in 1910 (Lyons). The banking system remained unchanged until the Second World War when the Irish Government established a separate Central Bank to conduct the Government's business, and to regulate banking and the money supply. The Bank of Ireland then became an ordinary joint-stock bank. Later the various Irish banking companies amalgamated with each other to form two large groups, the Bank of Ireland group and the Allied Irish group. The banks in Ulster were acquired by London joint-stock banks and operated as subsidiaries, still issuing the silver notes.[Top] 

(iii) Other Financial Institutions 

            Savings banks were started in Scotland around 1810, and in Ireland, in Dundalk, around 1815. The rather similar Charitable Loans Societies dated from about the same time, one being established in Co. Meath in 1809, though there were earlier attempts to form them. The savings banks were formed to allow workers to put by a little each week so that when work was scarce they would have something to live on. Loan societies, on the other hand, aimed at accumulating a fund of cash from wealthy subscribers that could be loaned out in small amounts at low interest to workers who might need money, for example, to buy tools or a stock of yarn. 

            The Dundalk bank soon collapsed because rumours were put about that it was a swindle. The Belfast Savings Bank opened in 1816 with two clergymen, one of them the future Archbishop Crolly, on the committee of directors. A group of businessmen met to discuss how savings banks could be best regulated and protected by law, and in 1817 Sir John Newport introduced a bill into Parliament. The Savings Banks Act (1817) regulated their affairs for the next thirty years. 

            By 1830 there were 65 savings banks with published accounts in Ireland. They had 15,000 depositors with deposits under £20, and 10,000 with deposits under £50. In 1829 deposits had amounted to £213,000 while withdrawals had amounted to £221,000, but normally the deposits exceeded the withdrawals.  Just before the Famine the average deposit around Cork was £34 which was perhaps equivalent to a year's income of the depositor. 

            It would seem that the savings banks appealed to a rather wealthier class than we would have expected. The Mayo Constitution (6 Jan 1846) published the accounts of the Mayo Savings Bank for the previous year. This bank had been established in 1823 under the patronage of the Marquis of Sligo.  Lodgements were made totalling: 

            £11,384 by 366 'small farmers';
£ 5,925 by 238 'children' (or on their behalf);
£ 3,771 by 144 'domestic servants';
£ 6,877 by 195 'spinsters';
£ 5,484 by 177 'housekeepers';
£ 2,509 by 85 'journeymen or mechanics'
£ 2,005 by 38 'shopkeepers' (who may have preferred ordinary

The deposits for children may have been made to avoid debt-collectors. 

            There were in all 1633 accounts of which 597 were under £20, 781 between £20 and £50, and 186 between £50 and £100. The impression is given that the bank was chiefly used by people like (women) schoolteachers who were paid quarterly. The tradesmen, surprisingly, were poorly represented, and the cottiers not at all. Average (disclosed) savings in the province of Connaught at the onset of the Famine amounted to only two pence per person. 

            During the Famine 24 savings banks closed, but with little or no loss to depositors. Some of the closures may be attributed to the call of the revolutionary John Mitchell for a run on the banks, but others were clearly due to mismanagement. Because of this latter circumstance a Savings Banks Act (1850) was passed. In 1861 the Post Office Savings Bank was started. 

            Loan Fund Societies were more popular with tradesmen in the Thirties and Forties. The interest they charged for 'productive loans' was lower than what was charged elsewhere. They were regulated by a Loan Funds Societies Act (1836). A Central Loan Fund was set up in Dublin administered by gentlemen like the Earl of Fingall and Lord Cloncurry. Its function was to supervise local societies. The Irish Central Board reported in 1846 that it had 255 local societies associated with it whose circulation amounted to £1,779,000. In the following year the circulation was only half that sum, reflecting poor prospects for tradesmen. (It should be remembered that those who were normally paid in cash were little affected by the Famine, but with large sums of money taken up in taxes prospects for expanding trade were small.)

            Loan societies were essentially charitable not commercial institutions, and many of them were run at a loss. But a criticism was often made regarding savings banks as well that they were managed by people like clergymen who had no knowledge of trade or industry, and that the depositors' money was used to erect imposing buildings. The savings banks charged more on loans than the loan funds. Not all loan fund societies were connected with the Central Board in Dublin. Many, especially in Connaught, were connected with the London Irish Reproductive Loan Fund. 

            Pawnbrokers could also legally grant loans at interest. There were 477 of them registered in 1849. The legal rate they were allowed to charge was one halfpenny on two shillings per month that is five shillings in the pound simple interest per annum or 25%. (This is not very different from the interest now charged by credit card companies.) However, as the loans might be outstanding for a considerable time an annual rate of 40% might be nearer the mark in practice. 

            Unregistered moneylenders or gombeen men (from Latin cambium exchange) charged what they liked. An example of a shilling in the pound per week (about 520% simple interest or 1,200% compound interest per annum) was quoted in the Evening Packet (4 August 1842). It is reasonable to conclude from what occurs in primitive societies that the cottier class as a whole was heavily in debt to the moneylenders. Weddings and funerals always needed an outlay of cash and it was unthinkable not to spend it. Despite the nominal exorbitant rate of interest it is unlikely that the moneylenders ever expected repayment or wished for it. The actual return to the moneylender would probably have been much less in most cases than what was demanded, but we have no way of calculating it It was better to have a permanent first claim on any income of the borrower. It is for this reason that taking interest on non-productive loans has always been denounced as usury. 

            Insurance companies existed in Ireland as long as they did in England i.e. from the seventeenth century, for the English companies established branches in Ireland. The principle underlying insurance is one of simple statistics. If 2% of ships and cargoes are lost at sea each year, then all ships and cargoes should be charged a premium of 2% of their value, plus a certain amount of commission to the organiser of the insurance. Rates can then be varied for time of war, the more dangerous voyages, the nature of the cargoes, the ages of the ships, and so on. The rate on ships sailing between Dublin and London in 1793, for example, was 4%. 

            The first native Irish company was established in 1771. Marine and fire insurances were popular. There were six insurance companies operating in Dublin in 1815, and in the Twenties there was a great expansion in the business matching that in banking. Some English companies seem to have established Irish branches because they were prohibited by their own statutes from insuring in the kingdom of Ireland from their offices in London, Norwich, or elsewhere. Otherwise there was nothing peculiar to note about Irish insurance. For political reason, and especially to try to encourage local people to denounce the criminals to the police, damage from agrarian crime was paid for from the local cesses or rates. 

            There seems to have been only one building society in Ireland before 1850, one established in Dublin in 1846. 

            The Dublin stock exchange dates from 1793, in which year some gentlemen associated themselves for the purpose of buying and selling stocks. Before that individuals could sell stocks to each other, and offices dealing with the buying and selling of stocks and shares were opened. It was regulated by an Irish Stock Exchange Act (1799) which however dealt only with Government stock. There were then only three companies in Ireland carried on through the issue of debenture stock, the Bank of Ireland, the Grand Canal Company, and the Royal Canal Company, so most of the buying and selling would have been in public stocks. Besides Government stocks and Exchequer Bills, there were Dublin City bonds, Ballast Office debentures, Paving Board debentures, etc. Debentures, bonds, and Government stocks carried no voting rights, so their owners were not shareholders in the modern sense. 

            By stocks was originally meant the amount an individual contributed to an enterprise. Unlike bonds this contribution was not returnable. But it was saleable. His return was in proportion to his contribution. The term was extended to cover loans from the Government that carried a fixed interest until the debt was repaid. 

            Only the amount of stock authorised by Parliament could be issued. These stocks could be bought and sold. Their price was not their nominal one, but rose and fell according to demand. Shares meant the same thing except that all the units were equal. 

             In 1804 18 different kinds of stocks were being quoted, Government stocks, Treasury bills, Bank of Ireland stock, city bonds, and the canal stocks.  By 1826 the Arigna Iron and Coal Company, the Hibernian Mining Company, several insurance companies, two joint stock banks, the Phoenix Gas Supply Company, and the Irish Manufacturing Company had been added to the list. In 1845 23 Irish railway companies had floated their shares on the Irish stockmarket. It is never clear on what grounds a company floated its shares in Dublin, or in London, or in both. At that time, too, Irish Government stock or loans repayable at the Bank of England amounted to £33,909,000 but it is unlikely that all of this had been raised in Ireland.[Top] 

(iv) Note on Coinage 

            The structure of British and Irish coinages up to decimalization was identical, and remained so even after. Both were based on a silver pound, or pound sterling, in Latin librum, written as L of £. The pound was divided into twenty silver shillings, in Latin solidus written as s. (In France the corresponding livre was divided into twenty sols or sous).  The shilling was divided into twelve pennies or pence, bronze since the seventeenth century, in Latin denarius written as d. 

             The abbreviations £.s.d. indicates pounds, shillings, and pence, as in the form £5.5s.5d, but more commonly in the nineteenth century the form £5 5/5, pronounced five pounds five and fivepence, or five pounds five and five, was used. If there were no pence the form 5/- was used. The halfpenny was pronounced hayp'ney, and the quarter penny called a farthing. There were coins for the guinea, the pound called a sovereign, 10 shillings called a half sovereign, five shillings called the crown, two shillings and sixpence called half crown, two shillings called a florin, one shilling, six pence, three pence, one penny, half penny, and quarter penny called the farthing. 

             Only the pound, the shilling, the penny, the halfpenny, and the farthing were used in keeping accounts, all other coins being reduced to their values in these coins. Before 1817 there was a gold coin called a guinea valued at 21 shillings, but it was replaced by a gold pound coin called the sovereign in that year.  (For reasons of tradition and sentiment the sale of some articles like livestock is still conducted nominally in guineas.)  

            With regard to purchasing power it was regarded that £5 would support a grown man for a year. 

(In 1971 the British and Irish Government simultaneously decimalised their currencies in the same manner. The pound sterling was divided into 100 new pence, and £1 10/- is now written as £1.50. The advantages of the similar and simultaneous decimalization were lost when the Irish Government floated the Irish pound independently. As in the eighteenth century the Irish pound found it’s level somewhat below that of the British pound. Irish coinage is now written as Ir £1.50.)



Copyright Desmond J. Keenan, B.S.Sc.; Ph.D. ;.London, U.K.