Overend, Gurney and Co., a wholesale discount…

The failure of Overend Gurney is the most significant casualty of the credit crisis.

The bank goes into liquidation in June 1866.

The financial crisis following the collapse will see the bank rate rise to ten per cent for three months.

More than two hundred companies, including other banks, will fail as a result.

The directors of the company will be 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 will opine that they were guilty only of "grave error" rather than criminal behavior, and the jury will acquit them, but the advisor will be found to be guilty.

Although some of the Gurneys lose their fortunes in the bank's collapse, the Norwich cousins succeed in insulating themselves from the bank's problems, and the Gurney bank will escape significant damage to its business and reputation.

Overend, Gurney & Company was founded in 1800 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 and Company at Nottingham (which will be absorbed into the National Provincial Bank in 1902), with Gurney's Bank (which will be absorbed into Barclays Bank in 1896) 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 had considered that there was room for a London house which should devote itself entirely to the trade in bills.

This idea, novel at the time, had proved an instant success.

Samuel Gurney had joined the firm in 1807 and had taken control of Overend, Gurney and Co. in 1809.

The Gurneys are a well known Quaker family that had founded Gurney's Bank in Norwich.

The bank's core business is the buying and selling of bills of exchange at a discount.

Well respected, it had expanded rapidly, reaching a turnover double its competitors combined.

For forty years it has been the greatest discounting-house in the world.

During the financial crisis of 1825, the firm had been able to make short loans to many other bankers.

The house has become known as "the bankers' banker", and has secured many of the previous clients of the Bank of England.

After the retirement of Samuel Gurnery, who died in 1856, the bank had expanded its investment portfolio, and had taken on substantial investments in railways and other long term investments rather than holding short term cash reserves as was necessary for their role.

It had found itself with liabilities of around four million pounds, and liquid assets of only one million pounds.

In an effort to recover its liquidity, the business had been incorporated as a limited company in July 1865 and had sold its £15 shares at a £9 premium, taking advantage of the buoyant market during the years of 1864-66.

However, this period has been followed by a rapid collapse in stock and bond prices, accompanied by a tightening of commercial credit.

Railway stocks are particularly badly affected.

Overend Gurney's monetary difficulties had increased, and it had requested assistance from the Bank of England, but this had been refused.