The East Lothian Banking Company was founded in Dunbar in 1810. The partners were mainly tenant farmers who were well aware of the 'singular utility and advantage of having a banking company in the County of East Lothian for promoting trade, manufacture, agriculture and industry and facilitating every branch of commerce.'
By far the most important industry in East Lothian was agriculture. Not only was that County 'the most fruitful province in North Britain' and the 'most fertile and finest farming land' that Cobbett had ever seen, but war conditions had acted as an incentive to even greater efforts. Large numbers of troops had been stationed in the County and that influx of population had acted as a spur to the economy. 'The cattle and victuals consumed by the troops was the means of farmers, traders and merchants attaining to moderate wealth, and no wonder they sang with zest: Bonaparte's a friend o'mine, I sell my wheat at ninety nine.'
The prime mover of this bank was Christopher Middlemass. He had been agent for the British Linen Bank in Dunbar until 1808, when he had been dismissed for negligence following a robbery.
In 1822 the East Lothian Banking Company closed its doors because the directors had failed to give that degree of attention to the business required of them. The failure was caused by the disappearance of the cashier, William Borthwick, with the company's funds.
At the close, liabilities were £129,191 and assets £63,186, leaving a deficit of £66,006 for which the partners were of course liable. Only a few of the partners remained solvent after paying the debts of the bank - those who did not lost not only their capital, but an additional call of £250 per share.
The Cashier, William Borthwick, escaped to America. He had been appointed cashier to the newly formed bank at the age of 20 or 22, and was placed in charge of the daily running of the company.
The East Lothian Banking Company had branches in Dunbar, Selkirk and Haddington.
The East Lothian Bank
The East Lothian Bank was begun on 1 June 1810 in Dunbar. It raised capital by issuing 400 shares of £200 each, which were snapped up by the then cash-rich merchants and farmers of East Lothian (who were greatly profiting from good prices and exceptional sales on the back of the wars with Napoleon's France!). The Board of Directors recruited William Borthwick from a similar regional bank in Falkirk as Cashier - essentially the chief operating officer of the business. Agents and tellers were appointed in Haddington, Selkirk and elsewhere as the bank got into its stride.
For a while all went well. The Bank circulated £1 and £5 notes - the collections have examples of both - as well as their own cheques and other documents. The quantities of documents that have survived both in the archive and museum collections (as well as in the hands of collectors) suggest that a considerable amount of business passed through the Bank. But signs that the Bank was overreaching did begin to appear, although these may have been hidden from the Board.
Borthwick and his brother began to develop other interests in Belhaven and one suggestion was that they may have diverted funds without authorisation from the Bank to support these concerns. However it happened, Borthwick disappeared on 10 April 1822 and a gaping hole in the Bank's finances was quickly apparent. The Bank closed immediately. The Board and partners (shareholders) rallied round and obtained a credit line of £100,000 secured over their own property, and an Edinburgh accountant was appointed to wind up the Bank. This took over twenty years to unravel all the strands but by the 1840s all the creditors were paid in full!
HISTORY OF EAST LOTHIAN BANKING COMPANY 1810
The East Lothian Banking Company was established on 1st June 1810 on which date it commenced business in Dunbar. The main mover in establishing this bank is thought to have been Christopher Middlemass who was not only a well-respected local dignitary but was also an experienced banker, having been employed in the town as agent of the British Linen Company in 1808, when he was dismissed for negligence following a robbery of the British Linen Company office.
The initial contract of co-partnery for the East Lothian Banking Company was for 21 years; the capital £80,000, in 400 shares of £200 each. There were 27 Partners, chiefly small landed proprietors or tenant farmers; 9 ordinary Directors and 3 extra ordinary Directors.
The Cashier was William Borthwick who was recruited from the Falkirk Union Banking Company. On 10th April 1822 Borthwick absconded with a large sum of the Bank's cash and bills with this resulting in the closure of the Bank.
The then Edinburgh agents – Sir William Forbes, James Hunter & Co. – assisted the directors in their difficulty and provided credit of £100,000, on ample security over the Partners' estates, until the Bank's assets could be realised. Mr William Paul, Accountant, Edinburgh was appointed to assist a committee of Partners in the winding up of the Bank. This took many years (actions still seen in the 1840s) although all Creditors were paid in full.
William Borthwick was recruited by the Directors of the East Lothian Bank at the outset of the business and moved from his employment with the Falkirk Union Banking Company to take up the position of Cashier. There is some doubt as to his age at the time of the appointment although it is thought he was in the region of 20 – 22 years of age. His youth for such a position is thought to be reflective of the general lack of experienced Scottish bankers as a consequence of many having been recruited by other Scottish, UK and International banks. Borthwick's responsibilities were considerable with the Directors (mostly lacking any banking experience) leaning heavily on him. It is thought that his role was sound in the early years.
Much can be found on his stated intention to kidnap the Directors of the Bank; to imprison them in air-holed vessels and to then set them off on a trade ship to Danzig although whether these comments were a true intention or not is difficult to say. It is certain that he (either alone or with an accomplice named Goudie) removed cash and bills from the Bank and departed in 1822. It is very likely that the economic climate of the time was causing other businesses in which he had an interest (with his brother, Bruce Borthwick) financial difficulty and that William Borthwick was propping up these businesses using the Bank's funds. When he could support this no longer he fled. There is some debate as to whether he ever stood trial for the offence although it is known that he was arrested in South America. John Aitken, a bank official, is credited with being the author of the following poem which appeared soon after the failure of the Bank.
Touch of the Times
A sad confusion has happened here,
By William Borthwick our cashier,
He's run away with a' our gear –
A roguish turn.
Which many ane, I am apt to fear,
Have cause to mourn.
First, Mr Goudie he maun thole,
To site awhile in yon dark hole,
With no window, but a bole
With Iron gate;
Nae doubt he'll think it e'en right droll
In sic a state.
Next, monie a farmer, far and near
Who had lodged in her their pennie dear,
Which they had gathered thro the year,
With the intent,
When terms came their lands to clear,
And pay the rent.
There's monie ane will suffer loss,
But what it may be in the gross,
To state it fair, I am at a loss.
Till the conclusion,
I fear they may draw a black cross,
Through eighty thousand.
But yet, I think some are to blame
To let Will Borthwick play such game;
Sure they some better care should ta-en
To search things out,
Which would have saved them meikle pain
You need not doubt.
But now he's fled and left them a'
It's said he's off to America,
If he got there the feint a flaw
He'll care for ane.
He'll be fu' safe, by Yankee law,
In his new hame.