Bank of England

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The Bank of England is the central bank of the United Kingdom. Sometimes known as "The Old Lady of Threadneedle Street" or "The Old Lady". It has eight branches.

It performs all the recognized functions of a central bank -- to maintain price stability, and subject to that, to support the economic policy of Her Majesty's Government (Bank of England Act 1998). It has a monopoly on the issue of banknotes in England and Wales; it is both the Government's banker and the bankers' bank; a "Lender of Last Resort"; it manages the country's foreign exchange and gold reserves and the Government's stock register; it is responsible for the regulation of the banking industry (see Johnson Matthey, BCCI, and Barings ). Since 1997 it has had the responsibility for setting the official interest rate.

The current Governor of the Bank of England is Sir Edward George.

History

The bank was founded by William Paterson in 1694 to act as the Government's banker. 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 banking privileges including the issue of notes. The Royal Charter was granted on 27 July 1694. The charter was renewed in in 1742, 1764, and 1781. In 1734 the Bank moved to its current location on Threadneedle Street, slowly acquiring the land to create the edifice seen today.

When the idea and reality of the National Debt came about during the 18th Century this was also manged 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 1797 when war had so diminished gold reserves that the Government prohibited the Bank from paying out in gold. This lasted until 1821.

The 1844 Bank Charter Act tied the issue of notes to the gold reserves and gave the bank a monopoly on the issue of banknotes. Britain remained on the gold standard until 1931 when the gold and foreign exchange reserves were transferred to the Treasury. But their management was still handled by the Bank. In 1870 it was given responsibility for interest rate policy.

In 1946 the bank was nationalised.

In 1997 the bank's Monetary Policy Committee was given sole responsibility for setting interest rates to meet the Government's stated inflation target.