Bank of England
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The Bank of England is the central bank of the United Kingdom, and as such it convenes the Monetary Policy Committee, which is responsible for the monetary policy of the country. It was established in 1694 to act as the English Government's banker, a role which it still fulfils today. The Bank's building is located in the City of London, on Threadneedle Street, and hence it is sometimes known as The Old Lady of Threadneedle Street or The Old Lady. The current Governor of the Bank of England is Mervyn King, who took over on June 30 2003 from Sir Edward George.
 Functions of the Bank
The Bank of England performs all the functions of a central bank. The most important of these are maintaining price stability and supporting the economic policies of the UK's government, thus promoting economic growth. There are two main areas which are tackled by the Bank to ensure it carries out these functions efficiently:
- Monetary Stability
- Stable prices and confidence in the currency are the two main criteria for monetary stability. Stable prices are maintained by making sure price increases meet the Government's inflation target. The Bank aims to meet this target by adjusting the base interest rate, which is decided by the Monetary Policy Committee.
- Financial Stability
- Maintaining financial stability involves protecting against threats to the whole financial system. Threats are detected by the Bank's surveillance and market intelligence functions. The threats are then dealt with through financial and other operations, both at home and abroad. In exceptional circumstances, the Bank may act as the lender of last resort by extending credit when no other institution will.
The Bank works together with several other institutions to secure both monetary and financial stability, including:
- HM Treasury, the Government department responsible for financial and economic policy.
- The Financial Services Authority, an independent body that regulates the financial services industry.
- Other central banks and international organisations, with the aim of improving the international financial system.
The 1997 Memorandum of Understanding describes the terms under which the Bank, the Treasury and the FSA work toward the common aim of increased financial stability.
The Bank of England acts as the Government's banker, and as such it maintains the Government's Consolidated Fund account. It also manages the country's foreign exchange and gold reserves. The Bank also acts as the bankers' bank, especially in its capacity as a lender of last resort, and to maintain its pragmatic experience in all aspects of banking also provides commercial and retail banking facilities to a very limited number of corporate institutions and individuals.
The Bank of England has a monopoly on the issue of banknotes in England and Wales. Scottish and Northern Irish banks retain the right to issue their own banknotes, but they must be backed one to one with deposits in the Bank of England, excepting a few million pounds representing the value of notes they had in circulation in 1845. The Bank decided to sell its bank note printing operations to De La Rue in December 2002, under the advice of Close Brothers Corporate Finance Ltd.<ref>Template:Cite web</ref>
Since 1997 the Monetary Policy Committee has had the responsibility for setting the official interest rate. However, with the decision to grant the Bank operational independence, responsibility for government debt management was transferred to the new UK Debt Management Office in 1998, which also took over government cash management in 2000. Computershare took over as the registrar for UK Government bonds (known as gilts) from the Bank at the end of 2004.
The Bank used to be responsible for the regulation and supervision of the banking industry, although this responsibility was transferred to the Financial Services Authority in June 1998.
The bank was founded by the Scotsman William Paterson, in 1694 to act as the English government's banker. He proposed a loan of £1.2m to the government; in return the subscribers would be incorporated as The Governor and Company of the Bank of England with banking privileges including the issue of notes. The Royal Charter was granted on July 27 1694. Public finances were in so dire a condition at the time that the terms of the loan were that it was to be serviced at a rate of 8% per annum, and there was also a service charge of £4000 per annum for the management of the loan. The first governor was Sir John Houblon, who is depicted in the £50 note issued in 1990. The charter was renewed in 1742, 1764, and 1781. The Bank was originally constructed above the ancient Temple of Mithras, London at Walbrook, dating to the founding of Londinium in antiquity by Roman garrisons. Mithras was, among other things, considered the god of contracts, a fitting association for the Bank. In 1734 the Bank moved to its current location on Threadneedle Street, slowly acquiring the land to create the edifice seen today. Sir Herbert Baker's rebuilding of the Bank of England, demolishing most of Sir John Soane's earlier building was described by Pevsner as "the greatest architectural crime, in the City of London, of the twentieth century".
When the idea and reality of the National Debt came about during the 18th century this was also managed by the bank. By the charter renewal in 1781 it was also the bankers' bank—keeping enough gold to pay its notes on demand until February 26, 1797 when war had so diminished gold reserves that the government prohibited the Bank from paying out in gold. This prohibition lasted until 1821.
The 1844 Bank Charter Act tied the issue of notes to the gold reserves and gave the bank sole rights with regard to the issue of banknotes. Private banks which had previously had that right retained it, provided that their headquarters were outside London and that they deposited security against the notes that they issued. A few English banks continued to issue their own notes until the last of them was taken over in the 1930s. The Scottish and Northern Irish private banks still have that right. Britain remained on the gold standard until 1931 when the gold and foreign exchange reserves were transferred to the Treasury. But their management was still handled by the Bank. In 1870 the bank was given responsibility for interest rate policy.
During the governorship of Montagu Norman, which lasted from 1920 to 1944, the Bank made deliberate efforts to move away from commercial banking and become a central bank. In 1946, shortly after the end of Norman's tenure, the bank was nationalised.
In 1997 the bank's Monetary Policy Committee was given sole responsibility for setting interest rates to meet the Government's stated inflation target of 2.5%. This decision was taken by the Chancellor of the Exchequer, Gordon Brown in consultation with Tony Blair prior to the 1997 general election though the announcement was made the day after the election. Should inflation overshoot or undershoot the target by more than 1%, the Governor will have to write a letter to the Chancellor of the Exchequer explaining why, and how he will remedy the situation. This was considered an astute move for several reasons:
- It removed the politically controversial responsibility from the government.
- It was very popular with the City of London, showing a sign of the new government's desire for a strong economy.
- Economic theories on time inconsistency developed by Nobel laureates Edward C. Prescott and Finn E. Kydland, along with empirical experience from New Zealand and elsewhere, suggested that independent central banks could be more successful at reducing inflation without prompting unemployment.
The target has now changed to 2% since the replacement of RPI (Retail Price Index) with CPI (Consumer Price Index) as the treasury's inflation index. RPI / CPI figures are produced in Britain by the Office for National Statistics, whose independence from direct political control and interference was announced in 2005, also by the Chancellor of the Exchequer, Gordon Brown. He modelled this move on his decision affecting the Bank of England.
An independent Bank of England had featured as a key plank of the Liberal Democrats economic policy since the 1992 general election.<ref>Liberal Democrat election manifesto, 1992</ref> A Conservative MP Nicholas Budgen had also proposed this as a Private Member's Bill in 1996, but the bill failed as it had neither the support of the government nor that of the opposition.
 Banknote issues
The Bank of England has issued banknotes since 1694. Notes were originally hand-written; although they were partially printed from 1725 onwards, cashiers still had to sign each note and make them payable to someone. Notes were fully printed from 1855, no doubt to the relief of the bank's workers. Until 1928 all notes were "White Notes", printed in black and with a blank reverse. During the 20th century White Notes were issued in denominations between £5 and £1000, but in the 18th and 19th centuries there were White Notes for £1 and £2. In the twentieth century, the Bank issued notes for ten shillings and one pound for the first time on 22 November 1928 when the Bank took over responsibility for these denominations from the Treasury which had issued notes of these denominations three days after the declaration of war in 1914 in order to remove gold coins from circulation.
During the Second World War the German Operation Bernhard attempted to counterfeit various denominations between £5 and £50 producing 500,000 notes each month in 1943. The original plan was to parachute the money on Britain in an attempt to destabilise the British economy, but it was found more useful to use the notes to pay German agents operating throughout Europe — although most fell into Allied hands at the end of the war, forgeries were frequently appearing for years afterward, so all denominations of banknote above £5 were subsequently removed from circulation.
All old Bank of England notes remain exchangeable for current notes forever. Forgeries however will be retained and destroyed by the Bank (including Bernhard notes), and it is not therefore advisable to send notes to the Bank in order to confirm whether or not they are forgeries. Notes can either be taken in person to the Bank in London during normal business hours, or sent by post at the sender's risk to:
- Custodial Services,
- Threadneedle Street,
- London EC2R 8AH
The Bank of England's first ever ten shilling note was issued on 22 November 1928. This note featured a vignette of Britannia, a feature of the Bank's notes since 1694. The predominant colour was red-brown. Unlike previous notes it, and the contemporaneous £1 note, were not dated but are instead identified by the signature of the Chief Cashier of the time. In 1940 a metal security thread was introduced for the first time, and the colour of the note was changed to mauve for the duration of the war. The original design of the note was replaced by the "Series C" design in 1960, when Queen Elizabeth agreed to allow the use of her portrait on the notes. The ten shilling note was withdrawn following the introduction in 1969 of the fifty pence coin.
The first Bank of England £1 note was issued on 26 February 1797 under the direction of Thomas Raikes, Governor of the Bank of England and according to the orders of the government of William Pitt The Younger, in response to the need for smaller denomination banknotes to replace gold coin during the French Revolutionary Wars
The Bank of England's first one pound note since 1845 was issued on 22 November 1928. This note featured a vignette of Britannia, a feature of the Bank's notes since 1694. The predominant colour was green. Unlike previous notes it, and the contemporaneous ten shilling note, were not dated but are instead identified by the signature of the Chief Cashier of the time. In 1940 a metal security thread was introduced for the first time, and the colour of the note was changed to pink for the duration of the war. The original design of the note was replaced by the "Series C" design in 1960, when Queen Elizabeth agreed to allow the use of her portrait on the notes. In 1977 the "Series D" design (known as the "Pictorial Series") featuring Sir Isaac Newton on the reverse was issued, but following the introduction in 1983 of the One Pound coin, the note was withdrawn from circulation in summer 1988.
The first Bank of England £2 note was issued on 26 February 1797 under the direction of Thomas Raikes, Governor of the Bank of England and according to the orders of the government of William Pitt The Younger, in response to the need for smaller denomination banknotes to replace gold coin during the French Revolutionary Wars
The first Bank of England £5 note was issued in 1793 in response to the need for smaller denomination banknotes to replace gold coin during the French Revolutionary Wars (previously the smallest note issued had been £10). The 1793 design, latterly known as the "White Fiver" (black printing on white paper), remained in circulation essentially unchanged until 1957 when the multicoloured (although predominantly dark blue) "Series B" note, depicting the helmeted Britannia was introduced. This note was replaced in turn in 1963 by the "Series C" £5 note which for the first time introduced the portrait of the monarch, Queen Elizabeth II, to the £5 note (the Queen's portrait having first appeared on the Series C ten shilling and one pound notes issued in 1960). In 1971 the "Series D" pictorial £5 note was issued, showing a slightly older portrait of the Queen and a battle scene featuring the Duke of Wellington on the reverse. On 7 June 1990 the "Series E" £5 note, by now the smallest denomination issued by the Bank, was issued. The Series E note (known as the "Historical Series") changed the colour of the denomination to a turquoise blue, and incorporated design elements to make photocopying and computer reproduction of the notes more difficult. Initially the reverse of the Series E £5 note featured the railway engineer George Stephenson, but on 21 May 2002 a new Series E note was produced featuring the prison reformer Elizabeth Fry. The initial printing of several million Stephenson notes was destroyed when it was noticed that the wrong year for his death had been printed. The original issue of the Fry banknote was withdrawn after it was found the ink on the serial number could be rubbed off the surface of the note. The Stephenson £5 note was withdrawn as legal tender from 21 October 2003, at which time it formed around 54 million of the 211 million £5 notes in circulation.
The first ten pound note was issued in 1759, when the Seven Years War caused severe gold shortages. Following the withdrawal of the denomination after the Second World War, it was not reintroduced until the Series C design of the mid 1960s produced the brown ten pound note. The Series D pictorial note appeared in the early 1970s, featuring nurse Florence Nightingale (1820-1910) on the reverse, plus a scene showing her work at the army hospital in Scutari during the Crimean War. This note was subsequently replaced in the early 1990s by the Series E note, where the predominant colour was changed from brown to orange. The reverse of the first Series E £10 featured Charles Dickens and a scene from the Pickwick Papers (this note was withdrawn from circulation in July 2003), while a second Series E note was issued in 2000 featuring Charles Darwin, the HMS Beagle, a hummingbird, and flowers under a magnifying glass, illustrating the Origin of Species.
After the Second World War, the £20 denomination did not reappear until Series D in the early 1970s. The predominant colour of this denomination is purple. The reverse of the Series D £20 features a statue of William Shakespeare and the balcony scene from Romeo and Juliet. In 1992 this note was replaced by the first Series E note, featuring the physicist Michael Faraday and the Royal Institution lectures. By 1999 this note had been extensively copied, and therefore it became the first denomination to be replaced by a second Series E design, featuring a bolder denomination figure at the top left of the obverse side, and a reverse side featuring the composer Sir Edward Elgar and Worcester Cathedral. In November 2006, the Bank announced that a new design for the reverse would be introduced the following spring, featuring economist Adam Smith and a drawing of a pin factory - the institution which supposedly inspired his theory of economics. Smith will be the first Scot to appear on a Bank of England note.
The fifty pound denomination did not reappear until 1981 when a Series D design was issued featuring the architect Christopher Wren and the plan of Saint Paul's Cathedral on the reverse of this large note. In 1990 this denomination saw the start of the Series E issue, when the Bank commemorated its own impending tercentenary by putting its first governor, Sir John Houblon on the reverse.
Most of the bank notes issued by the banks in Scotland and Northern Ireland are required to be backed pound for pound by Bank of England notes. Due to the large number of notes issued by these banks it would be cumbersome and wasteful to hold Bank of England notes in the standard denominations. Special one million pound notes are used for this purpose. These are used only internally within the Bank and are never seen in circulation.<ref>Template:Cite web</ref>
 Chief Cashiers of the Bank of England
- John Kendrick 1694
- Thomas Speed 1694–1699
- Thomas Madockes 1699–1739
- James Collier (jointly with Daniel Race) 1739–1751
- Ellas Simes (jointly with Daniel Race) 1751–1759
- Daniel Race 1759–1775
- Charles Jewson 1775–1778
- Abraham Newland 1778–1807
- Henry Hase 1807–1829
- Thomas Rippon 1829–1835
- Matthew Marshall 1835–1864
- William Miller 1864–1866
- George Forbes 1866–1873
- Frank May 1873–1893
- Horace George Bowen 1893–1902
- John Gordon Nairne 1902–1918
- Ernest Musgrave Harvey 1918–1925
- C.Patrick Mahon 1925–1929
- Basil G. Catterns 1929–1934
- Kenneth O. Peppiatt 1934–1949
- Percival S. Beale 1949–1955
- Leslie K. O'Brien 1955–1962
- Jasper Q. Hollom 1962–1966
- John S. fforde 1966–1970
- John B. Page 1970–1980
- David H.F. Somerset 1980–1988
- G. Malcolm Gill 1988–1991
- Graham E.A. Kentfield 1991–1998
- Merlyn Lowther 1999–2003 (first woman to hold the post)
- Andrew Bailey 2004 -
 Governors of the Bank of England
- Sir John Houblon (1694–1697)
- Sir William Scawen (1697–1699)
- Nathaniel Tench (1699–1701)
- John Ward (1701–1703)
- Abraham Houblon (1703–1705)
- Sir James Bateman (1705–1707)
- Francis Eyles (1707–1709)
- Sir Gilbert Heathcote (1709–1711)
- Nathaniel Gould (1711–1713)
- John Rudge (1713–1715)
- Sir Peter Delme (1715–1717)
- Sir Gerard Conyers (1717–1719)
- John Hanger (1719–1721)
- Sir Thomas Scawen (1721–1723)
- Sir Gilbert Heathcote (1723–1725)
- William Thompson (1725–1727)
- Humphry Morice (1727–1729)
- Samuel Holden (1729–1731)
- Sir Edward Bellamy (1731–1733)
- Horatio Townshend (1733–1735)
- Bryan Benson (1735–1737)
- Thomas Cooke (1737–1740)
- Delillers Carbonnel (1740–1741)
- Stamp Brooksbank (1741–1743)
- William Fawkener (1743–1745)
- Charles Savage (1745–1747)
- Benjamin Longuet (1747–1749)
- William Hunt (1749–1752)
- Alexander Sheafe (1752–1754)
- Charles Palmer (1754–1756)
- Matthews Beachcroft (1756–1758)
- Merrik Burrell (1758–1760)
- Bartholomew Burton (1760–1762)
- Robert Marsh (1762–1764)
- John Weyland (1764–1766)
- Matthew Clarmont (1766–1769)
- William Cooper (1769–1771)
- Edward Payne (1771–1773)
- James Sperling (1773–1775)
- Samuel Beachcroft (1775–1777)
- Peter Gaussen (1777–1779)
- Daniel Booth (1779–1781)
- William Ewer (1781–1783)
- Richard Neave (1783–1785)
- George Peters (1785–1787)
- Edward Darell (1787–1789)
- Mark Weyland (1789–1791)
- Samuel Bosanquet (1791–1793)
- Godfrey Thornton (1793–1795)
- Daniel Giles (1795–1797)
- Thomas Raikes (1797–1799)
- Samuel Thornton (1799–1801)
- Job Mathew (1801–1802)
- Joseph Nutt (1802–1804)
- Benjamin Winthrop (1804–1806)
- Beeston Long (1806–1808)
- John Whitmore (1808–1810)
- John Pearse (1810–1812)
- William Manning (1812–1814)
- William Mellish (1814–1816)
- Jeremiah Harman (1816–1818)
- George Dorrien (1818–1820)
- Charles Pole (1820–1822)
- John Bowden (1822–1824)
- Cornelius Buller (1824–1826)
- John Baker Richards (1826–1828)
- Samuel Drewe (1828–1830)
- John Horsley Palmer (1830–1833)
- Richard Mee Raikes (1833–1834)
- James Pattison (1834–1837)
- Timothy Abraham Curtis (1837–1839)
- Sir John Rae Reid (1839–1841)
- Sir John Henry Pelly (1841–1842)
- William Cotton (1842–1845)
- John Benjamin Heath (1845–1847)
- William Robinson Robinson (April 1847-August 1847)
- James Morris (1847–1849)
- Henry James Prescot (1849–1851)
- Thomson Hankey (1851–1853)
- John Gellibrand Hubbard (1853–1855)
- Thomas Matthias Weguelin (1855–1857)
- Sheffield Neave (1857–1859)
- Bonamy Dobree (1859–1861)
- Alfred Latham (1861–1863)
- Kirkman Daniel Hodgson (1863–1865)
- Henry Lancelot Holland (1865–1867)
- Thomas Newman Hunt (1867–1869)
- Robert Wigram Crawford (1869–1871)
- George Lyall (1871–1873)
- Benjamin Buck Greene (1873–1875)
- Henry Hucks Gibbs (1875–1877)
- Edward Howley Palmer (1877–1879)
- John William Birch (1879–1881)
- Henry Riversdale Grenfell (1881–1883)
- John Saunders Gilliat (1883–1885)
- James Pattison Currie (1885–1887)
- Mark Wilks Collet (1887–1889)
- William Lidderdale (1889–1892)
- David Powell (1892–1895)
- Albert George Sandeman (1895–1897)
- Hugh Colin Smith (1897–1899)
- Samuel Steuart Gladstone (1899–1901) Baron O'Brien of Lothbury
- Augustus Prevost (1901–1903)
- Samuel Hope Morley (1903–1905)
- Alexander Falconer Wallace (1905–1907)
- William Middleton Campbell (1907–1909)
- Reginald Eden Johnston (1909–1911)
- Alfred Clayton Cole (1911–1913)
- Walter Cunliffe, Baron Cunliffe (1913–1918)
- Sir Brien Ibrican Cokayne (1918–1920)
- Sir Montagu Collet Norman, 1st Baron Norman, (1920–1944)
- Thomas Sivewright Catto, 1st Baron Catto (1944–1949)
- Cameron Fromanteel Cobbold, 1st Baron Cobbold (March 1949-30 June 1961)
- George Rowland Stanley Baring, 3rd Earl of Cromer (1 July 1961–1966)
- Sir Leslie O'Brien, Baron O'Brien of Lothbury (1966–1973)
- Gordon Richardson, Baron Richardson of Duntisbourne (1973–1983)
- Robin Leigh-Pemberton, Baron Kingsdown (1983–1993)
- Sir Edward George, Baron George of St Tudy (1993-30 June 2003)
- Mervyn King (1 July 2003-)
 In fiction
- In Around the World in Eighty Days, Phileas Fogg is hunted around the world under the suspicion that he robbed the Bank of England.
- In The Million Pound Note by Mark Twain, a penniless American is given a million-pound note as a practical joke to settle a bet.
 See also
- Bank of England Museum
- Bank of Japan
- British coinage
- British banknotes
- European Central Bank
- Federal Reserve
- HM Treasury
- Pound Sterling
- UK topics
- Financial Sanctions Unit
- East India Company shareholders
 External links
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