Bank of england

Today the British banking system is a complicated system. The system is headed by the Bank of England.

The Bank of England was established privately under a royal charter in 1694 and chartered by the government in return for a loan. The bank was also allowed to issue its own notes. Although started as a private bank, it gradually evolved into a Central Bank.

The Bank of England was the first central bank. It serves as the banker to the government of the United Kingdom, with sole authority to issue notes in England and Wales, and also as the banker to the country’s commercial banks. Until 1946 the bank was privately owned, but it has long governed its operations in the national interest.

From its founding in 1694 it acted as the government’s banker, lending it money to fund the national debt. It soon acquired a practical monopoly of the note issue; eventually other banks began keeping deposits with the Bank of England and using it as a clearing house for their transactions with one another. By 19^th century, the Bank of England had become a “banker’s bank”. It had also acquired another function associated with central banking – that of being the “lender of last resort,” to which other banks could turn for aid when they were hard pressed.

During the 19-th century the Bank of England developed techniques for regulating interest rates and the amount of credit issued by itself and by the banking system generally. As the leading bank in the world’s leading financial center, its actions were considered critical in maintaining the international gold standard. By adjusting its discount rate, that is the interest it charged on loans to commercial borrowers, it was able to affect the international flow of-short-term capital. An increase in the discount rate would attract money to London and at the same time discourage borrowers; a reduction in the discount rate would have the opposite effect. The Bank of England was nationalized in 1946.

Today the bank is able to adjust the country’s supply of money through the purchase and sale of securities. It also controls interest rates and sets limits on the amount of bank credit.

The head of the Bank is Governor of the Bank appointed by the Queen on recommendation of the Prime Minister. The Queen also appoints Deputy Governor and the Court of Directors, which consists of 16 directors.