The BANK OF ENGLAND, formally the GOVERNOR AND COMPANY OF THE BANK OF
ENGLAND, is the central bank of the
In 1998, it became an independent public organisation, wholly owned
The Bank is one of eight banks authorised to issue banknotes in the
The Bank's Monetary Policy Committee has a devolved responsibility for managing monetary policy . The Treasury has reserve powers to give orders to the committee "if they are required in the public interest and by extreme economic circumstances", but such orders must be endorsed by Parliament within 28 days. The Bank's Financial Policy Committee held its first meeting in June 2011 as a macro prudential regulator to oversee regulation of the UK's financial sector.
The Bank's headquarters have been in London's main financial
district, the City of
As a regulator and central bank, the Bank of
* 1 History
* 1.1 Founding * 1.2 18th century * 1.3 19th century * 1.4 20th century * 1.5 21st century
* 2 Functions of the Bank
* 2.1 Monetary stability * 2.2 Asset purchase facility
* 5 Governance of the Bank of
* 5.1 Governors * 5.2 Court of Directors * 5.3 Other staff
* 6 See also * 7 References * 8 Further reading * 9 External links
To induce subscription to the loan, the subscribers were to be incorporated by the name of the Governor and Company of the Bank of England. The Bank was given exclusive possession of the government's balances, and was the only limited-liability corporation allowed to issue bank notes. The lenders would give the government cash (bullion) and issue notes against the government bonds, which can be lent again. The £1.2m was raised in 12 days; half of this was used to rebuild the navy.
As a side effect, the huge industrial effort needed, including
establishing ironworks to make more nails and advances in agriculture
feeding the quadrupled strength of the navy, started to transform the
economy. This helped the new
Kingdom of Great Britain –
The establishment of the bank was devised by Charles Montagu, 1st
Earl of Halifax , in 1694. The plan of 1691, which had been proposed
by William Paterson three years before, had not then been acted upon.
(It is worth noting though, that 28 years earlier, in 1636, Financier
to the king
Philip Burlamachi had proposed exactly the same idea in a
letter addressed to
Sir Francis Windebank
The Bank's original home was in Walbrook, a street in the City of
London, where during reconstruction in 1954 archaeologists found the
remains of a Roman temple of Mithras (Mithras is – rather fittingly
– said to have been worshipped as, amongst other things, the God of
Contracts); the Mithraeum ruins are perhaps the most famous of all
20th-century Roman discoveries in the City of
The Bank moved to its current location in Threadneedle Street in 1734, and thereafter slowly acquired neighbouring land to create the edifice seen today. Sir Herbert Baker 's rebuilding of the Bank, demolishing most of Sir John Soane 's earlier building, was described by architectural historian Nikolaus Pevsner as "the greatest architectural crime, in the City of London, of the twentieth century".
When the idea and reality of the National Debt came about during the 18th century, this was also managed by the Bank. By the charter renewal in 1781 it was also the bankers' bank – keeping enough gold to pay its notes on demand until 26 February 1797 when war had so diminished gold reserves that - following an invasion scare caused by the Battle of Fishguard days earlier - the government prohibited the Bank from paying out in gold by the passing of the Bank Restriction Act 1797 . This prohibition lasted until 1821.
Bank Stock of the Bank of England, issued 25. January 1876
The 1844 Bank
The bank acted as lender of last resort for the first time in the panic of 1866 .
The last private bank in
The main Bank of
Britain remained on the gold standard until 1931 when the gold and foreign exchange reserves were transferred to the Treasury , but they continued to be managed by the Bank.
During the governorship of Montagu Norman , from 1920–44, the Bank made deliberate efforts to move away from commercial banking and become a central bank. In 1946, shortly after the end of Norman's tenure, the bank was nationalised by the Labour government.
After 1945 the Bank pursued the multiple goals of Keynesian economics, especially "easy money" and low interest rates to support aggregate demand. It tried to keep a fixed exchange rate, and attempted to deal with inflation and sterling weakness by credit and exchange controls.
In 1977, the Bank set up a wholly owned subsidiary called Bank of
In 1981 the reserve requirement for banks to hold a minimum fixed
proportion of their deposits as reserves at the Bank of
On 6 May 1997, following the 1997 general election which brought a Labour government to power for the first time since 1979, it was announced by the Chancellor of the Exchequer, Gordon Brown , that the Bank would be granted operational independence over monetary policy. Under the terms of the Bank of England Act 1998 (which came into force on 1 June 1998), the Bank's Monetary Policy Committee was given sole responsibility for setting interest rates to meet the Government's Retail Prices Index (RPI) inflation target of 2.5%. The target has changed to 2% since the Consumer Price Index (CPI) replaced the Retail Prices Index as the Treasury's inflation index. If inflation overshoots or undershoots the target by more than 1%, the Governor has to write a letter to the Chancellor of the Exchequer explaining why, and how he will remedy the situation.
The success of inflation targeting in the
Independent central banks that adopt an inflation target are known as Friedmanite central banks. Inflation targets combined with central bank independence have been characterised as a "starve the beast" strategy creating a lack of money in the public sector. This change in Labour's politics was described by Sidelsky in _The Return of the Master_ as a mistake and as an adoption of the Rational Expectations Hypothesis as promulgated by Walters
The handing over of monetary policy to the Bank had been a key plank of the Liberal Democrats ' economic policy since the 1992 general election . Conservative MP Nicholas Budgen had also proposed this as a private member\'s bill in 1996, but the bill failed as it had the support of neither the government nor the opposition.
Mark Carney assumed the post of Governor of the Bank of England on 1 July 2013. He succeeded Mervyn King , who took over on 30 June 2003. Carney, a Canadian, will serve an initial five-year term rather than the typical eight, and will seek UK citizenship. He is the first non-British citizen to hold the post. As of January 2014, the Bank also has four Deputy Governors .
FUNCTIONS OF THE BANK
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Note: It is important to note that "monetary" and "financial" are synonyms.
Stable prices and confidence in the currency are the two main criteria for monetary stability. Stable prices are maintained by seeking to ensure that price increases meet the Government's inflation target. The Bank aims to meet this target by adjusting the base interest rate , which is decided by the Monetary Policy Committee , and through its communications strategy, such as publishing yield curves . Maintaining financial stability involves protecting against threats to the whole financial system. Threats are detected by the Bank's surveillance and market intelligence functions. The threats are then dealt with through financial and other operations, both at home and abroad. In exceptional circumstances, the Bank may act as the lender of last resort by extending credit when no other institution will.
The Bank works together with other institutions to secure both monetary and financial stability, including:
* HM Treasury , the Government department responsible for financial and economic policy; and * Other central banks and international organisations, with the aim of improving the international financial system.
The 1997 Memorandum of Understanding describes the terms under which the Bank, the Treasury and the FSA work toward the common aim of increased financial stability. In 2010 the incoming Chancellor announced his intention to merge the FSA back into the Bank. As of 2012, the current director for financial stability is Andy Haldane .
The Bank acts as the government's banker, and it maintains the government's Consolidated Fund account. It also manages the country's foreign exchange and gold reserves . The Bank also acts as the bankers' bank, especially in its capacity as a lender of last resort.
The Bank has a monopoly on the issue of banknotes in
Since 1998, the Monetary Policy Committee (MPC) has had the responsibility for setting the official interest rate. However, with the decision to grant the Bank operational independence, responsibility for government debt management was transferred in 1998 to the new Debt Management Office , which also took over government cash management in 2000. Computershare took over as the registrar for UK Government bonds (gilt-edged securities or _gilts_) from the Bank at the end of 2004.
The Bank used to be responsible for the regulation and supervision of the banking and insurance industries. This responsibility was transferred to the Financial Services Authority in June 1998, but after the financial crises in 2008 new banking legislation transferred the responsibility for regulation and supervision of the banking and insurance industries back to the Bank.
In 2011 the interim Financial Policy Committee (FPC) was created as a mirror committee to the MPC to spearhead the Bank's new mandate on financial stability. The FPC is responsible for macro prudential regulation of all UK banks and insurance companies.
To help maintain economic stability, the Bank attempts to broaden understanding of its role, both through regular speeches and publications by senior Bank figures, a semiannual Financial Stability Report, and through a wider education strategy aimed at the general public. It maintains a free museum and runs the Target Two Point Zero competition for A-level students.
ASSET PURCHASE FACILITY
The Bank has operated, since January 2009, an Asset Purchase Facility
(APF) to buy "high-quality assets financed by the issue of Treasury
bills and the DMO 's cash management operations" and thereby improve
liquidity in the credit markets. It has, since March 2009, also
provided the mechanism by which the Bank's policy of quantitative
easing (QE) is achieved, under the auspices of the MPC. Along with the
managing the £200 billion of QE funds, the APF continues to operate
its corporate facilities. Both are undertaken by a subsidiary company
of the Bank of England, the Bank of
Main article: Bank of England note issues
The Bank has issued banknotes since 1694. Notes were originally hand-written; although they were partially printed from 1725 onwards, cashiers still had to sign each note and make them payable to someone. Notes were fully printed from 1855. Until 1928 all notes were "White Notes", printed in black and with a blank reverse. In the 18th and 19th centuries White Notes were issued in £1 and £2 denominations. During the 20th century White Notes were issued in denominations between £5 and £1000.
Until the mid-19th century, commercial banks were allowed to issue
their own banknotes, and notes issued by provincial banking companies
were commonly in circulation. The Bank
At the start of the
First World War
_UNITED KINGDOM OF GREAT BRITAIN AND IRELAND – Currency notes are Legal Tender for the payment of any amount – Issued by the Lords Commissioners of His Majesty's Treasury under the Authority of Act of Parliament (4 & 5 Geo. V c.14)_.
Treasury notes were issued until 1928, when the Currency and Bank
Notes Act 1928 returned note-issuing powers to the banks. The Bank of
During the Second World War the German Operation Bernhard attempted to counterfeit denominations between £5 and £50, producing 500,000 notes each month in 1943. The original plan was to parachute the money into the UK in an attempt to destabilise the British economy, but it was found more useful to use the notes to pay German agents operating throughout Europe. Although most fell into Allied hands at the end of the war, forgeries frequently appeared for years afterwards, which led banknote denominations above £5 to be removed from circulation.
In 2006, over £53 million in banknotes belonging to the Bank was stolen from a depot in Tonbridge, Kent .
The Bank is custodian to the official gold reserves of the United Kingdom and around 30 other countries. The vault, beneath the City of London, covers a floor space greater than that of the third-tallest building in the City, Tower 42 , and needs keys that are three feet (90 cm) long to open. As of April 2016, the Bank held around 400,000 bars, which is equivalent to 5,134 tonnes of gold. These gold deposits were estimated in July 2017 to have a current market value of £142,000,000,000. These estimates suggest the vault could hold as much as 3% of the gold mined throughout human history.
GOVERNANCE OF THE BANK OF ENGLAND
Main article: Governor of the Bank of England
Following is a list of the Governors of the Bank of
Samuel Gladstone 1899–1901
Augustus Prevost 1901–03
Samuel Morley 1903–05
Alexander Wallace 1905–07
William Campbell 1907–09
Reginald Johnston 1909–11
Alfred Cole 1911–13
Walter Cunliffe 1913–18
Brien Cokayne 1918–20
Montagu Norman 1920–44
Thomas Catto 1944–49
Cameron Cobbold 1949–61
Rowland Baring (3rd Earl of Cromer) 1961–66
Leslie O\'Brien 1966–73
Gordon Richardson 1973–83
Robert Leigh-Pemberton 1983–93
Edward George 1993–2003
Mervyn King 2003–13
Mark Carney 2013–
COURT OF DIRECTORS
_Court of Directors (2015)_
Anthony Habgood Chairman of Court
Mark Carney Governor
Ben Broadbent Deputy Governor , Monetary Policy
Sir Jon Cunliffe Deputy Governor, Financial Stability
Sam Woods Deputy Governor, Prudential Regulation "> , the Bank's COO has been Charlotte Hogg .
As of 2014 , the Bank's chief economist is Andrew Haldane .
* Business and economics portal
* Numismatics portal
List of British currencies
Bank of England Act
Bank of England club
Coins of the pound sterling
East India Company
* ^ Bank of
* Brady, Robert A. (1950). _Crisis in Britain. Plans and Achievements of the Labour Government_. University of California Press. , on nationalisation 1945–50, pp 43–76 * Capie, Forrest. _The Bank of England: 1950s to 1979_ (Cambridge University Press, 2010). xxviii + 890 pp. ISBN 978-0-521-19282-8 excerpt and text search * Clapham, J. H. _Bank of England_ (2 vol 1944) for 1694–1914 * Fforde, John. _The Role of the Bank of England, 1941–1958_ (1992) excerpt and text search * Francis, John. _History of the Bank of England: Its Times and Traditions_ excerpt and text search * Hennessy, Elizabeth. _A Domestic History of the Bank of England, 1930–1960_ (2008) excerpt and text search * Roberts, Richard, and David Kynaston. _The Bank of England: Money, Power and Influence 1694–1994_ (1995) * Sayers, R. S. _The Bank of England, 1891–1944_ (1986) excerpt and text search * Schuster, F. _The Bank of