City of Glasgow Bank

PP/MS 1/CGB

City of Glasgow Bank

English

In 1857 the City of Glasgow Bank experienced its first crash. Financial difficulties forced the Bank to close on 11 November, with a deficiency of £77,577. Business resumed on 31 December. Mackinnon served as Director of the City of Glasgow Bank from 1858, during which time he worked to extricate the bank from its earlier difficulties. In 1870, finding he could no longer approve the policy of the other directors, he resigned his seat on the Board.

On 2 October 1878, the directors were once more forced to close the doors and the Bank collapsed precipitating one of the most serious crises in modern Scottish financial history. On audit, the estimated balance of loss, including the Bank's capital was £6,200,000. It transpired that balance sheets had been falsified over a number of years. The Bank had been a major lender to the Racine & Mississippi Railroad (later Western Union) and when the collapse occurred, the Railroad owed over one million pounds. Hundreds of Glasgow firms folded as a result of the crash, and many shareholders faced bankruptcy, as liability was unlimited. The directors were tried for fraud at the High Court in Edinburgh in January 1879.

Following the crash in 1878, the Bank's liquidators brought a claim against Mackinnon in the Court of Session for about £400,000, in connection with advice he was said to have given on American railroad securities. After protracted litigation, Mackinnon was completely exonerated by the Court when it was demonstrated that the course taken by the Bank's directors was contrary to his express advice.