BANK OF ENGLAND

Banking Sector of England before 17 Century

• Mostly Gold Smith were the bankers – safe custodian of gold
• They also gave receipts for cash, that is to say gold coins,
deposited with them. These receipts, known as "running cash
notes", were made out in the name of the depositor and
promised to pay him on demand.
• This writing were exchanged for transaction
• This were the earlier notes
• Other institutions also used to issue written notes
HISTORY
• in 17th century a lot of changes were happening in the
country
• Economic expansion– increase in colonies
• Increase in import
• Greater need for liquid cash with people
• The fundraising powers of the King were limited
• To meet the financial needs of the war, a private institution was
established in the form of a joint stock company
•
• It was “…born out of a marriage of convenience between the business
community of the City [of London], ambitiously confident that it could
run such a bank profitably, and the government of the day,
desperately short of the very large amount of cash urgently needed to
carry on the long war against Louis XIV…” (Davies (2002, p.257)*

*A History of Money, 3e, (Cardiff: University of Wales Press)

• To increase the fund for waging war, a joint stock company was
established in 1694
• “Ways and Means Act of June 1694”
• private institution in 1694 with the power to raise money for the
government by issuing bonds.
• By limiting the maximum ownership of the original shares to £10,000,
ownership of the Bank was spread over more than 1,500, private,
investors.
• The bank also had the power to issue notes up to the amount it had
lent to the government
• the loan of £1,500,000 was initially given to government for a period
of 12 years
• The new banks were looked with envy by the “gold
smith banks”
• To exchange the notes acquired by them, they began
to open account with BoE
• A number of modification in the Bank charter
followed
• There were a number of commercial banks but, the
BoE, as the banker of government had some
advantages. So small banks began to open account in
BoE
• Initially the bank had no monopoly power of issue the notes– each
local banks used to issue their own notes
• But by 1825-26, many banks failed– the notes issued by them became
just papers
• This pavaed the BoE the ground for becoming a banker of the
commercial banks
• The Bank Charter Act of 1844 gave the Monopoly power of note issue
to the BoE
Location ( HQ of bank)
• The bank was located first in Mercers’ Hall and then in Grocers’
Hall,
• it was moved to its permanent location on Threadneedle Street
in the 1730s– a centre of Economic activity in England
• It is know as the “Old Lady of the Threadneedle Street”
• The bank was privately owned until 1946, when it was
nationalized. 
• Recent Changes
• Banking Act 1998
• The BA 1998 regulated more clearly the relationship between the
Treasury and the BoE.
• The treasury could give directions to the Bank on the inflation
target to be followed.
• The Financial Services Modernisation Act 2000
• It took away the monitoring power of the BoE
• The Financial Services Authority (FSA) regulated financial
between 2001 and 2013.
• The crisis of 2008 made the monitory authorities to rethink
on the feasibility of FSA and dissolved it in 2013
• Regulatory authority was divided into the Financial
Conduct Authority and the Prudential Regulation
Authority of the Bank of England
Structure of BoE
• The hierarchical structure
• Governor, --
• the Court of Directors,
• and a few subcommittees.
• The Governor of BoE is selected from within the bank, holding the most senior executive
position and participating in all committees. 
• 8 years tenure which is renewable once

• Deputy Governor
• There are deputy goverors
• Appointed for 5 years term and are renewable twice

• The Court of Directors is the main administrative body and oversees the bank’s operations,
strategies, and resource allocations.
•
The court of Directors

•
• Usually consists of Governor, Deputy governors and other executive
members
• 5 executive members and 9 non executive members
• Non executive members enjoy a period of 4 years
Some Important Sub-Cummittees
• Monetary Policy Committee (MPC) implements monetary policy
and sets the interest rates
• Financial Policy Committee (FPC) ensures stability in the financial
system
• Prudential Regulation Authority (PRA) regulates the Financials
industry
Some of the Major units of BoE
• Monetary Analysis and Statistics
• Markets
• Financial Stability
• Banking Services
• Central Services
• Finance
• Internal Audit
• Communications
• Human Resources
Functions of the Bank of England
• Monetary Stability
• Monetary stability means stable prices and confidence in
the currency.
• Stable prices are defined by the Government's inflation target,
which the Bank seeks to meet through the decisions on interest
rates taken by the Monetary Policy Committee.
Financial Stability

•
• detecting and reducing threats to the financial system as a whole
• Agencies that works to achieve financial and monitary stability
 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 organizations, with the aim of improving the
international financial system.
General Functions of the BoE
• Issue of Notes
• Sterling banknotes – the currency of England
• GBP (Great Britain pound).
• Coins are minted at the royal Mint

•  for historical reasons, three banks in Scotland and 

four banks in Northern Ireland are permitted to issue their own
currency – but the law requires that the issuing banks hold a
sum of Bank of England banknotes (or gold) equivalent to the
total value of notes issued.
• Banker to the Government
• Register of Government Stocks
• Banker to other Banks
• Banker to the other central banks
• Private( individual) accounts
• Foreign Exchange control
• Deciding interest rates
• Overseeing the money supply
• Managing foreign reserves
• Providing banking facilities
• Regulating the UK banking system