Bank of England

Bank of England

Overview
The Bank of England is the central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

 of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world (the oldest being the Sveriges Riksbank
Sveriges Riksbank
Sveriges Riksbank, or simply Riksbanken, is the central bank of Sweden and the world's oldest central bank. It is sometimes called the Swedish National Bank or the Bank of Sweden .-History:...

 (Bank of Sweden), established in 1668). It was established to act as the English
Kingdom of England
The Kingdom of England was, from 927 to 1707, a sovereign state to the northwest of continental Europe. At its height, the Kingdom of England spanned the southern two-thirds of the island of Great Britain and several smaller outlying islands; what today comprises the legal jurisdiction of England...

 Government's banker, and to this day it still acts as the banker for HM Government. The Bank was privately owned and operated from its foundation in 1694.
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Encyclopedia
The Bank of England is the central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

 of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world (the oldest being the Sveriges Riksbank
Sveriges Riksbank
Sveriges Riksbank, or simply Riksbanken, is the central bank of Sweden and the world's oldest central bank. It is sometimes called the Swedish National Bank or the Bank of Sweden .-History:...

 (Bank of Sweden), established in 1668). It was established to act as the English
Kingdom of England
The Kingdom of England was, from 927 to 1707, a sovereign state to the northwest of continental Europe. At its height, the Kingdom of England spanned the southern two-thirds of the island of Great Britain and several smaller outlying islands; what today comprises the legal jurisdiction of England...

 Government's banker, and to this day it still acts as the banker for HM Government. The Bank was privately owned and operated from its foundation in 1694. It was subordinated to the Treasury after 1931 in making policy and was nationalised in 1946.

In 1998, it became an independent public organisation, wholly owned by the Treasury Solicitor on behalf of the Government, with independence in setting monetary policy.

The Bank is one of eight banks authorised to issue banknotes in the United Kingdom, but has a monopoly on the issue of banknotes in England and Wales
England and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...

 and regulates the issue of banknotes by commercial banks in Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...

 and Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...

.

The Bank's Monetary Policy Committee
Monetary Policy Committee
The Monetary Policy Committee is a committee of the Bank of England, which meets for two and a half days every month to decide the official interest rate in the United Kingdom . It is also responsible for directing other aspects of the government's monetary policy framework, such as quantitative...

 has devolved responsibility for managing the monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...

 of the country. 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
Financial Policy Committee
The Financial Policy Committee is an official committee of the Bank of England, modelled on the existing Monetary Policy Committee, that will be responsible for monitoring the economy of the United Kingdom. Focussing on the macro-economic and financial issues that may threaten long term growth...

 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 has been located in London's main financial district, the City of London
City of London
The City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...

, on Threadneedle Street
Threadneedle Street
Threadneedle Street is a street in the City of London, leading from a junction with Poultry, Cornhill, King William Street and Lombard Street, to Bishopsgate....

, since 1734. It is sometimes known by the metonym The Old Lady of Threadneedle Street or simply The Old Lady. The current Governor of the Bank of England
Governor of the Bank of England
The Governor of the Bank of England is the most senior position in the Bank of England. It is nominally a civil service post, but the appointment tends to be from within the Bank, with the incumbent grooming his or her successor...

 is Sir Mervyn King
Mervyn King (economist)
An ex-officio member of the Bank's interest-rate setting Monetary Policy Committee since its inception in 1997, Sir Mervyn is the only person to have taken part in every one of its monthly meetings to date. His voting style is often seen as "hawkish", a perspective that emphasises the dangers of...

, who took over on 30 June 2003 from Sir Edward George. As well as its London offices, the Bank of England also has secondary offices in Leeds
Leeds
Leeds is a city and metropolitan borough in West Yorkshire, England. In 2001 Leeds' main urban subdivision had a population of 443,247, while the entire city has a population of 798,800 , making it the 30th-most populous city in the European Union.Leeds is the cultural, financial and commercial...

.

History


England's crushing defeat by France, the dominant naval power, in naval engagements culminating in the 1690 Battle of Beachy Head
Battle of Beachy Head (1690)
The Battle of Beachy Head was a naval engagement fought on 10 July 1690 during the Nine Years' War. The battle was the greatest French tactical naval victory over their English and Dutch opponents during the war...

, became the catalyst to England rebuilding itself as a global power. England had no choice but to build a powerful navy if it was to regain global power. As there were no public funds available, in 1694 a private institution, the Bank of England, was set up to supply money to the King. £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, from establishing iron-works to make more nails to agriculture feeding the quadrupled strength of the Royal Navy, started to transform the economy. This helped the new United Kingdom – England and Scotland were formally united in 1707
Acts of Union 1707
The Acts of Union were two Parliamentary Acts - the Union with Scotland Act passed in 1706 by the Parliament of England, and the Union with England Act passed in 1707 by the Parliament of Scotland - which put into effect the terms of the Treaty of Union that had been agreed on 22 July 1706,...

 – to become prosperous and powerful. Together with the power of the navy, this made Britain the dominant world power in the late eighteenth and early nineteenth centuries.

The establishment of the bank was devised by Charles Montagu, 1st Earl of Halifax
Charles Montagu, 1st Earl of Halifax
Charles Montagu, 1st Earl of Halifax, KG, PC, FRS was an English poet and statesman.-Early life:Charles Montagu was born in Horton, Northamptonshire, the son of George Montagu, fifth son of 1st Earl of Manchester...

, in 1694, to the plan which had been proposed by William Paterson
William Paterson (banker)
Sir William Paterson was a Scottish trader and banker.- Early life :...

 three years before, but had not been acted upon. He proposed a loan of £1.2m to the government; in return the subscribers would be incorporated as The Governor and Company of the Bank of England with long-term banking privileges including the issue of notes. The Royal Charter
Royal Charter
A royal charter is a formal document issued by a monarch as letters patent, granting a right or power to an individual or a body corporate. They were, and are still, used to establish significant organizations such as cities or universities. Charters should be distinguished from warrants and...

 was granted on 27 July through the passage of the Tonnage Act of 1694. Public finances were in so dire a condition at the time that the terms of the loan were that it was to be serviced at a rate of 8% per annum, and there was also a service charge of £4000 per annum for the management of the loan. The first governor was Sir John Houblon
John Houblon
Sir John Houblon was the first Governor of the Bank of England from 1694 to 1697.-Biography:Sir John was the third son of James Houblon, a London merchant, and his wife, Mary Du Quesne, daughter of Jean Du Quesne, the younger...

, who is depicted in the £50 note issued in 1994. The charter was renewed in 1742, 1764, and 1781.

The Bank's original home was in Walbrook in the City of London, where during the building's reconstruction in 1954 archaeologists found the remains of a Roman temple to Mithras
Temple of Mithras, London
The Temple of Mithras, Walbrook is a Roman temple whose ruins were discovered in Walbrook, a street in the City of London, during rebuilding work in 1954. It is perhaps the most famous of all twentieth-century Roman discoveries in the City of London....

 (Mithras was – rather fittingly – worshipped as being the God of Contracts); the Mithraeum ruins are perhaps the most famous of all twentieth-century Roman discoveries in the City of London and can now be viewed by the public.

The Bank of England moved to its current location on Threadneedle Street, and thereafter slowly acquired neighbouring land to create the edifice seen today. Sir Herbert Baker
Herbert Baker
Sir Herbert Baker was a British architect.Baker was the dominant force in South African architecture for two decades, 1892–1912....

's rebuilding of the Bank of England, demolishing most of Sir John Soane
John Soane
Sir John Soane, RA was an English architect who specialised in the Neo-Classical style. His architectural works are distinguished by their clean lines, massing of simple form, decisive detailing, careful proportions and skilful use of light sources...

's earlier building was described by architectural historian Nikolaus Pevsner
Nikolaus Pevsner
Sir Nikolaus Bernhard Leon Pevsner, CBE, FBA was a German-born British scholar of history of art and, especially, of history of architecture...

 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
Charter
A charter is the grant of authority or rights, stating that the granter formally recognizes the prerogative of the recipient to exercise the rights specified...

 renewal in 1781 it was also the bankers' bank – keeping enough gold to pay its notes on demand until 26 February 1797 when war
French Revolution
The French Revolution , sometimes distinguished as the 'Great French Revolution' , was a period of radical social and political upheaval in France and Europe. The absolute monarchy that had ruled France for centuries collapsed in three years...

 had so diminished gold reserves that the government prohibited the Bank from paying out in gold. This prohibition lasted until 1821.

19th century


The 1844 Bank Charter Act tied the issue of notes to the gold reserves and gave the bank sole rights with regard to the issue of banknotes. Private banks which had previously had that right retained it, provided that their headquarters were outside London and that they deposited security against the notes that they issued. A few English banks continued to issue their own notes until the last of them was taken over in the 1930s. The Scottish and Northern Irish private banks still have that right.

20th century


Britain remained on the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...

 until 1931 when the gold and foreign exchange reserves were transferred to the Treasury
HM Treasury
HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...

. But their management was still handled by the Bank. In 1998, the bank was given responsibility for interest rate policy.

During the governorship of Montagu Norman
Montagu Norman
Montagu Collet Norman, 1st Baron Norman DSO PC was an English banker, best known for his role as the Governor of the Bank of England from 1920 to 1944...

, which lasted from 1920 to 1944, the Bank made deliberate efforts to move away from commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...

ing 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 England Nominees Limited (BOEN), a private limited company, with 2 of its 100 £1 shares issued. According to its Memorandum & Articles of Association, its objectives are:- “To act as Nominee or agent or attorney either solely or jointly with others, for any person or persons, partnership, company, corporation, government, state, organisation, sovereign, province, authority, or public body, or any group or association of them....” Bank of England Nominees Limited was granted an exemption by Edmund Dell, Secretary of State for Trade, from the disclosure requirements under Section 27(9) of the Companies Act 1976, because, “it was considered undesirable that the disclosure requirements should apply to certain categories of shareholders.” The Bank of England is also protected by its Royal Charter status, and the Official Secrets Act. BOEN is a vehicle for Governments and Heads of State to (subject to approval from the Secretary of State) invest in UK companies, providing they undertake "not to influence the affairs of the company". BOEN is no longer exempt from company law disclosure requirements. Although a dormant company, dormancy does not preclude a company actively operating as a nominee shareholder. BOEN has 2 shareholders: the Bank of England, and the Secretary of the Bank of England.

On 6 May 1997, following the 1997 general election
United Kingdom general election, 1997
The United Kingdom general election, 1997 was held on 1 May 1997, more than five years after the previous election on 9 April 1992, to elect 659 members to the British House of Commons. The Labour Party ended its 18 years in opposition under the leadership of Tony Blair, and won the general...

 which brought a Labour government to power for the first time since 1979, it was announced by the Chancellor of the Exchequer, Gordon Brown
Gordon Brown
James Gordon Brown is a British Labour Party politician who was the Prime Minister of the United Kingdom and Leader of the Labour Party from 2007 until 2010. He previously served as Chancellor of the Exchequer in the Labour Government from 1997 to 2007...

, that the Bank of England 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
Monetary Policy Committee
The Monetary Policy Committee is a committee of the Bank of England, which meets for two and a half days every month to decide the official interest rate in the United Kingdom . It is also responsible for directing other aspects of the government's monetary policy framework, such as quantitative...

 was given sole responsibility for setting interest rates to meet the Government's stated Retail Prices Index
Retail Prices Index (United Kingdom)
In the United Kingdom, the Retail Prices Index or Retail Price Index is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a basket of retail goods and services.-History:...

 (RPI) inflation target of 2.5%. The target has now changed to 2% since the Consumer Price Index
Consumer Price Index (United Kingdom)
The Consumer Price Index is the official measure of inflation of consumer prices of the United Kingdom. It is also called the Harmonised Index of Consumer Prices .-History:...

 (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
Chancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...

 explaining why, and how he will remedy the situation.

The handing over of monetary policy to the Bank of England had featured as a key plank of the Liberal Democrats
Liberal Democrats
The Liberal Democrats are a social liberal political party in the United Kingdom which supports constitutional and electoral reform, progressive taxation, wealth taxation, human rights laws, cultural liberalism, banking reform and civil liberties .The party was formed in 1988 by a merger of the...

' economic policy since the 1992 general election
United Kingdom general election, 1992
The United Kingdom general election of 1992 was held on 9 April 1992, and was the fourth consecutive victory for the Conservative Party. This election result was one of the biggest surprises in 20th Century politics, as polling leading up to the day of the election showed Labour under leader Neil...

. A Conservative MP Nicholas Budgen
Nicholas Budgen
Nicholas William Budgen , often called Nick Budgen, was a British Conservative Party politician.Named after St...

 had also proposed this as a Private Member's Bill
Private Member's Bill
A member of parliament’s legislative motion, called a private member's bill or a member's bill in some parliaments, is a proposed law introduced by a member of a legislature. In most countries with a parliamentary system, most bills are proposed by the government, not by individual members of the...

 in 1996, but the bill failed as it had neither the support of the government nor that of the opposition.

Functions of the Bank


The Bank of England performs all the functions of a central bank. The most important of these is supposed to be maintaining price stability and supporting the economic policies of the British Government, thus promoting economic growth. There are two main areas which are tackled by the Bank to ensure it carries out these functions efficiently:
Monetary stability
Stable prices and confidence in the currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 are the two main criteria for monetary stability. Stable prices are maintained by making sure price increases meet the Government's inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 target. The Bank aims to meet this target by adjusting the base interest rate
Interest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...

, which is decided by the Monetary Policy Committee
Monetary Policy Committee
The Monetary Policy Committee is a committee of the Bank of England, which meets for two and a half days every month to decide the official interest rate in the United Kingdom . It is also responsible for directing other aspects of the government's monetary policy framework, such as quantitative...

, and through its communications strategy, such as publishing yield curve
Yield curve
In finance, the yield curve is the relation between the interest rate and the time to maturity, known as the "term", of the debt for a given borrower in a given currency. For example, the U.S. dollar interest rates paid on U.S...

s.


Financial stability
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
Lender of last resort
A lender of last resort is an institution willing to extend credit when no one else will. The term refers especially to a reserve financial institution, most often the central bank of a country, intended to avoid bankruptcy of banks or other institutions deemed systemically important or 'too big to...

 by extending credit when no other institution will.

The Bank works together with several other institutions to secure both monetary and financial stability, including:
  • HM Treasury
    HM Treasury
    HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...

    , the Government department responsible for financial and economic policy.
  • The Financial Services Authority
    Financial Services Authority
    The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...

    , an independent body that regulates the financial services industry.
  • Other central banks and international organisations, with the aim of improving the international financial system.

The 1997 Memorandum of Understanding
Memorandum of understanding
A memorandum of understanding is a document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It is often used in cases where parties either do not imply a legal commitment or in...

 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.

The Bank of England acts as the Government's banker, and as such it maintains the Government's Consolidated Fund
Consolidated Fund
Consolidated Fund or the Consolidated Revenue Fund is the term used for the main bank account of the government in many of the countries in the Commonwealth of Nations.-Establishment:...

 account. It also manages the country's foreign exchange
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...

 and gold reserves. The Bank also acts as the bankers' bank, especially in its capacity as a lender of last resort.

The Bank of England has a monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

 on the issue of banknotes in England and Wales. Scottish and Northern Irish
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...

 banks retain the right to issue their own banknotes, but they must be backed one to one with deposits in the Bank of England, excepting a few million pounds representing the value of notes they had in circulation in 1845. The Bank decided to sell its bank note printing operations to De La Rue
De La Rue
De La Rue plc is a British security printing, papermaking and cash handling systems company headquartered in Basingstoke, Hampshire. It also has a factory on the Team Valley Trading Estate, Gateshead, and other facilities at Loughton, Essex and Bathford, Somerset...

 in December 2002, under the advice of Close Brothers Corporate Finance Ltd.

Since 1998, the Monetary Policy Committee
Monetary Policy Committee
The Monetary Policy Committee is a committee of the Bank of England, which meets for two and a half days every month to decide the official interest rate in the United Kingdom . It is also responsible for directing other aspects of the government's monetary policy framework, such as quantitative...

 (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 to the new UK Debt Management Office
UK Debt Management Office
The UK Debt Management Office , was established on 1 April 1998. The DMO is responsible for carrying out the Government's debt management policy of minimising financing costs over the long term, taking account of risk, and managing the aggregate cash needs of the Exchequer in the most...

 in 1998, which also took over government cash management in 2000. Computershare
Computershare
Founded in Melbourne, Australia in 1978, Computershare Limited has grown to become the world's largest share registry business. It is a leading financial market services and technology provider, employing over 10,000 people, providing services in 20 countries and to more than 30,000 clients and...

 took over as the registrar for UK Government bonds (known as gilts
Gilts
Gilts are bonds issued by certain national governments. The term is of British origin, and originally referred to the debt securities issued by the Bank of England, which had a gilt edge. Hence, they are called gilt-edged securities, or gilts for short. The term is also sometimes used in Ireland...

) 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, although this responsibility was transferred to the Financial Services Authority in June 1998. 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
Financial Policy Committee
The Financial Policy Committee is an official committee of the Bank of England, modelled on the existing Monetary Policy Committee, that will be responsible for monitoring the economy of the United Kingdom. Focussing on the macro-economic and financial issues that may threaten long term growth...

 (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.

In order 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
Target Two Point Zero
Target Two Point Zero is an interest rate challenge in the UK set by the Bank of England and The Times.- The challenge :Target Two invites students aged 16 to 18 to take on the role of the Monetary Policy Committee to analyse current economic conditions in the UK and the outlook for inflation...

 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
UK Debt Management Office
The UK Debt Management Office , was established on 1 April 1998. The DMO is responsible for carrying out the Government's debt management policy of minimising financing costs over the long term, taking account of risk, and managing the aggregate cash needs of the Exchequer in the most...

'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
Quantitative easing
Quantitative easing is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy...

 (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 England Asset Purchase Facility Fund Limited (BEAPFF).

Banknote issues


The Bank of England 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-nineteenth century, commercial banks in Britain were able to issue their own banknotes, and notes issued by provincial banking companies were commonly in circulation. The Bank Charter Act 1844
Bank Charter Act 1844
The Bank Charter Act 1844 was an Act of the Parliament of the United Kingdom, passed under the government of Robert Peel, which restricted the powers of British banks and gave exclusive note-issuing powers to the central Bank of England....

 began the process of restricting note issue to the Bank of England; under this act, new banks were prohibited from issuing their own banknotes and existing note-issuing banks were not permitted to expand their issue. As provincial banking companies merged to form larger banks, they lost their right to issue notes, and the English private banknote eventually disappeared, leaving the Bank of England with a monopoly of note issue in England and Wales. The last private bank to issue its own banknotes in England and Wales was Fox, Fowler and Company
Fox, Fowler and Company
Fox, Fowler, and Company was a British private bank, based in Wellington, Somerset. The company was founded in 1787 as a supplementary business to the main activities of the Fox family, sheep-herding and wool-making.-Banknote issue:...

 in 1921. However, the limitations of the 1844 Act only affected banks in England and Wales, and today three commercial banks in Scotland and four in Northern Ireland continue to issue their own sterling banknotes, regulated by the Bank of England.

At the start of the First World War
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...

, the Currency and Bank Notes Act 1914 was passed which granted temporary powers to HM Treasury
HM Treasury
HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...

 for issuing banknotes to the value of £1 and 10/- (ten shillings) in the UK. Treasury notes had full legal tender status and were not convertible for gold through the Bank of England, replacing the gold coin in circulation to prevent a run on sterling and to enable raw material purchases for armament production. These notes featured an image of King George V
George V of the United Kingdom
George V was King of the United Kingdom and the British Dominions, and Emperor of India, from 6 May 1910 through the First World War until his death in 1936....

 (Bank of England notes did not begin to display an image of the monarch until 1960). The wording on each note was:
Treasury notes were issued until 1928, when the Currency and Banknotes Act 1928
Currency and Banknotes Act 1928
The Currency and Banknotes Act 1928 is an Act of the Parliament of the United Kingdom relating to banknotes. Among other things, it makes it a criminal offence to deface a banknote ....

 returned note-issuing powers to the banks. The Bank of England issued notes for ten shilling
Shilling
The shilling is a unit of currency used in some current and former British Commonwealth countries. The word shilling comes from scilling, an accounting term that dates back to Anglo-Saxon times where it was deemed to be the value of a cow in Kent or a sheep elsewhere. The word is thought to derive...

s and one pound for the first time on 22 November 1928.

During the Second World War the German Operation Bernhard
Operation Bernhard
Operation Bernhard was the codename of a secret Nazi plan devised during the Second World War by the RSHA and the SS to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes...

 attempted to counterfeit various denominations between £5 and £50 producing 500,000 notes each month in 1943. The original plan was to parachute the money on 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
Allies of World War II
The Allies of World War II were the countries that opposed the Axis powers during the Second World War . Former Axis states contributing to the Allied victory are not considered Allied states...

 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, a sum in excess of £53 million in banknotes belonging to the bank was stolen from a depot
Securitas depot robbery
The Securitas depot robbery was the largest cash robbery in British history, that took place on the evening of 21 February 2006 from 18:30 GMT until the early hours of 22 February...

 in Tonbridge, Kent.

The Vault


The Bank of England is custodian to the official Gold reserve of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 and many other countries. The Vault, which is situated beneath the City of London, covers a floor space greater than that of the second-tallest building in the City, Tower 42
Tower 42
Tower 42 is the second tallest skyscraper in the City of London and the fifth tallest in London overall. The original name was the National Westminster Tower, having been built to house the National Westminster Bank's International Division. Seen from above, the tower closely resembles the NatWest...

, and needs keys that are 3 feet long to open. The Bank of England is the fifteenth largest custodian of Gold Reserves, holding around 310 tonnes.

See also

  • Bank of England Museum
    Bank of England Museum
    The Bank of England Museum is located on the eastern side of the Bank of England, London, England in Bartholomew Lane.The museum is open to the public, free of charge, on weekdays only and on the day of the Lord Mayor's Show....

  • British coinage
    British coinage
    The standard circulating coinage of the United Kingdom is denominated in pounds sterling , and, since the introduction of the two-pound coin in 1998, ranges in value from one penny to two pounds. Since decimalisation, on 15 February 1971, the pound has been divided into 100 pence...

  • East India Company
    East India Company
    The East India Company was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China...

     shareholders
  • European Central Bank
    European Central Bank
    The European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...

  • Financial Sanctions Unit
    Financial Sanctions Unit
    The Financial Sanctions Unit of the Bank of England administers financial sanctions in the United Kingdom on behalf of HM Treasury. It has been in operation since before 1993 when it applied sanctions against the Government of Libya...

  • Fractional-reserve banking
    Fractional-reserve banking
    Fractional-reserve banking is a form of banking where banks maintain reserves that are only a fraction of the customer's deposits. Funds deposited into a bank are mostly lent out, and a bank keeps only a fraction of the quantity of deposits as reserves...

  • United Kingdom national debt
    United Kingdom national debt
    The British public debt is the money borrowed by the Government of the United Kingdom at any one time through the issue of securities by the British Treasury and other government agencies. The origins of the British national debt can be found during the reign of William III, who engaged a syndicate...


Further reading

  • 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.
    Felix Schuster
    Sir Felix Schuster, Bt. was a British banker and financier.-Biography:He was educated at Frankfurt-am-Main, Geneva, and Owens College, Manchester; and then went into business in London...

     The Bank of England and the State
  • Wood, John H. A History of Central Banking in Great Britain and the United States (Cambridge University Press, 2005)

External links