Overend, Gurney and Co
Overend, Gurney & Company was a London wholesale discount bank, known as "the bankers' bank", which collapsed in 1866 owing about 11 million pounds (£828 million at 2003 prices). Until events at Northern Rock in September 2007, this was the last run on a British bank.
1800 The business was founded as Richardson, Overend and Company by Thomas Richardson, clerk to a London bill-discounter, and John Overend, chief clerk in the bank of Smith, Payne & Company at Nottingham, with the Gurneys supplying the capital.
At that time, bill-discounting was carried on in a spasmodic fashion by the ordinary merchant in addition to his regular business, but Richardson considered that there was room for a London house which would devote itself entirely to the trade in bills. This, at that time, novel idea proved an instant success.
1807 Samuel Gurney Senior joined the firm and took control of Overend, Gurney and Co. in 1809. The Gurneys were a well known Quaker family that had founded the Gurney bank in Norwich.
The bank's core business was the buying and selling of bills of exchange at a discount. It was well respected, and expanded rapidly, reaching a turnover double its competitors combined. For forty years it was the greatest discounting-house in the world.
Financed the Stockton and Darlington Railway
1825 During the financial crisis of 1825, the firm was able to make short loans to many other bankers. The house became known as "the bankers' banker," and secured many of the previous clients of the Bank of England.
In its financial dealings, the bank was typical of the developing network of credit which helped to propel British industrialization during a crucial period.
As a young man, Gurney's son, Samuel Gurney Junior, joined the bank as a partner
After Samuel Gurney's retirement, an adviser expanded the bank's investment portfolio, and the bank took on substantial investments in railways and other long term investments rather than holding short term cash reserves as was necessary for their role. It found itself with liabilities of around £4 million, and liquid assets of only £1 million.
1856 Samuel Gurney died.
In an effort to recover its liquidity, the business was incorporated as a limited company in July 1865 and sold its £15 shares at a £9 premium. Its difficulties only increased, and it requested assistance from the Bank of England, but it was refused. The bank suspended payments on 10 May 1866. Panic spread across the City of London the following day, with large crowds around its offices at 65 Lombard Street.
The financial crisis following the collapse saw the bank rate rise to 10 per cent for three months. More than 200 companies, including other banks, failed as a result. The bank went into liquidation in June 1866.
The directors of the company were tried at the Old Bailey for fraud based on false statements in the prospectus for the 1865 offering of shares. However, the Lord Chief Justice Sir Alexander Cockburn said that they were guilty only of "grave error" rather than criminal behaviour, and the jury acquitted them. The advisor was found to be guilty. Although some of the Gurneys lost their fortunes in the bank's collapse, the Norwich cousins succeeded in insulating themselves from the bank's problems, and the Gurney bank escaped significant damage to its business and reputation.
See Also
Sources of Information
- [1] Wikipedia