The Ayr Bank failure: why did confidence collapse in 1772?

The collapse of the Ayr Bank in 1772 formed part of a wider period of British credit stress. The Ayr Bank is a reminder that aggressive expansion existed long before modern finance.

Funding can feel easy right up to the moment counterparties step away. The bank's operations reflected ambitious lending and funding practices vulnerable when counterparties lost confidence.

Losses were transmitted through connections among borrowers, merchants and other financial institutions. Connections between firms transmitted the shock beyond a single balance sheet.

Modern labels such as too big to fail can obscure how different eighteenth-century legal and banking structures were. Modern catchphrases don't quite fit eighteenth-century legal realities.

What mattered most in the crisis: reckless expansion, lack of liquidity or interdependence among firms?