History (2)
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.
Lender of last resort
The Bank Return, as it's called, is still published every week.
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.
Managing the modern bank
The 1998 Bank of England Act made changes to the Bank's governing
body too. 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.
Key Resources
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Governors of the Bank of England A chronological list (1694 - Present) Download PDF (74k) |
