Bank of Scotland

On the 10 September 2001 the Bank of Scotland formed part of HBOS plc, following a merger with the Halifax Group (formerly the Halifax Building Society). The Bank equally owns a 50% stake in Sainsbury's Bank- the other 50% being owned by J Sainsbury plc.

Bank of Scotland History

The Bank of Scotland was formed by an Act of the Scottish Parliament on 17 July 1695, opening for business in February 1696. Although established soon after the Bank of England (1694), the Bank of Scotland was a very different institution.

Where the Bank of England was established specifically to finance defence spending by the English government, the Bank of Scotland was established by the Scottish government to support Scottish business, and was prohibited from lending to the government without parliamentary approval.

The bank also took the lead in establishing the security and stability of the entire Scottish banking system, which became more important after the collapse of the Ayr Bank in 1772. The Western Bank collapsed in 1857, and the Bank of Scotland stepped in with the other Scottish banks to ensure that all Western Bank's notes were paid.

In 1955 the Bank merged with the Union Bank of Scotland. The Bank also expanded into consumer credit with the purchase of Chester based, North West Securities (now Capital Bank).

In 1971 the Bank agreed to merge with the British Linen Bank owned by Barclays Bank. The merger saw Barclays Bank acquire a 35% stake in the Bank of Scotland, a stake it retained until the 1990s.

The merchant banking division of the Bank of Scotland was relaunched as British Linen Bank (now known as HBOS Treasury Services).

In 1959 Bank of Scotland became the first bank in the UK to install a computer to process accounts centrally. At 11 am on 25 January 1985 the Bank introduced HOBS (Home and Office Banking Services) - an early application of remote access technology being made available to banking customers. This followed a small-scale service operated jointly with the Nottingham Building Society for two years, but developed by Bank of Scotland. The new HOBS service enabled customers to access their accounts directly on a television screen, using a Prestel telephone network.

The arrival of North Sea Oil to Scotland in the 1970s, allowed the Bank of Scotland to expand into the energy sector. The Bank later used this expertise in energy finance to expand internationally. The first international office opened in Houston, Texas, followed by more in the United States, Moscow and Singapore. In 1987, the Bank acquired Countrywide Bank of New Zealand (later sold to Lloyds TSB in 1998). The Bank later expanded into the Australian market by acquiring the Perth based Bank of Western Australia.

A controversial period in the Bank's history was the attempt to enter the United States retail banking market via a joint venture with evangelist Pat Robertson. The move was met with criticism from civil rights groups in the UK due to Robertson's controversial views on homosexuality. The Bank was forced to cancel the deal when Robertson described Scotland as a "dark land overrun by homosexuals".

In the late 1990s, the UK financial sector market was a period of consolidation. Many of the large building societies were demutalising and becoming banks in their own rights, or merging with existing banks. Lloyds Bank and TSB Bank also merged in 1995 to create Lloyds TSB. In 1999, the Bank of Scotland made a takeover bid for the NatWest Bank. Given the Bank of Scotland was significantly smaller than the English based NatWest, the move was seen as an audacious and risky move. However, the Royal Bank of Scotland tabled a rival offer, and a bitter takeover battle ensured, with the Royal Bank the victor.

The Bank of Scotland was now the centre of other merger opportunities. A proposal to merge with the Abbey National was explored, but later rejected. In 2001, the Bank of Scotland and the Halifax agreed a merger to form HBOS ("Halifax Bank of Scotland"). The headquarters was to stay in Edinburgh, and both bank's brands would continue to be used.

Since then HBOS has grown to become the fourth largest bank in the UK by market value, and the UK's largest mortgage lender. In Scotland all of the Halifax's branches have been amalgamated with the Bank of Scotland, with the Halifax brand only used for mortgages and savings products. Halifax branches in England have used the Bank of Scotland brand for business purposes.

Gaelic policy

The Bank of Scotland, like the other Scottish banks, historically saw itself as an institution of the lowland Scottish establishment. Although it had a presence in every major Gaelic community, it was still operating exclusively in English in the early 1970s. In 1972, Gaelic activist Iain Noble persuaded the bank to issue him with its first Gaelic (actually bilingual) cheque-book. These have since become popular, and the Royal Bank soon followed suit. Today the bank advertises itself in the Highlands and Hebrides under the Gaelic title Banca na h-Alba.

Corporate Structure

The Bank has several subsidiaries and brands:-

  • Sainsbury's Bank (45%)
  • Bank of Scotland Corporate
  • Bank of Scotland Investment Services
  • Bank of Scotland Private Banking
  • Capital Bank plc
  • HBOS Financial Services Ltd
  • HBOS Insurance & Investment Group Ltd
  • HBOS Treasury Services plc
  • Bank of Scotland (Ireland)
  • Bank of Scotland (Netherlands)

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