BANK OF ENGLAND

central bank and note-issuing institution of Great Britain. Popularly known as the Old Lady of Threadneedle Street, its main office stands on the street of that name in London. The bank has eight branches, all of which are located in the British Isles. Although Bank of England notes are legal tender throughout the United Kingdom, banks in Scotland and Northern Ireland also issue notes that may be either used as currency themselves or exchanged for Bank of England issues. In all matters beside note issue, the Bank of England has sole central banking functions in Great Britain. The affairs of the bank are controlled by a governor, a deputy, and 16 directors.

It was founded (1694) as a commercial bank by William Paterson with a capital of £1.2 million, which was advanced to the government in return for banking privileges, including the right to issue notes up to the amount of its capital. In 1709 the capital was doubled; the charter was renewed in 1742, 1764, and 1781. The bank's facilities proved a great asset in English commercial, and later industrial, expansion. The bank's functions were both public and private; it safeguarded the English pound and also operated for private profit. Efficient regulation was assured by the Bank Charter Act of 1844, which laid the basis for the bank's modern structure. The issue department, which handles the issuing of bank notes for general circulation, was separated from the banking department, which handles the remaining banking functions, including the management of the public debt, and serves as the depository of government funds and as the staple bank of England. It was privately owned until 1946, when an act of Parliament provided for its nationalization. The stockholders were compensated, and the bank subsequently dropped virtually all its private business. In 1997 the bank was given the power to set interest rates, a function formerly performed by the cabinet; at the same time its oversight of the British banking industry was transferred to the Securities and Investments Board

See J. H. Clapham, The Bank of England: A History (2 vol., 1944; repr. 1966); J. Giuseppi, The Bank of England (1966).

The Columbia Encyclopedia, Sixth Edition Copyright© 2004, Columbia University Press. Licensed from Lernout & Hauspie Speech Products N.V. All rights reserved.

-4118-