The 1866 London banking panic was the Panic of 1866, linked to the failure of Overend, Gurney and Company. The prominent London discount house suspended payments on 10 May 1866.
Overend, Gurney had shifted from relatively conservative bill discounting toward riskier railway and infrastructure finance. When confidence weakened and borrowers failed, the firm could not meet demands for cash despite its long-standing reputation.
The collapse caused a run on other financial institutions and severe pressure in London’s money market. The Bank of England suspended the Bank Charter Act’s normal limits, allowing it to lend more freely and helping stop the panic.
The episode demonstrated the importance of a credible lender of last resort. It also damaged the idea that an old and prestigious financial institution was automatically safe. The failure was not simply a stock-market fall; it was a banking and credit crisis with effects on companies and investors.