The Bank of England website [visit
link] tells us:
"The Bank of England was founded in
1694 to act as the Government's banker and debt-manager. Since then its role has
developed and evolved, centred on the management of the nation's currency and
its position at the centre of the UK's financial system.
The history of the Bank is
naturally one of interest, but also of continuing relevance to the Bank today.
Events and circumstances over the past three hundred or so years have shaped and
influenced the role and responsibilities of the Bank. They have moulded the
culture and traditions, as well as the expertise, of the Bank which are relevant
to its reputation and effectiveness as a central bank in the early years of the
21st century. At the same time, much of the history of the Bank runs parallel to
the economic and financial history, and often the political history, of the
United Kingdom more generally.
If you want to get closer to the
Bank's history and are visiting London, the Bank's Museum provides a unique
insight into the history of the Bank and its business, alongside a great deal of
material about the Bank today.
Key moments in the Bank's history -
a brief guide
King William & Queen
Mary
When William and Mary came to the throne in 1688, public finances were
weak. The system of money and credit was in disarray. A national bank was needed
to mobilise the nation's resources.
William Paterson
William
Paterson proposed a loan of £1,200,000 to the Government. In return the
subscribers would be incorporated as the Governor and Company of the Bank of
England.
The Royal Charter
The money was
raised in a few weeks and the Royal Charter was sealed on 27th July 1694. The
Bank started life as the Government's banker and debt-manager, with 17 clerks
and 2 gatekeepers. In 1734 the Bank moved to Thread-needle Street, gradually
acquiring land and premises to create the site seen today.
Commercial functions
The Bank
managed the Government's accounts and made loans to finance spending at times of
peace and war. A commercial bank too, it took deposits and issued
notes.
The 18th Century
During the 18th
Century the Government borrowed more and more money. These outstanding loans
were called the National Debt.
1781: renewal of the Bank's
Charter
Reliance on the Bank of England was such that when its charter was
renewed in 1781 it was described as ' the public exchequer'.
The bankers' bank
By now the
Bank was acting as the bankers' bank too. It was liable to fail if all its
depositors decided to withdraw their money at the same time. But the Bank made
sure it kept enough gold to pay its notes on demand.
The 'Restriction Period'
By 1797
war with France had drained the gold reserves. The Government prohibited the
Bank from paying its notes in gold. This Restriction Period lasted until
1821.
The 19th Century
The 1844 Bank
Charter Act tied the note issue to the Bank's gold reserves. The Bank was
required to keep the accounts of the note issue separate from those of its
banking operations and produce a weekly summary of both accounts. The Bank
Return, as it's called, is still published every week.
Lender of last resort
In the
19th Century the Bank took on the role of lender of last resort, providing
stability during several financial crises.
The First World War:
1914-18
During the First World War the National Debt jumped to £7 billion.
The Bank helped manage Government borrowing and resist inflationary
pressures.
Gold
In 1931 the United Kingdom
left the gold standard; its gold and foreign exchange reserves were transferred
to the Treasury. But their management was still handled by the Bank and this
remains the case today.
Nationalisation 1946
After the
Second World War the bank was nationalised. It remained the Treasury's adviser,
agent and debt manager.
Financial crises
During the
1970s, the Bank played a key role during several banking crises. The Bank was at
the fore when monetary policy again became a central part of Government policy
in the 1980s.
Operational independence May
1997
In May 1997 the Government gave the Bank responsibility for setting
interest rates to meet the Government's stated inflation target. This was
enshrined in the 1998 Bank of England Act.
Managing the modern bank
The
Bank's governing body, the Court of Directors, as it's known, is made up of the
Bank's Governor and 2 Deputy Governors, and 9 Non-Executive Directors (under the
Banking Act 2009)."