When Ireland’s Banks Closed, Cheques Kept Circulating

David Russell

What We Trust: Six true stories about money, ownership and survival is a six-part GoldCore Friday Read series that uses episodes from financial and social history to explore what money is, what ownership means, why intelligent people speculate, where wealth becomes safe, and what we are ultimately trying to preserve.

On Friday, 1 May 1970, the doors of Ireland’s main banks did not open. A dispute between the Associated Banks and their employees had reached an impasse, and what might normally have been a temporary inconvenience became an extraordinary six-and-a-half-month experiment.

The affected banks formed the backbone of the Irish banking system. They operated hundreds of branches and held roughly 60% of the country’s bank deposits. Without them, cheques could not be cleared in the usual way, deposits became difficult to access, and businesses could no longer assume that the machinery of payment would operate in the background.

Heading into such a period, one might have expected economic life, and the system that supported it, to seize up. Instead, it did not.

People continued writing cheques and life carried on. Shopkeepers accepted those cheques, and suppliers passed them on. Publicans, who knew a remarkable amount about the financial habits of their customers, became informal assessors of credit. A cheque drawn by a reliable employer or signed by someone known locally could circulate as though it were money, even though nobody could say precisely when it would finally reach a bank and be settled.

In a world where payment systems are usually invisible, the strike made them visible by removing them. The ordinary routines of payroll, settling invoices, and moving money between accounts suddenly depended on whether people could keep extending one another credit.

This was not because Ireland had dispensed with money. Rather, the situation revealed what money had been resting upon all along.

We often imagine that money derives its authority from the institution whose name appears on it. A banknote is trusted because a central bank issued it, deposit is trusted because a regulated bank records it, and a payment is trusted because the banking system confirms that it has been made. Yet beneath all these arrangements sits something older, less technical, and very human: the belief that another person’s promise will be honoured.

During the strike in 1970, that belief came from the participants themselves. It was personal. The publican knew who had a regular wage, who owned the hardware shop, and who had a habit of becoming overconfident on a Friday evening. Local knowledge performed part of the work normally done by a bank’s records, risk department, and clearing system.

This should not be romanticised as proof that a community can simply carry on without banks. Banks clearly play a role beyond day-to-day spending, and the whole system did not collapse. Other financial institutions remained open, sterling continued to circulate, and the strike had been anticipated. Most importantly, people believed the closed banks were solvent and would eventually reopen. Their cheques were delayed claims on a functioning system, not claims on one believed to have failed. In short, much of this came down to belief.

The longer the dispute continued, the more difficult it became for households and businesses to know their true financial positions. Cheques accumulated without being reconciled, and as the situation dragged on, international suppliers became less willing to extend credit. The system adapted impressively, but the strain was growing.

That strain matters because the episode shows how much of daily commerce depends on continuity, not just confidence. A payment network can be trusted in principle, but if access to it is interrupted for long enough, people have to improvise with what they know about one another. The Irish strike did not remove the banking system; it showed how quickly local reputation, routine, and memory can become part of the settlement process when formal channels are unavailable.

That is why the story deserves more than a cheerful conclusion about Irish ingenuity. It distinguishes between two ideas that are often treated as the same: trust in an institution, and trust that an institution will remain available.

In 1970, the banks were unavailable but still trusted because society believed they would reopen. People also believed, of course, that the banks were still good for the credit being passed around. In a banking crisis, the opposite can occur: the branches may be open and the apps may function, while depositors begin to doubt the promises underneath them. A payment interruption is an operational problem. A solvency crisis is ultimately a crisis of belief. They may look similar from the queue outside a bank, but economically they are very different events.

Modern finance has made trust less visible, partly because of the complicated layers that have been added over the years. We can send money to a stranger in seconds without knowing anything about that person, their bank, or the systems connecting us. This is an immense achievement, but it also means that many personal judgements have been replaced by a relatively small number of institutional dependencies. We have not removed trust from money; by concentrating and automating it, we have removed the personal aspect.

That helps explain why people choose to hold some wealth outside the payment system. Physical gold cannot replace the speed or convenience of a current account, nor would one want it to. Its purpose is different. It is an asset that does not depend on a bank deposit remaining accessible or another party meeting a future payment. It answers one form of trust with a form of ownership.

The lesson of 1970 is not that banks are unnecessary; as time went on, Ireland’s experience demonstrated how necessary their clearing and settlement functions eventually become. Nor is it that personal reputation can support a modern global economy indefinitely; as time went on, it could not.

The deeper lesson is that money is never merely the object in our pocket or the number on our screen. It is a network of promises, records, and expectations about the future. Institutions allow that network to work between millions of strangers, but the underlying human question remains unchanged: whose word do you accept, and for how long?

For six and a half months, Ireland answered that question across shop counters and public house bars. The banks had temporarily stopped operating, but the trust was still there. The episode reminds us that trust is indispensable to a financial system. Concentrating all of it in one place is not.

Antoin E. Murphy, “Money in an Economy Without Banks: The Case of Ireland,” The Manchester School, 1978.

Malte Krüger, “Money and Credit: Lessons of the Irish Bank Strike of 1970,” 2017/2018.

Central Bank of Ireland, Survey of Economic Effects of Bank Dispute, 1970, published 1971.

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About the author

David Russell

David is the CEO of GoldCore.

Until Summer 2023 he was the Director of Marketing and Communications, responsible for all marketing and communications strategies and branding.

David joined GoldCore in 2008 as Director of Business Development and later took over as Director of Marketing and Communications in 2020.

Prior to this, Dave managed and operated his own marketing agency and completed multiple coaching qualifications.

“Working for GoldCore gives you a fantastic lens through which to view global financial and geopolitical developments. I am very proud to be part of a company that contributes to increasing investors understanding of these developments.”

When he’s not at work, David is passionate about sailing and has completed the ‘Round Ireland Yacht Race’ twice.

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