Amalgamation and Survival in Lancashire Banking

Mark Billings, Philip Garnett, and Simon Mollan

Britain’s commercial banking system had become heavily concentrated by 1920.  Five large London-based banks dominated, having grown through a process of amalgamation in the late nineteenth and early twentieth centuries.  A pocket of exceptionalism remained in northwest England, with a handful of banks with their head offices in Manchester and Liverpool.  These banks had merged or been taken over by larger banks by 1940, victims of interwar depression and the long-term decline of some of their major customers in cotton textiles manufacturing.  This paper explains and analyses this process of consolidation, driven by the Governor of the Bank of England, Montagu Norman.  But the process took much longer than he had anticipated, and did not deliver his initial aim of creating a single large bank to counterbalance the Big Five.  Nevertheless, Norman showed considerable persistence in overcoming the obstacles to reshaping Lancashire banking to secure financial stability. Familiar banking themes are present: the risks of herd-like behaviour and geographical and industry concentration in lending; the key role of the central bank in orchestrating support for weak banks; the dominance of a small number of large ‘too-big-to-fail’ banks; and the tensions between competition, diversification, moral hazard, stability, and trust.