Bank of the Commonwealth of Kentucky

The Bank was chartered by the General Assembly in 1820 to offset the financial instability which followed the War of 1812.

This instability was characterized by massive land speculation and unsecured borrowing, the multiplication of unsound banks, and the creation of more than a hundred different currencies. The speculative bubble burst in the 1819 panic with many Kentuckians facing bankruptcy and demanding help from the state government.

The legislature chartered the Bank to lend money to Kentuckians so that they could pay their debts and purchase local commodities. Its 2 million dollars in capital stock was owned entirely by the Commonwealth.

Ten years later the General Assembly recognized that the Bank had fulfilled its purpose of helping the Commonwealth through the depression. It passed legislation prohibiting the Bank and its branches from making loans. Eventually, all the branch banks were withdrawn, with their records and remaining monies sent to the principal bank. Though bank agents continued to operate in each judicial district, receiving interest on loans, renewing notes on a limited basis, and performing other assigned duties, the Bank of the Commonwealth ceased to function as an active institution in 1830. Over the next 25 years, the General Assembly extended its charter on five different occasions, in order to settle debts and close out its concerns, but beginning in 1855, the ACTS of the General Assembly make no further mention of it.

The principal bank was established in the state capitol, Frankfort. Branch banks were located in the judicial districts at Flemingsburg, Falmouth, Lexington, Louisville, Hartford, Princeton, Greensburg, Mount Sterling, Somerset, Winchester, and Bowling Green.

The Bank at Frankfort could issue notes, receive deposit money, discount bills of exchange, and make loans to Kentucky citizens and the government of the Commonwealth, but not to any corporate body. Money was loaned proportionately to each county based on the amount of state taxes paid in 1820.