The terms of the 1707 Union between England and Scotland included compensation to be paid to Scots for the money they had lost in the Darien disaster of the 1690s. A company was formed to manage the payments, and it soon found that it had spare money to invest. Its directors had the idea of starting a bank, and petitioned King George I for his approval. In 1727 a royal charter was granted, establishing The Royal Bank of Scotland.
Scotland already had one bank – Bank of Scotland – and in the years after 1727 there was a bitter rivalry between the old and new banks. In a series of financial skirmishes known as the ‘note wars’, each bank tried to bankrupt the other by hoarding and then presenting for payment large quantities of its opponent's banknotes. Neither bank succeeded in inflicting a fatal blow, and as the years went by, each came to accept the other’s presence.