Founding charter, 1727

This document is the birth certificate of the Royal Bank of Scotland. Handwritten in Latin on 22 pages of vellum, it declares that the king has granted permission for a new bank to be founded in Scotland. This was a defining moment in the Royal Bank of Scotland's own history, but also a turning point in the history of banking, particularly in Scotland.

Before 1727, Scotland was like most other European countries in having just one public bank. Conventional thinking saw no value in having any more than that, but in the solemn, respectable city of Edinburgh, something unconventional was about to happen. A group of businessmen and investors decided that Scotland should have two banks.

The arrival of the Royal Bank of Scotland was welcomed by many people in Scotland, who resented what they saw as the restrictive practices of the existing Bank of Scotland, which had been trading unchallenged for over 30 years. They were pleased to put their support behind a fresh new enterprise which might shake up the banking business and force bankers to compete for customers.

This was the beginning of Scotland's multi-bank system

When Bank of Scotland was founded in Edinburgh in 1695, it was granted a monopoly on banking in Scotland, but it allowed the privilege to lapse, probably because it did not expect anyone to challenge its position. By 1727, however, a lot had changed. In the intervening 32 years Scotland had experienced economic crisis, political division, armed uprising and even the loss of her status as an independent nation. Compensation had been paid or promised, development funds were being introduced and businesses were becoming more ambitious.

It was against this backdrop that the new bank's promoters approached the king to ask his permission to form a new bank. The king, possibly influenced by whispers that Bank of Scotland was in league with his enemies, was glad to support the idea, and the Royal Bank of Scotland was born.

This was the beginning of Scotland's multi-bank system, which saw a large number of well-matched rivals competing for the Scottish people's banking business. It was a quite different pattern from the one that grew up in England, where the Bank of England's monopoly ensured that all other banks remained small, limited in scope and vulnerable to collapse until well into the 19th century. Scottish banks became world-famous for their stability and success, and what had begun as an unconventional idea in 1727 became the basis for a globally admired system.