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Central bank of the United Kingdom

The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker and debt manager, and still one of the bankers for the Government of the United Kingdom, it is the world's eighth oldest bank. The bank was privately owned by stockholders from its foundation in 1694 until it was nationalised in 1946 by the Attlee ministry. In 1998 it became an independent public organisation, wholly owned by the Treasury Solicitor on behalf of the government, with a mandate to support the economic policies of the government of the day, but independence in maintaining price stability. In the 21st century the bank took on increased responsibility for maintaining and monitoring financial stability in the UK, and it increasingly functions as a statutory regulator. The road junction outside is known as Bank Junction. The bank, among other things, is custodian to the official gold reserves of the United Kingdom (and those of around 30 other countries). as of 2016, the bank held around of gold, worth £141 billion. These estimates suggest that the vault could hold as much as 3% of the 171,300 tonnes of gold mined throughout human history.

According to its strapline, the bank's core purpose is 'promoting the good of the people of the United Kingdom by maintaining monetary and financial stability'. This is achieved in a variety of ways:

Stable prices and secure forms of payment are the two main criteria for monetary stability.

Stable prices are maintained by seeking to ensure that price increases meet the Government's inflation target. The bank aims to meet this target by adjusting the base interest rate (known as the bank rate), which is decided by the bank's Monetary Policy Committee (MPC). (The MPC has devolved responsibility for managing monetary policy; HM Treasury has reserve powers to give orders to the committee "if they are required in the public interest and by extreme economic circumstances", but Parliament must endorse such orders within 28 days.) As of 2024 the inflation target is 2%; if this target is missed the Governor is required to write an open letter to the Chancellor of the Exchequer explaining the situation and proposing remedies. Other than setting the base interest rate, the main tool at the bank's disposal in this regard is quantitative easing.

The bank has a monopoly on the issue of banknotes in England and Wales and regulates the issuance of banknotes by commercial banks in Scotland and Northern Ireland. (Scottish and Northern Irish banks retain the right to issue their own banknotes, but they must be backed one for one with deposits at the bank, excepting a few million pounds representing the value of notes they had in circulation in 1845.) In addition the bank supervises other payment systems, acting as a settlement agent and operating Real time gross settlement systems including CHAPS. In 2024 the bank was settling around £500 billion worth of payments between banks each day.

Maintaining financial stability involves protecting the UK's savers, investors and borrowers against threats to the financial system as a whole. Threats are detected by the bank's surveillance and market intelligence functions, and dealt with through financial and other operations (both at home and abroad). The majority of these safeguards were put in place in the wake of the 2008 global financial crisis:

In 2011 the bank's Prudential Regulation Authority was established to regulate and supervise all major banks, building societies, credit unions, insurers and investment firms in the UK ('microprudential regulation'). The bank also has a statutory supervisory role in relation to financial market infrastructures.

At the same time, the bank's Financial Policy Committee (FPC) was set up to identify and monitor risks in the financial system, and to take appropriate action where necessary ('macroprudential regulation'). The FPC publishes its findings (and actions taken) in a biannual Financial Stability Report.

The bank provides wholesale banking services to the UK Government (and to over a hundred overseas central banks). It manages the UK's Exchange Equalisation Account on behalf of HM Treasury and it maintains the government's Consolidated Fund account. It also manages the country's foreign exchange reserves and is custodian of the UK's (and others') gold reserves. The bank also offers 'liquidity support and other services to banks and other financial institutions'. (for this reason the Bank of England is sometimes called 'the bankers' bank').

Under the terms of the Banking Act 2009 the bank is the UK's Resolution Authority for any bank or building society judged 'too big to fail'; as such it is empowered to act in the event of a bank failure 'to protect the UK's vital financial services and financial stability'.

Between 1715 and 1998, the Bank of England managed Government Stocks (which formed the bulk of the national debt): the bank was responsible for issuing stocks to stockholders, paying dividends and maintaining a register of transfers; Computershare took over as the registrar for UK Government bonds (gilt edged securities or 'gilts') from the bank at the end of 2004. The bank, however, continues to act as settlement agent for the Debt Management Office and custodian of its securities. Previously, the bank had maintained private and commercial accounts for all sorts of customers, including individuals, small businesses and public organisations; but a change of policy following the First World War saw the bank increasingly withdraw from this type of business to focus more clearly on its central banking role.

England's crushing defeat by France, the dominant naval power, in naval engagements culminating in the 1690 Battle of Beachy Head, became the catalyst for England to rebuild itself as a global power. William III's government wanted to build a naval fleet that would rival that of France; however, the ability to construct this fleet was hampered both by a lack of available public funds and the low credit of the English government in London. This lack of credit made it impossible for the English government to borrow the £1.5m that it wanted to construct the fleet.

In 1691, William Paterson had proposed establishing a national bank as a means of bolstering public finances. As he later wrote in his pamphlet A Brief Account of the Intended Bank of England (1694): While his scheme was not immediately acted upon, it did provide the basis for the bank's first Charter and the legislation which made its establishment possible. that William Phips played a timely, if incidental, role: his successful expedition to retrieve booty from a sunken Spanish galleon (the Nuestra Señora de la Concepción) helped create an ideal market for the bank's foundation: flooding the market with bullion and creating an enthusiasm for joint stock ventures.

Paterson's proposal required the Government to set up a fund from which interest would be paid to the subscribers. It was decided that this would be provided for by income from tonnage, and certain other shipping duties routinely levied by HM Exchequer; therefore Parliament approved the bank's establishment by means of the Tonnage Act 1694 ('An Act for granting to theire Majesties severall Rates and Duties upon Tunnage of Shipps and Vessells and upon Beere Ale and other Liquors for secureing certaine Recompenses and Advantages in the said Act mentioned to such Persons as shall voluntarily advance the summe of Fifteen hundred thousand Pounds towards the carrying on the Warr against France'). To induce subscription to the loan, the subscribers were to be incorporated by the name of the Governor and Company of the Bank of England. Public finances were in such dire condition at the time that the terms of the loan (as laid down in the Act of Parliament) were that it was to be serviced at a rate of 8% per annum; there was also a service charge of £4,000 per annum payable to the bank for the management of the loan. The Act limited the subscribers' investment to a maximum of £10,000 each in the first instance, and £1,200,000 in total (it was envisaged that the Exchequer would raise the remaining £300,000 through other forms of borrowing). The majority of the original subscribers were of 'the mercantile middle classes of London' (though tradesmen and artisans also subscribed). Investment in the navy duly took place. As a side effect, the huge industrial effort needed (including establishing ironworks to make more nails and advances in agriculture feeding the quadrupled strength of the navy) started to transform the economy. This helped the new Kingdom of Great Britain – England and Scotland were formally united in 1707 – to become powerful. The power of the navy made Britain the dominant world power in the late 18th and early 19th centuries.

The first Governor of the bank was John Houblon, and the first Deputy Governor Michael Godfrey. (330 years later, in 1994, the bank would issue a £50 note depicting Houblon to mark its tercentenary.) Governance was vested in the Governor, his Deputy and a 'Court' of 24 Directors (most of whom were merchant bankers recruited from the City); the Directors were elected annually by a 'General Court' of all the Bank's registered stockholders (collectively known as 'the Proprietors'). The common seal of the Court of Directors, adopted on 30 July 1694, depicted 'Britannia sitting and looking on a Bank of mony'; Britannia has been the bank's emblem ever since. The Court appointed three senior officers who, alongside the Governor and Deputy Governor, were responsible for its day to day running of the bank: the Secretary and Sollicitor, the First Accomptant and the First Cashier. (Their successors, the Secretary, Chief Accountant and Chief Cashier, continued to head up the main divisions of the bank's operations for the next 250 years: the Chief Cashier and the Chief Accountant had oversight of the 'cash side' and the 'stock side' of the bank, respectively, while the Secretary oversaw its internal administration.)

The bank initially did not have its own building, first opening on 1 August 1694 in Mercers' Hall on Cheapside. This however was found to be too small and from 31 December 1694 the bank operated from Grocers' Hall (located then on Poultry), where it would remain for almost 40 years. (Houblon had served as Master of the Grocers' Company in 1690 1691.)

[[File:ONL (1887) 1.463 Dividend Day at the Bank, 1770. jpg|thumb|Dividend Day at the Bank, 1770. The Pay Hall of 1732 was one of the Bank's first buildings on Threadneedle Street. (At one time shareholders were required to attend in person for the payment of Government dividends; the practice was abolished in 1910). this marked the start of the bank's role in managing Government Stocks, which were a means for people to invest in government debt (previously Government borrowing had been administered directly by the Exchequer). The bank was obliged by the Act to pay half yearly dividends and to keep a book record of all transfers (as it was already accustomed to do with regard to its own Bank Stock). The bank did not have a monopoly on lending to the government, however: the South Sea Company had been established in 1711, and in 1720 it too became responsible for part of the UK's national debt, becoming a major competitor to the Bank of England. While the "South Sea Bubble" disaster soon ensued, the company continued managing part of the UK national debt until 1853. The East India Company too was a lender of choice for the government. In 1734 there were ninety six members of staff at the bank.

thumb|right|A Perspective View of the Bank of England (published 1756): the bank initially occupied a narrow site behind the front on Threadneedle Street. The Bank of England moved to its current location, on the site of Sir John Houblon's house and garden in Threadneedle Street (close by the church of St Christopher le Stocks), in 1734. (The estate had been purchased ten years earlier; Houblon had died in 1712, but his widow lived on in the house until her death in 1731, after which the house was demolished and work on the bank began.) The front building contained transfer offices on the first floor, beneath which was an entrance arch leading to a courtyard. Facing the entrance was the 'main building' of the bank: and where deposits and withdrawals could be made. Beyond the Hall was a quadrangle of buildings enclosing a 'spacious and commodious Court yard' (later known as Bullion Court). On the south side of the quadrangle were the Court Room and Committee Room, on the north side was a large Accountants' Office; on either side were arcaded walkways, with rooms for the senior officers, while the upper floors contained offices and apartments. The pediment above the entrance to the main Hall was decorated with a carved alto relievo figure of Britannia (who had appeared on the common seal of the bank since 30 July 1694); the sculptor was Robert Taylor, who went on to be appointed Architect, in succession to Sampson, in 1764. Inside, the east end of the Hall was dominated by a large statue by John Cheere of King William III, lauded in an accompanying Latin inscription as the bank's founder (conditor); East of the Pay Hall, Taylor built a suite of halls and offices dedicated to the management of stocks and dividends, which more or less doubled the size of the bank's footprint (extending it as far as Bartholomew Lane). These rooms were centred on a large Rotunda, also known as the Brokers' Exchange, where dealing in Government Stock took place; around it were arranged four sizeable Transfer Offices, each corresponding with a different fund (as described in the 1820s: 'In each office under the several letters of the alphabet, are arranged the books on which the names of all persons having property in the funds are registered, as well as the particulars of their respective interests'). All these offices were top lit, to avoid the need for windows in the external walls. thumb|right|The bank in 1797: matching east and west wings by Sir Robert Taylor flank Sampson's centrepiece of 1733. In 1782 the church of St Christopher le Stocks was demolished, allowing the bank to expand westwards along Threadneedle Street. The new west wing was completed to Taylor's design in 1786 (its frontage matching that of Taylor's earlier east wing): it housed the Reduced Annuities Office, the Cheque Office and the Dividend Warrant Office (among others). Immediately to the north lay the former churchyard of St Christopher le Stocks, which was preserved within the complex of buildings as a garden (known as the 'Garden Court'). North of Bullion Court, Taylor built a new four storey Library, to house the bank's expanding collection of archives.

The church's demolition had been prompted by the 1780 Gordon Riots, during which rioters reportedly climbed on the church to throw projectiles at the buildings of the bank. During the riots, in June 1780, the Lord Mayor of London petitioned the Secretary of State to send a military guard to protect the bank and the Mansion House. Thenceforward a nightly guard (the 'Bank Picquet') was provided by soldiers of the Household Brigade (a practice which continued until 1973). To house the guard Taylor built a Barracks (accessed from a separate entrance on Princes Street) in the north west corner of the site.

thumb|right|The Dividend Office as rebuilt by John Soane. Sir Robert Taylor died in 1788 and in his place the bank appointed John Soane as Architect and Surveyor (he would remain in post until 1827). Under his direction, the bank was further expanded and partially rebuilt, bit by bit but to a cohesive plan. A survey of the buildings, undertaken at the start of his tenure, identified some problems, which were promptly remedied by Soane: for example in 1795 he rebuilt the Rotunda and two of the adjacent Transfer Offices (the Bank Stock Office and the Four Per Cent Office), replacing Taylor's timber roofs, which were leaking, with more durable stonework. to the west of this he built a new Chief Cashier's office, and rooms for the Secretary and Chief Accountant; to the east he constructed a new Library block and added a fifth Transfer Office (the Consols Transfer Office) to the north of the other four.

thumb|right|upright|Soane's Rotunda, when still in use as a trading floor (1804). In the late 18th and early 19th century, prior to the establishment of the London Stock Exchange, the Rotunda in the Bank of England was used as a trading floor 'where stock brokers, stock jobbers, and other persons, meet for the purpose of transacting business in public funds'.

thumb|left|Satirical cartoon protesting against the introduction of paper money, by James Gillray, 1797. The "Old Lady of Threadneedle St" (the bank personified) is ravished by William Pitt the Younger. The credit crisis of 1772 has been described as the first modern banking crisis faced by the Bank of England. The whole City of London was in uproar when Alexander Fordyce was declared bankrupt. In August 1773, the Bank of England assisted the EIC with a loan. The strain upon the reserves of the Bank of England was not eased until towards the end of the year. During the American War of Independence, business for the bank was so good that George Washington remained a shareholder throughout the period. By the bank's charter renewal in 1781, it was also the bankers' bank – keeping enough gold to pay its notes on demand until 26 February 1797 when war had so diminished gold reserves that – following an invasion scare caused by the Battle of Fishguard days earlier – the government prohibited the bank from paying out in gold by the passing of the bank Restriction Act 1797. This prohibition lasted until 1821. In 1798, during the French Revolutionary Wars, a Corps of bank Volunteers was formed (of between 450 and 500 men) to defend the bank in the event of an invasion. It was disbanded in 1802, but promptly re formed the following year at the start of the Napoleonic Wars. Its soldiers were trained, in the event of an invasion, to remove the gold and silver from the vaults to a remote location, along with the banknote printing presses and certain important records. An armoury was provided on site at Threadneedle Street for their arms and accoutrements. Soane continued in post until 1833; in the last years before his retirement he completed his rebuilding of Taylor's east wing and reconfigured Sampson and Taylor's street facing façades to make the entire perimeter of the complex a coherent whole. In 1811, an 'ingeniously contrived clock' by Thwaites & Co. was installed above the Pay Hall: as well as chiming the hours and quarters, it conveyed the time remotely (by means of brass rods extending a total of 700 feet (213 m) in length) to dials located in sixteen different offices around the site. thumb|left|The Pay Hall (where notes were exchanged for coins, and vice versa) pictured in 1866. The 'panic of 1825' highlighted risks inherent in the bank's three way split loyalties: to its stockholders, to the Government (and thereby to the public), and to its commercial banking customers. In 1825–26 the bank was able to avert a liquidity crisis when Nathan Mayer Rothschild succeeded in supplying it with gold; nevertheless in the wake of the crisis many country and provincial banks failed prompting numerous commercial bankruptcies.

thumb|The Bank's classic white five pound note remained in circulation until 1957. Until 1931 Britain was on the gold standard, meaning the value of sterling was fixed by the price of gold. That year, the Bank of England had to take Britain off the gold standard due to the effects of Great Depression spreading to Europe.

The bank has operated, since January 2009, an Asset Purchase Facility (APF) to buy "high quality assets financed by the issue of Treasury bills and the DMO's cash management operations" and thereby improve liquidity in the credit markets. It has, since March 2009, also provided the mechanism by which the bank's policy of quantitative easing (QE) is achieved, under the auspices of the MPC. Along with managing the QE funds, which were £895 bn at peak, the APF continues to operate its corporate facilities. Both are undertaken by a subsidiary company of the Bank of England, the Bank of England Asset Purchase Facility Fund Limited (BEAPFF). Initially this would be achieved by not replacing tranches of maturing bonds, and would later be accelerated through active bond sales. In August 2022, the Bank of England reiterated its intention to accelerate the QE wind down through active bond sales. This policy was affirmed in an exchange of letters between the Bank of England and the UK Chancellor of the Exchequer in September 2022. Between February 2022 and September 2022, a total of £37.1bn of government bonds matured, reducing the outstanding stock from £875.0bn at the end of 2021 to £837.9bn. In addition, a total of £1.1bn of corporate bonds matured, reducing the stock from £20.0bn to £18.9bn, with sales of the remaining stock planned to begin on 27 September.

thumb|A £1 note dated 1797 (and marked as having been paid in 1928). The bank 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. Until 1928 all notes were "White Notes", printed in black and with a blank reverse. In the 18th and 19th centuries, White Notes were issued in £1 and £2 denominations. During the 20th century, White Notes were issued in denominations between £5 and £1000. Until the passing of the Gold Standard Act 1925 the bank was obliged to pay on demand the value of the note in gold coin to its bearer. The printing itself was undertaken by private printing firms; the copper plates were kept in the vault, and accompanied during their time at the printer by a bank clerk (who would record the number of copies made); once dry they would be delivered to the bank. The printing operation was brought within the bank's premises (albeit still under private contract) in 1791; in 1808 it was brought fully in house. thumb|A One Guinea banknote, issued by the Gloucester Old Bank in 1813. Until the mid 19th century, commercial banks were allowed to issue their own banknotes, and notes issued by provincial banking companies were commonly in circulation. The Bank Charter Act 1844 began the process of restricting note issue to the bank; new banks were prohibited from issuing their own banknotes, and existing note issuing banks were not permitted to expand their issue. As provincial banking companies merged to form larger banks, they lost their right to issue notes, and the English private banknote eventually disappeared, leaving the bank with a monopoly of note issues in England and Wales. The last private bank to issue its own banknotes in England and Wales was Fox, Fowler and Company in 1921. However, the limitations of the 1844 Act only affected banks in England and Wales, and today three commercial banks in Scotland and four in Northern Ireland continue to issue their own banknotes, regulated by the bank. The Bank of England issued notes for ten shillings and one pound for the first time on 22 November 1928.

thumb|An 'Operation Bernhard' £50 note, forged by prisoners at Sachsenhausen concentration camp. During the Second World War, the German Operation Bernhard attempted to counterfeit denominations between £5 and £50, producing 500,000 notes each month in 1943. The original plan was to parachute the money into the UK 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 frequently appeared for years afterward, which led banknote denominations above £5 to be removed from circulation. In 2006, over £53 million in banknotes belonging to the bank was stolen from a depot in Tonbridge, Kent. In 1917 the bank had moved its printing operation into St Luke's Printing Works, a former hospital; in 1958 it moved out to Debden. Modern banknotes are printed by contract with De La Rue Currency in Loughton, Essex.

The Secretary of the Bank of England is today responsible for the banks governance and ethics: 'He is responsible for ensuring the organisation is well run and advises our Court of Directors [ ] He is also our conflicts officer and supports the Government when it makes appointments to our policy committees and Court of Directors'. Since 2013, the bank has had a chief operating officer (COO) with the status and remuneration of a Deputy Governor. as of 2024, the bank's COO is Ben Stimson; he is responsible for the day to day operations of the bank, including Human Resources, Property, IT and Security. Some twenty Executive Directors work alongside the Governors, forming 'the wider executive management team'. Among their number are the bank's chief economist (Huw Pill since 2021), and chief cashier.