The 1866 London market crash following the failure of Overend, Gurney and Company was the Panic of 1866.
Overend, Gurney and Company began as a bill broker and became one of Britain’s largest financial institutions. It converted into a limited company in 1865, but inherited or accumulated troubled assets as it expanded beyond traditional short-term bill financing.
The firm suspended payments in May 1866 after losses became unsustainable. Its failure triggered a run on banks and a sharp contraction in credit. The Bank of England responded by lending freely after the government suspended the Bank Charter Act’s note-issue restrictions.
The panic demonstrated how the collapse of a major intermediary could spread through London’s highly connected financial system. It also helped establish the modern central-bank principle that emergency liquidity may be needed during a banking panic.