Photo: Bank of Ireland College Green. Following the dissolution of the Irish Parliament in 1801, the Bank of Ireland bought the former Parliament House in 1803 for £40,000. Photo taken during my trip to Ireland in May 2013.
The Governor and Company of the Bank of Ireland
In 1783, a Royal Charter was granted to a group of prominent Dublin merchants and aristocrats led by the La Touche family to establish the Bank of Ireland, which was based on the joint-stock model of the Bank of England (founded 1694) and the Bank of Scotland (founded 1695). The La Touches were Huguenots (French Protestants) who fled to Holland in the 1680s in search of religious freedom. A certain David Digues (also spelt Digges) La Touche joined the army of English King William of Orange and fought in the Battle of the Boyne in Ireland against Catholic King James II. Following William of Orange ’s victory, David Digues La Touche decided to stay in Ireland and launched a fabric weaving business, which became very successful and the family was elevated to the Anglo-Irish Protestant establishment in Ireland.
In 1713, the family founded private bank David La Touche & Son. and it immediately became a trusted banking firm because of its strong financial backing and the La Touche name. The family’s expertise in finance was so well regarded that another David La Touche, a grandson of David Digues La Touche, was elected the first governor of the Bank of Ireland in 1783. In addition, a few other La Touche family members were amongst the biggest subscribers to the new bank’s shares.
Emulating the Bank of England and Bank of Scotland model, the Bank of Ireland was appointed the banker to the Irish government and Irish Treasury. A major function of the bank was the issuance of the Irish Pound and Guinea banknotes. Another main activity of the bank at the time was to discount trade bills of exchange for importers and exporters. In the areas of banknote issue, the bank was allowed a special monopoly status in Ireland by the British parliament until 1821, after which other join-stock banks could issue their own notes provided that they not maintain any offices or branches within a 50-mile radius from Dublin, the most important market in the nation. It wasn’t until 1845 that all monopoly powers of the Bank of Ireland were removed and other note-issuing banks could compete in Dublin. As only the most wealthy families had bank accounts at the time, accepting deposits from ordinary citizens was not an important business of the bank during the first 75 years of the bank’s history.
Ireland at the time was a British colony but with a sort of “home rule” (i.e. governed by a local Dublin parliament that was controlled by the Anglo-Protestant ruling class known as the Protestant Ascendancy). The decades following the bank’s founding were turbulent times in Ireland. After over a century of harsh oppression by the English administration, the Irish rebelled in 1798. Even though Britain quickly suppressed the unrest, it was spooked by the uprising and the wave of revolutions in the United States (1776) and France (1789 – 1799). In 1801, the Parliament of Ireland was dissolved, and Ireland became part of the United Kingdom of Great Britain and Ireland. From this point on until 1922, Ireland was governed directly by the British Parliament. In 1803, the government sold the now vacant Parliament House in Dublin’s College Green to the Bank of Ireland for £40,000 (GBP). Today, this Bank of Ireland College Green is a major landmark and has become a tourist attraction in Dublin.
In 1825, Bank of Ireland’s first offices outside of Dublin opened in Cork, Waterford, Clonmel, Newry, Belfast, Londonderry (now also known as Derry) and Westport. By 1830, the bank’s network had expanded to Armagh, Limerick, Sligo, Wexford and Galway.
The Irish people suffered greatly during the infamous Great Potato Famine between 1845 and 1849, when blight (fungus) decimated the potato crop -- pretty much the sole food source for a vast majority of the Catholic tenant-farmers. Unable to grow their cash crop and food, the destitute farmers were evicted from their rented farms. A million people died of starvation and illness during the famine, and another one million fled Ireland for Britain, the United States, Canada, Australia and New Zealand. Ironically, as primarily the government banker and the bank for the wealthy Protestant landowners, Bank of Ireland didn’t suffer much from the otherwise devastating famine.
In 1860, a special act prohibiting the Bank of Ireland from lending money on the pledge of land (i.e. to make mortgage loans) was repealed, and the bank launched a new line of business. In 1864, the bank began to pay interest on deposits for the first time in its history, in order to attract more capital in the form of deposits. By 1883, the bank had 58 branches across Ireland.
The second half of the 19th century was turbulent times for Ireland. A massive increase in the supply of wheat, corn and meat from the U.S., Canada, Argentina, Australia and New Zealand beginning in the 1870s caused global grain and livestock prices to tumble, and agriculture became much less profitable for both the Irish farmers and the landowners. A grass-root movement by the tenant farmers to withhold rent payments and to boycott their landowners by refusing to work for them and deal with them in any manner became known as the “Land War,” which was surprisingly effective in hurting the fortunes of the Protestant landowners.
Then in 1885, Munster Bank, a major bank based in Cork in southern Ireland, suffered a devastating bank run following allegations of frauds committed by its directors. Munster Bank’s collapse caused panics across Ireland. As a quasi-central bank, the Bank of Ireland advanced emergency funds to some of banks in distress. Munster Bank itself was re-structured into the Munster and Leinster Bank, which in 1966 became part of the Allied Irish Banks.
The English had had a long history of oppressive rule against the Irish Catholics. In the 1650s, the English confiscated a vast majority of the arable land in Ireland from the Catholics for themselves; in the 1720s, the Catholics lost their rights to buy land, to vote in elections and to hold public office in local town councils and in the Irish Parliament; during the 18th century, Britain erected trade barriers on Irish exports; in the 1840s, Britain turned a blind eye to the starving Catholic farmers during the Potato Famine. Even though various Emancipation Acts eventually restored the Catholics’ rights to buy land, to vote and to stand as Members of Parliament (MP) by 1829, the Catholics were too poor to buy the land back from the Protestant landed gentry, plus the dissolution of the Irish Parliament back in 1801 ensured that it’s the British parliament, dominated by the majority English and Scottish MPs, that would determine the governance and affairs of Ireland, not the Irish MPs.
It was under such context that throughout the 19th century, Irish nationalism swelled and political parties and socialist labour groups were formed with the initial aim to press for Home Rule (i.e. to re-establish an independent Parliament in Ireland). But as the British Parliament and House of Lords kept rejecting or delaying successive Home Rule Acts between 1886 and 1914, the nationalists became increasingly militant. Their goal was no longer just Home Rule, but full independence from Britain. The result was first the Easter Rising in 1916, then the Anglo-Irish War (1919 to 1922).
In December 1921, following two-and-a-half years of terror, violence and destruction in Ireland, the nationalists and the British government agreed to a truce and signed the Anglo-Irish Treaty, which in December 1922 officially partitioned Ireland into the Irish Free State (gaining independence from Britain) and Northern Ireland, which opted to remain part of the United Kingdom. Bank of Ireland was immediately appointed as the banker to the new Irish Free State government.
Earlier, in the midst of the Anglo-Irish War, the provisional Irish parliament (known as the Dáil) had founded the National Land Bank in 1919 whose mandate was to offer state-sponsored mortgage loans to the Catholic tenant farmers to acquire land from the gentry landowners. In 1923, this land purchase scheme was transferred to the Irish Land Commission, removing the primary function of the National Land Bank. In 1926, Bank of Ireland acquired the remnants of National Land Bank and renamed its National City Bank Ltd.
Ireland very controversially opted to stay neutral during World War II. Had Ireland gone to the European battlefront, it almost certainly would have come under the command of British army. After finally gaining independence from centuries of harsh British rule, the Irish simply weren’t willing to listen to London so soon again. Its escape from the war devastation, however, didn’t mean Ireland had an easy time in the 1950s. On the contrary, Ireland’s protectionist, agricultural-based economy fared poorly in the post-war industrial and consumerism recovery. Its economy was in such poor state that many disheartened young people left the country, and Ireland’s population suffered a net loss during the decade. Amidst this decade of doom and gloom, the Bank of Ireland in 1958 took over the Hibernian Bank, which was founded in 1825 with backing from the Catholic community.
The 1960s were somewhat kinder to Ireland, as its economy finally became more competitive after years of economic reform. As for the Bank of Ireland, it gained significant market share when it acquired the Irish operations of National Bank Ltd. in 1966. National Bank started out as the London-based National Bank of Ireland in 1836, and counted Daniel O’Connell, the first Irish Catholic to ever win a seat in the British House of Commons, as one of the bank’s founders. In 1856, National Bank of Ireland was renamed National Bank Ltd. and by then had established a significant presence in England also in addition to its core Irish business. By the 1960s, it became increasingly politically unacceptable for a major Irish bank to be based in and controlled from London, and the decision was made to split up the bank. National Bank’s Irish operations were sold to the Bank of Ireland, whereas its British operations were sold to the National Commercial Bank of Scotland.
In 1966, the Bank of Ireland established an asset management subsidiary as well as an investment bank division. Meanwhile, to streamline its operations and governance, all three sister banks Bank of Ireland, National Bank of Ireland and Hibernian Bank were consolidated into the Bank of Ireland Group in 1969.
The bank then set out to provide overseas support for its clients in the 1970s, opening an office in New York in 1971, then in London in 1972, and Frankfurt in 1974. The bank also established offshore banking subsidiaries in Jersey, the Isle of Man and the Cayman Islands.
Banking automation came rather late for the Irish banking sector, and Bank of Ireland’s first PASS ATM machines were only installed in 1980.
Bank of Ireland began aggressive expansion into other financial services in the 1980s, beginning with its 1984 acquisition of the investment shares of ICS Building Society (a mutually-owned mortgage lender), and the 1987 establishment of Lifetime, a life insurance subsidiary. Also in 1987, it acquired a small British bank and transformed it into the Bank of Ireland Home Mortgages Ltd., launching the bank’s mortgage loan business in Britain.
Then in 1988, Bank of Ireland bravely entered the U.S. retail market when it bought the First NH Banks Inc. (of New Hampshire) for USD $370-million, gaining over 50 branches. The bank’s expansion in the New England region continued when in 1991, it acquired the bankrupt Amoskeag Bankshares and the BankEast Corporation, both of New Hampshire, with a combined network of 56 branches. The two banks had become insolvent due to heavy real estate loan losses and had been taken over by the FDIC. In 1994, the bank’s U.S. unit First NH, by now the largest bank in New Hampshire, bought Great Bay Bankshares for USD $53-million.
Between 1988 and 2006, Bank of Ireland also owned a majority stake in Davy Stockbrokers, Ireland’s largest securities underwriter and asset manager.
- In 1996, Bank of Ireland merged its U.S. unit First NH Banks of New Hampshire into the Royal Bank of Scotland’s Citizens Financial Group in exchange for a 23.5% stake of the enlarged Citizens Financial.
- In 1997, Bank of Ireland acquired the freshly de-mutualized Bristol & West Building Society of Bristol, southwest England. South-western England historically and culturally has close ties with Ireland.
- In 1999, Bank of Ireland briefly held talks to acquire British bank Alliance & Leicester plc for Eur 8-billion (USD $8.34-billion). However, the talks ended without a deal.
- Also in 1999, Bank of Ireland sold its 23.5% stake in Citizens Financial Group back to the Royal Bank of Scotland for USD $763-million. The sale marked the exit of Bank of Ireland from the U.S. retail market.
- In 2005, Bank of Ireland’s British retail bank Bristol & West sold its savings and investment business, as well as its branch network to Britannia Building Society. Bank of Ireland retained Bristol & West’s mortgage lending business.
- Following the Irish (and global) housing market bust and credit crisis that started in 2008, the Irish government in February 2009 injected Eur 3.5-billion (USD $4.92-billion, GBP 3.26-billion) into Bank of Ireland’s perpetual preference shares with an annual yield of 8%. The government gained voting rights of 25% of the bank. Bank of Ireland planned to raise Eur 1.5 billion from a rights issue to redeem part of the government’s holdings, limiting the state holding to 15%.
- In July 2011, Bank of Ireland completed a Eur 5.2 billion capital increase. The Irish state’s stake in the bank fell to 15% from 35%. A consortium led by Canadian re-insurer Fairfax Financial and American investor Wilbur Russ injected Eur 1.05 billion into the bank. After the capital increase, the old shareholders were left with 31% of the bank, the bondholders owned 19%, the Irish state, 15%, and the new consortium, a 35% stake.
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