The City of Glasgow Bank lent its way to ruin and took 1,200 shareholders with it

The City of Glasgow Bank was founded in 1839 and became one of Scotland's largest joint-stock banks. For years it reported healthy profits and paid reliable dividends. Behind the accounts, however, the directors had made large, speculative advances to a handful of borrowers, including the Racine and Mississippi Railroad in the United States. When those loans turned bad, the bank did not write them down.

Instead, the directors falsified the balance sheets and kept the dividends flowing. The appearance of stability attracted more capital from shareholders, most of whom were personally liable for the bank's debts under unlimited liability. In October 1878 the facade collapsed. An examination revealed that the bank's capital and reserves were wiped out and the deficit stood at roughly £6.2 million.

The bank closed its doors on 2 October 1878. Hundreds of Glasgow firms failed, and most of the bank's shareholders were ruined. Several directors and the general manager were tried and imprisoned. The case became the largest commercial banking failure in Britain before the twentieth century.