The Bank was established as a corporate body by Royal Charter under the Bank of England Act 1694. Since then there have been a number of enactments directly affecting the Bank and its organisation. Various statutory provisions remain in force which are concerned with the Bank’s organisation, governance, powers and functions.
The constitution of the Bank of England is largely contained in the following documents. The copies, or relevant parts, have been amended as appropriate to show what remains in force. Other statutes regulate the operations of the Bank in certain respects.
The Memorandum of Understanding on financial crisis management between HM Treasury on the one hand and the Bank and the Prudential Regulation Authority on the other, entered into pursuant to the 2012 Act, is also relevant.
The 1694 Charter incorporates the Bank, constitutes its capital stock and authorises it to have a common seal, to hold land and other property, and to sue and be sued. As a chartered corporation, incorporated pursuant to statute, the powers of the Bank have to be determined by reference to the 1694 Charter and statute and subsequent Charter and legislative amendments.
The 1844 Act obliges the Bank to separate its issue and banking functions and to keep them in distinct departments. Under the 1946 Act the Bank was nationalised and its capital stock transferred to HM Treasury. At that time a revised Charter was granted and the 1946 Act and the Charter contained various provisions relating to the management of the Bank. Importantly, section 4(l) of the 1946 Act enabled HM Treasury from time to time to give directions to the Bank as, after consultation with the Governor, they thought to be necessary in the public interest.
The 1998 Act introduced several important changes:
- Part I and Schedule 1 replaced the provisions relating to the constitution and operation of Court in the 1946 Act and the 1946 Charter. As a result much of the 1946 Charter became redundant and has been replaced by the 1998 Charter.
- Part I and Schedule 2 imposed formal reporting requirements on the Bank and placed the funding on a statutory basis.
- Part II and Schedule 3 conferred operational responsibility for monetary policy on the Bank and established the Monetary Policy Committee (the ‘MPC’) as a Committee of the Bank with responsibility for the exercise of its powers in relation to the formulation of monetary policy. Section 4(l) of the 1946 Act has been amended to exclude monetary policy from the matters in relation to which the Treasury can give directions.
- Part III deals with the transfer of the Bank’s supervisory functions to the Financial Services Authority and Part IV with miscellaneous matters.
The 1998 Charter, apart from continuing the 1694 Charter, contains provisions relating to the transfer of capital stock and the declaration required of Governors and Directors.
The 2009 Act introduced further important changes regarding the responsibilities, powers and role of the Bank. These included provisions regarding the governance of the Bank and a new statutory financial stability objective. It created a new Special Resolution Regime (SRR) for dealing with distressed banks and building societies. It conferred a statutory oversight role on the Bank in relation to inter-bank payment systems recognised by HM Treasury and created a new framework for the issuance of banknotes in Scotland and Northern Ireland to be overseen by the Bank. The Act also granted the Bank immunity in its capacity as a monetary authority (including its central bank and financial stability-related functions) and authorised the Bank to disclose financial stability-related information to certain bodies.
The 2012 Act introduces significant changes to the regulatory framework for financial services and abolishes the Financial Services Authority. The Act creates a new regulatory structure consisting of the Bank’s Financial Policy Committee (‘FPC’), the Prudential Regulation Authority (a subsidiary of the Bank) and the Financial Conduct Authority (‘FCA’). It also makes other important changes to the Financial Services and Markets Act 2000 and to the 1998 and 2009 Acts. In particular, as regards the Bank, under changes introduced by the 2012 Act the Bank assumes responsibility for the supervision of central counterparties and securities settlement systems in the United Kingdom to sit alongside its existing responsibilities for overseeing recognised payment systems. It also introduces revised governance arrangements regarding the roles of Court and the newly created Oversight Committee in the 1998 Act and provides for revised appointment arrangements of the Governor of the Bank, with the effect that the Governor is to be appointed for a single term of eight years rather than a maximum of two five-year terms.
The 1998 Act was brought into force on 1 June 1998. A list of the Orders made under the 1998 Act, together with the dates on which they came into force, is set out in the document headed ‘Orders’. Various changes to the 1998 Act and related Orders have been made since 1998, in particular with the introduction of the Financial Services and Markets Act 2000, the 2009 Act and more recently the 2012 Act. These too are shown in the relevant documents, as are the Bank immunity and information disclosure provisions introduced by the 2009 Act (as amended by the 2012 Act) and the provisions in the 2012 Act concerning collaboration between HM Treasury and the Bank, FCA or PRA.
The 2012 Act is being introduced on a phased basis during 2013. The first Commencement Order was made on 23 January 2013 at which point certain provisions relating to the FCA’s and the PRA’s power to make orders or regulations came into force. Other provisions relating to appointments came into force on 19 February 2013. The 2012 Act came into force more fully on 1 April 2013. The full text of the 2009 Act and the 2012 Act can be accessed on: www.legislation.gov.uk
Crown Copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland.