Governance and funding

Overview

The Bank of England was nationalised in 1946, so we are now wholly owned by the UK Government. Before this, the Bank of England was a private bank owned by various shareholders. We gained independence from the Government to set monetary policy  in 1997. 

History of the Bank of England

We have specific statutory responsibilities for setting policy – for interest rates, for financial stability, and for the regulation of banks and insurance companies. We have independence from the Government in terms of how we carry out these responsibilities. We do this within a framework set by Government but free from day-to-day political influence.

The Bank is overseen by a board of directors, known as the Court of Directors, who are appointed by the Queen on the recommendation of the Prime Minister and the Chancellor. The Court of Directors is responsible for setting and monitoring the Bank's strategy and making key decisions on spending and appointments. The Government chooses one of the non-executive, or external, members to chair the Court of Directors.

Our policymaking committees: the Monetary Policy Committee, the Financial Policy Committee and the Prudential Regulation Committee make decisions about our responsibilities, for example on the interest rate.

Our Internal Audit Division helps the Court of Directors and executive management to protect our assets, reputation and sustainability by independently and objectively evaluating the effectiveness of internal controls, risk management and governance processes.

Internal audit charter

Appearances before Parliament

Although we are independent, we have to explain how and why we arrive at our decisions. We demonstrate our accountability to Parliament through the House of Commons Treasury Committee. Our Governors, Executive Directors and external Monetary Policy Committee and Financial Policy Committee members regularly appear before the committee after the Inflation Report, Financial Stability Report and Prudential Regulation Authority Annual Report are published.

New members of the Monetary Policy Committee and Financial Policy Committee also have hearings at the Treasury Committee before they are appointed. Other committees also occasionally hold evidence sessions with representatives of the Bank. Transcripts, reports and video footage of all appearances are available from the UK Parliament website.

Bank of England legislation

The Bank of England was originally established by Royal Charter under the Bank of England Act 1694. Since then a number of laws have been made that determine how we operate: 

Charter of the Bank of England 1694

Bank Charter Act 1844

Bank of England Act 1946

Charter of the Bank of England 1998

Bank of England Act 1998

Banking Act 2009

Financial Services Act 2012

Bank of England and Financial Services Act 2016

Orders

The following document explains how our resolution function and our supervision functions (including those carried out by the PRA) are separated. This fulfils our operational independence obligations, which are set out in the Bank of England and Financial Services Act 2016.

Statement on structural separation between the resolution and supervision functions of the Bank of England

How the Prudential Regulation Authority (PRA) is funded

We are funded by the fees we charge firms. These fees depend on the size and type of firm, and the potential risk they could pose to financial stability.

The Financial Services and Markets Act 2000, as amended by the Financial Services Act 2012, contains the provisions that allow us to make rules to raise fees, in order to allow us to fulfil our statutory objectives. The Financial Conduct Authority (FCA) collects these fees on our behalf.

We prudentially regulate six categories of firms, or ‘fee blocks’:

• deposit acceptors
• general insurers
• life insurers
• managing agents at Lloyd’s
• the Society of Lloyd’s
• firms dealing as principal.

The amount payable by each fee block depends on the budgeted cost of prudentially regulating that category of firms. Within each category, the fee payable by an individual firm depends on the size of its business. Size is based on a specific measure for each category of firms (see table below). Firms that could cause the greatest harm to the stability of the UK financial system will be the main contributors to our funding needs.

Categories of firms and relevant fee bases

Consulting on fees

The payment of fees is enforced through PRA rules, which are published in the PRA Rulebook. We will carry out an industry consultation before any proposed changes to the rules become final.

Bank of England’s undertakings regarding its tax obligations

This document sets out the Bank of England group’s approach to managing its tax affairs.

Bank of England’s undertakings regarding its tax obligations - April 2018

Memoranda of understanding

We are required under the Financial Services Act 2012 and the Financial Services and Markets Act 2000 to enter into memoranda of understanding with certain other organisations, including HM Treasury and the other UK financial regulators. 

We also have a number of memoranda of understanding in place with overseas authorities. These make it easier to share information with international organisations, which is necessary for us to carry out our supervisory activities effectively. 

The Bank’s strategic plan

We launched our new strategic plan, ‘Vision 2020’, in May 2017. It has two main elements: how we work and how we communicate.

How we communicate

Communication at a central bank is an important policy tool. Our policies have maximum impact when they are heard and understood. So good communication links directly back to the successful delivery of our mission. 

On external communications, we will try to attract a wider audience with a targeted, creative approach to content and analysis, including key publications and speeches. The most successful communication is also two-way – as much about listening as speaking. This will be supported by a step-change in how we communicate internally. We will tailor our internal communications content for different audiences to support better policy formulation and decision-making. Our decision-making process will be as effective and empowering as possible.

How we work

We all do our best work when we work with the right people, with the right skills, on what matters most – supported by the right technology. By 2020, working across boundaries will be the norm – bringing together people with deep expertise to solve problems. And we will invest in our managers along the way so they can support and unlock the potential of all our people. ‘How we work’ means better understanding our priorities and skills so we can match our expertise to where it is needed. And it means having the right technology to smooth the path.