Bank of England 4484 225476746 2008-07-13T22:07:10Z Astrotrain 16846 [[WP:UNDO|Undid]] revision 225439574 by [[Special:Contributions/Barryob|Barryob]] ([[User talk:Barryob|talk]]) {{Infobox Central bank |bank_name_in_local = |image_1 = london.bankofengland.arp.jpg |image_title_1 = The Bank of England |image_2 = |image_title_2 = |headquarters = [[Image:Flag of the City of London.svg|border|25px|Flag of the City of London]]&nbsp;[[Threadneedle Street]],<br>[[London]] [[EC postcode area|EC3]] |coordinates = {{coord|51.5141|N|0.0886|W|region:GB_type:Landmark|display=inline,title}} |established = [[July 27]] [[1694]] |president = [[Mervyn King (economist)|Mervyn King]] |leader_title = [[Governor of the Bank of England|Governor]] |bank_of = {{flag|United Kingdom}} |currency = [[Pound sterling]] |currency_iso = GBP |borrowing_rate = 5% |deposit_rate = |website = [http://www.bankofengland.co.uk/ bankofengland.co.uk] |footnotes = |succeeded = [[Currency Commission]] ([[Republic of Ireland]] only) }} The '''Governor and Company of the Bank of England''' (usually shortened to the '''Bank of England''') is a [[Nationalisation|state-owned]] institution<ref>[http://www.bankofengland.co.uk/about/parliament/index.htm Bank of England: Relationship with Parliament]. Bank of England. Retrieved on [[2007]]-[[December 21|12-21]]</ref> and the [[central bank]] of the [[United Kingdom]], that convenes the eponymous [[Monetary Policy Committee]] that is responsible for managing the [[monetary policy]] of the country. It was established in [[1694]] to act as the [[Kingdom of England|English]] Government's banker, and to this day it still acts as the banker for the [[Her Majesty's Government|UK Government]]. The Bank has a [[monopoly]] on the issue of [[banknotes]] in [[England and Wales]]. The Bank's headquarters has been located in [[London]]'s main financial district, the [[City of London]], on [[Threadneedle Street]], since 1734. It is sometimes known as ''The Old Lady of Threadneedle Street'' or just ''The Old Lady''. The [[Governor of the Bank of England]] is [[Mervyn King]] who took over on [[June 30]] [[2003]] from [[Edward George|Sir Edward George]]. ==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 [[Her Majesty's Government|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]] are the two main criteria for monetary stability. Stable prices are maintained by making sure 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. ;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]] 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]], the Government department responsible for financial and economic policy. * The [[Financial Services Authority]], 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]] describes the terms under which the Bank, the Treasury and the FSA work toward the common aim of increased financial stability. The Bank of England acts as the Government's banker, and as such it maintains the Government's [[Consolidated Fund]] account. It also manages the country's [[Foreign exchange market|foreign exchange]] and [[gold reserves]]. The Bank also acts as the bankers' bank, especially in its capacity as a lender of last resort, and to maintain its pragmatic experience in all aspects of banking also provides commercial and [[retail banking]] facilities to a very limited number of corporate institutions and individuals. The Bank of England has a [[monopoly]] on the issue of [[banknotes]] in England and Wales. [[Scotland|Scottish]] and [[Northern Ireland|Northern Irish]] 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]] in December 2002, under the advice of Close Brothers Corporate Finance Ltd.<ref>{{cite web|url=http://www.bankofengland.co.uk/publications/news/2003/041.htm|publisher=Bank of England|title=Sale of Bank Note Printing|accessdate=2006-06-10}}</ref> Since 1997 the [[Monetary Policy Committee]] 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]] in 1998, which also took over government cash management in 2000. [[Computershare]] took over as the registrar for UK Government bonds (known as [[gilts]]) from the Bank at the end of 2004. The Bank used to be responsible for the regulation and supervision of the banking [[industry]], although this responsibility was transferred to the Financial Services Authority in June 1998. 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, 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.<ref>{{cite web|url=http://www.bankofengland.co.uk/education/index.htm|publisher=Bank of England|title=Bank of England: Education|accessdate=2007-03-28}}</ref> ==History== [[Image:2POUND1994.jpg|thumb|right|120px|Tercentenary of the Bank of England, commemorated on a 1994 [[British two pound coin]].]] [[Image:City1.jpg|thumb|right|220px|The main Bank of England façade, c. [[1980]].]] [[Image:The Old Lady of Threadneedle St.png|thumb|right|220px|Satirical cartoon protesting against the introduction of paper money, by [[James Gillray]], 1797. The "Old Lady of Threadneedle St" (the Bank personified) is ravished by [[William Pitt the Younger]].]] The bank was founded by the [[Scotland|Scotsman]] [[William Paterson (banker)|William Paterson]] in 1694 to act as the English 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 long term banking privileges including the issue of notes. Only £750,000 of these funds were ever deposited with the Bank; the rest was generated by [[fractional reserve banking]]{{Fact|Feb 2008|date=February 2008}}. The [[Royal Charter]] was granted on [[July 27]] 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]], who is depicted in the £50 note issued in 1990. The charter was renewed in 1742, 1764, and 1781. The Bank was originally constructed above the ancient [[Temple of Mithras, London]] at Walbrook, dating to the founding of [[Londinium]] in antiquity by Roman garrisons. [[Mithras]] was, among other things, considered the god of contracts, a fitting association for the Bank. In 1734 the Bank moved to its current location on Threadneedle Street, slowly acquiring the land to create the edifice seen today. Sir [[Herbert Baker]]'s rebuilding of the Bank of England, demolishing most of Sir [[John Soane]]'s earlier building was described by [[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&mdash;keeping enough gold to pay its notes on demand until [[February 26]], [[1797]] when [[French Revolution|war]] had so diminished [[gold reserves]] that the government prohibited the Bank from paying out in gold. This prohibition lasted until 1821. 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. Britain remained on the [[gold standard]] until 1931 when the gold and foreign exchange reserves were transferred to the [[HM Treasury|Treasury]]. But their management was still handled by the Bank. In 1870 the bank was given responsibility for interest rate policy. During the governorship of [[Montagu Norman]], which lasted from 1920 to 1944, the Bank made deliberate efforts to move away from [[commercial bank]]ing and become a central bank. In 1946, shortly after the end of Norman's tenure, the bank was nationalised (and remains to this day government owned). In 1997 the bank's Monetary Policy Committee was given sole responsibility for setting interest rates to meet the Government's stated [[Consumer price index#United Kingdom|Retail Prices Index]] inflation target of 2.5%.<ref>{{cite web | title = Key Monetary Policy Dates Since 1990 | publisher = Bank of England | accessdate = 2007-09-20 | url = http://www.bankofengland.co.uk/monetarypolicy/history.htm}}</ref> This decision was taken by the Chancellor of the Exchequer, [[Gordon Brown]] in consultation with Tony Blair prior to their [[United Kingdom general election, 1997|election in 1997]] though the announcement was made the day after the election. The target has now changed to 2% since the [[consumer price index]] (CPI) replaced the [[retail price index]] (RPI) as the treasury's inflation index.<ref>{{cite web | title = Remit of the Monetary Policy Committee of the Bank of England and the New Inflation Target | publisher = HM Treasury | accessdate = 2007-09-20 | date = [[2003-12-10]] | url=http://www.bankofengland.co.uk/monetarypolicy/pdf/chancellorletter031210.pdf}}</ref> Should inflation overshoot or undershoot the target by more than 1%, the Governor will have to write a letter to the [[Chancellor of the Exchequer]] 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]]' economic policy since the 1992 general election.<ref>[Liberal Democrat election manifesto, 1992]</ref> A Conservative MP [[Nicholas Budgen]] had also proposed this as a [[Private Member's Bill]] in 1996, but the bill failed as it had neither the support of the government nor that of the opposition. In May 1997 The Governor and Company of the Bank of England regained their independence from Nationalisation and operate within the United Kingdom with autonomy from Government but under charter to it. The 1998 Bank of England Act made changes to the Bank's governing body. The Court of Directors, as it's known, is now made up of the Bank's Governor and 2 Deputy Governors, and 16 Non-Executive Directors. More recently the Bank of England, in its role as lender of last resort has, since 2007, been supporting [[Northern Rock]], a specialist mortgage lender that suddenly became unable to rely on wholesale market borrowing to finance its lending operation following the [[2007 subprime mortgage financial crisis]] and the subsequent reluctance of lenders to take on more mortgage debt. ==Banknote issues== {{main|Bank of England note issues}} {{seealso|Banknotes of the pound sterling}} 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. The Bank issued notes for ten [[shilling]]s and one pound for the first time on [[22 November]] [[1928]] when the Bank took over responsibility for these denominations from the Treasury which had issued notes of these denominations three days after the declaration of [[World War I|war]] in 1914 in order to remove gold [[coin]]s from circulation. During the [[World War II|Second World War]] the German [[Operation Bernhard]] 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 Britain 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 &mdash; although most fell into [[Allies|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, a sum in excess of £53 million in banknotes belonging to the bank was [[Securitas depot robbery|stolen from a depot]] in [[Tonbridge]], [[Kent]].<ref>[http://news.bbc.co.uk/1/hi/england/kent/4756454.stm Record £53m stolen in depot raid], [[BBC]], [[27 February]] [[2006]]</ref> ==See also== *[[Bank of England Museum]] *[[Bank of Japan]] *[[British coinage]] *[[Sterling banknotes]] *[[European Central Bank]] *[[Federal Reserve]] *[[Financial Sanctions Unit]] *[[Fractional-reserve banking]] *[[British East India Company|East India Company]] shareholders ==References== {{reflist}} ==External links== {{Wiktionarypar|Bank of England}} {{commonscat}} *[http://www.bankofengland.co.uk/ Bank of England official site] *[http://www.bankofengland.co.uk/about/legislation/1694act.pdf 1694 Act of Parliament founding the bank] {{Template group |list = {{London history}} {{Central Bank}} {{United Kingdom topics}} {{Economy of the United Kingdom}} {{Banknotes of the pound sterling}} {{Central Banks of EU}} }} [[Category:Bank of England| ]] [[Category:1694 establishments]] [[Category:Banknote issuers of the United Kingdom|England]] [[Category:Scottish inventions]] [[ar:بنك إنجلترا]] [[ca:Banc d'Anglaterra]] [[cs:Bank of England]] [[cy:Banc Lloegr]] [[de:Bank of England]] [[es:Banco de Inglaterra]] [[eo:Banko de Anglio]] [[fa:بانک انگلستان]] [[fr:Banque d'Angleterre]] [[it:Banca d'Inghilterra]] [[he:בנק אנגליה]] [[ka:ინგლისის ბანკი]] [[ms:Bank England]] [[nl:Bank of England]] [[ja:イングランド銀行]] [[no:Bank of England]] [[pl:Bank of England]] [[pt:Banco da Inglaterra]] [[ro:Banca Angliei]] [[ru:Банк Англии]] [[sq:Banka e Anglisë]] [[fi:Bank of England]] [[sv:Bank of England]] [[vi:Ngân hàng Anh]] [[uk:Англійський Банк]] [[yi:באנק פון ענגלאנד]] [[zh:英格兰银行]]