Bank of England Legislation,
the Charters of the Bank and related documents
Following the coming into force of the Bank of England Act 1998 (the ‘1998 Act’) on 1 June 1998 the constitution of the Bank of England is largely contained in the following documents. The documents have been amended as appropriate to show what remains in force. Other statutes regulate the operations of the Bank in certain respects.
Although not part of the Bank’s constitution, the Memorandum of Understanding (the ‘MOU’) between HM Treasury, the Bank and the Financial Services Authority (the ‘FSA’) is also relevant.
Memorandum
of Understanding between HM Treasury, the Bank of England and
the FSA; 
(50k)
The 1844 Act obliges the Bank to separate its issue and banking functions and to keep them in distinct departments. Probably the most important piece of legislation until the passing of the 1998 Act was the 1946 Act. This was the Act by which the Bank was nationalised and its capital stock transferred to the 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 the 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 As a result much of the 1946 Charter became redundant and has been replaced by the 1998 Charter.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 FSA and Part IV with miscellaneous matters.
Thus, the constitution of the Bank now comprises:
- the 1694 Act, which provides for the incorporation of the Bank;
- the 1694 Charter, insofar as it 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;
- the 1844 Act, which provides for the separation of the issue and banking departments;
- the 1946 Act which, apart from keeping in force sections 4(l) and 4(3), contains amended provisions relating to the payment of distributions by the Bank to the Treasury;
- the 1998 Charter which, apart from continuing the 1694 Charter, contains provisions relating to the transfer of capital stock and the declaration required of Governors and Directors; and
- the 1998 Act, which deals with the constitution and functions of Court and the MPC, reporting, funding and related matters.
Apart from the monetary policy objective stipulated in the 1998 Act, the Bank has no general statutory objectives. Its functions as seen by HM Treasury, the FSA and the Bank are, particularly so far as they relate to the Bank's financial stability functions, described in the MOU. As a chartered corporation, incorporated pursuant to a 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 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 at the end of this booklet. Various changes to the 1998 Act and related Orders have been made since 1998, in particular when the Financial Services and Markets Act 2000 came fully into force on 1 December 2001. These too are shown in the booklet.
Crown Copyright material is reproduced with the permission
of the Controller of HMSO and the Queen’s Printer for
Scotland.
