Founding Following the
Revolution of 1688, which brought
William III and
Mary II jointly to the British throne, the establishment of a national bank came to fruition. During the
Nine Years' War (1688-1697), the
Royal Navy was defeated by the
French Navy in the 1690
Battle of Beachy Head, causing consternation in the government of
William III of England. The English government decided to rebuild the Royal Navy into a force that was capable of challenging the French on equal terms; however, their ability to do so was hampered both by a lack of available public funds and the government's low credit. This lack of credit made it impossible for the English government to borrow the £1.5m that it wanted to use to expand the Royal Navy.
Concept The idea of a public bank antedated its establishment by two decades. It was a topic of discussion and dispute in the 1670s and 1680s.
John Locke was an early supporter of the concept, and, once it was established, an early investor. In 1691, Scottish trader and banker
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.
Legislation played a key role in devising the legislation for establishing the Bank and steering it through the House of Commons. 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: 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). In the end the £1.2 million was raised in 12 days; 1,268 people subscribed. Their holdings were known as Bank Stock (Bank Stock continued to be held in private ownership until 1946 when the Bank of England was nationalised). 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
Royal Navy made Britain the dominant world power in the late 18th and early 19th centuries.
Governance 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.) emblem, signed by the Chief Cashier,
Thomas Madockes, and dated 1699 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 Solicitor, 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.
Premises 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.)
18th century 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.
Threadneedle Street Pay Hall, beyond which lay 'Bullion Court' (and the bank vaults below). 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. 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 Bank Picquet 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.
John Soane's rebuilding 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.
The Brokers' Exchange in the Bank 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
stockbrokers,
stockjobbers, and other persons, meet for the purpose of transacting business in public funds'.
Conflicts and credit crises , 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 in length) to dials located in sixteen different offices around the site. 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, after the crisis, many country and provincial banks failed prompting numerous commercial bankruptcies.
20th century 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.
1913 attempted bombing bombs on display at the
City of London Police Museum in 2019. The bomb on the left was used in an attempted bombing outside the bank on 4 April 1913, an attack that likely would have caused many casualties had it not been foiled. A
terrorist bombing was attempted outside the Bank of England building on 4 April 1913. A bomb was discovered smoking and ready to explode next to railings outside the building. The bomb had been planted as part of the
suffragette bombing and arson campaign, in which the
Women's Social and Political Union (WSPU) launched a series of politically motivated bombing and arson attacks nationwide as part of their campaign for women's suffrage. The bomb was defused before it could detonate, in what was then one of the busiest public streets in the capital, which likely prevented many civilian casualties. The bomb had been planted the day after WSPU leader
Emmeline Pankhurst was sentenced to three years' imprisonment for carrying out a bombing on the home of politician
David Lloyd George. Initially the plan had been to retain Soane's banking halls behind the curtain wall, but this proved challenging so they were instead demolished and rebuilt in facsimile. The demolition and rebuilding took place in stages, with staff moving from one part of the building to another (or, in some cases, into temporary accommodation at
Finsbury Circus). The bullion and securities remained on site throughout. During reconstruction human remains pertaining to the old churchyard of St Christopher le Stocks were exhumed and reburied at
Nunhead Cemetery. by Charles Wheeler Baker's
steel-framed building stands seven storeys high, with a further three vault storeys extending below ground level. It is decorated with sculpture and bronze work by
Charles Wheeler, plasterwork by Joseph Armitage, and mosaics by
Boris Anrep. A number of the bank's operations and staff were relocated to Hampshire for the duration of the war, including the printing works (which moved to
Overton), the Accountant's Department (which went to
Hurstbourne Park) and various other offices. Those who remained at Threadneedle Street, including the Directors, moved their offices into the underground vaults. After the war, the very large Accountant's Department (which managed the stock side of the bank) moved back to London from Hampshire. Its designated office-space at Threadneedle Street, however, had in the meantime been taken over by the Exchange Control office. The department was instead provided with temporary accommodation (once more in Finsbury Circus), pending construction of a new building, which would occupy a
bombsite immediately to the east of
St Paul's Cathedral. 'Bank of England New Change' was designed by Victor Heal, and opened in 1957 (at the time it was London's biggest post-war rebuilding project); the new building contained several staff amenities alongside the office accommodation and, at street level, retail units were let to an assortment of businesses. The bank had the building on a 200-year lease; but with the advent of computerisation staff numbers were drastically reduced in the 1980s-90s; parts of the building were let to other firms (most notably the law firm
Allen & Overy). The bank sold the building in 2000 and in 2007 it was demolished;
One New Change now stands on the site. The bank's "
10 bob note" (10
shilling note) was withdrawn from circulation in 1970 in preparation for
Decimal Day in 1971. In 1977 the bank set up a wholly owned subsidiary called
Bank of England Nominees Limited (BOEN), a now-defunct private limited company, with two of its hundred £1 shares issued. According to its memorandum of association, its objectives were: "To act as Nominee or agent or attorney either solely or jointly with others, for any person or persons, partnership, company, corporation, government, state, organisation, sovereign, province, authority, or public body, or any group or association of them". Bank of England Nominees Limited was granted an exemption by
Edmund Dell, Secretary of State for Trade, from the disclosure requirements under Section 27(9) of the Companies Act 1976, because "it was considered undesirable that the disclosure requirements should apply to certain categories of shareholders". The Bank of England is also protected by its
royal charter status and the
Official Secrets Act. BOEN was a vehicle for governments and heads of state to invest in UK companies (subject to approval from the Secretary of State), providing they undertake "not to influence the affairs of the company". In its later years, BOEN was no longer exempt from company law disclosure requirements. Although a
dormant company, dormancy does not preclude a company actively operating as a nominee shareholder. BOEN had two shareholders: the Bank of England, and the Secretary of the Bank of England. The
reserve requirement for banks to hold a minimum fixed proportion of their deposits as reserves at the Bank of England was
abolished in 1981. The contemporary transition from Keynesian economics to Chicago economics was analysed by
Nicholas Kaldor in
The Scourge of Monetarism. The handing over of monetary policy to the bank became a key plank of the
Liberal Democrats' economic policy for the
1992 general election.
Conservative MP
Nicholas Budgen had also proposed this as a
private member's bill in 1996, but the bill failed as it had the support of neither the government nor the opposition. The UK government left the expensive-to-maintain
European Exchange Rate Mechanism in September 1992, in an action that cost HM Treasury over £3 billion. This led to closer communication between the government and the bank. The Bank of England has been a leader in producing innovative ways of communicating information to the public, especially through its Inflation Report, which many other central banks have emulated. The bank celebrated its three-hundredth birthday in 1994. Under the terms of the
Bank of England Act 1998, which came into force on 1 June 1998, the bank's
Monetary Policy Committee (MPC) was given sole responsibility for setting interest rates to meet the Government's
Retail Prices Index (RPI) inflation target of 2.5%. The target has changed to 2% since the
Consumer Price Index (CPI) replaced the Retail Prices Index as the Treasury's inflation index. If inflation overshoots or undershoots the target by more than 1% the Governor has to write a letter to the
Chancellor of the Exchequer explaining why, and how he will remedy the situation. Independent central banks that adopt an inflation target are known as
Friedmanite central banks. This change in Labour's politics was described by
Skidelsky in
The Return of the Master as a mistake and as an adoption of the
rational expectations hypothesis as promulgated by
Alan Walters. Inflation targets combined with central bank independence have been characterised as a "starve the beast" strategy creating a lack of money in the public sector. in June 1998 responsibility for the regulation and supervision of the banking and insurance industries was transferred from the bank to the
Financial Services Authority. A
memorandum of understanding described the terms under which the bank, the Treasury, and the FSA would work toward the common aim of increased financial stability. (Ten years later, however, after the
2008 financial crisis, new banking legislation transferred the responsibility for regulation and supervision of the banking and insurance industries back to the Bank of England).
21st century The bank decided to sell its banknote-printing operations to
De La Rue in December 2002, under the advice of Close Brothers Corporate Finance Ltd.
Mervyn King became the
Governor of the Bank of England on 30 June 2003. In 2009, a request made to
HM Treasury under the
Freedom of Information Act sought details about the 3% Bank of England stock owned by unnamed shareholders whose identity the bank is not at liberty to disclose. In a letter of reply dated 15 October 2009, HM Treasury explained that "Some of the 3% Treasury stock which was used to compensate former owners of bank stock has not been redeemed. However, interest is paid out twice a year and it is not the case that this has been accumulating and compounding." In 2010, the incoming Chancellor announced his intention to merge the Financial Services Authority back into the bank. In 2011 an interim
Financial Policy Committee (FPC) was created (as a mirror committee to the Monetary Policy Committee) to spearhead the bank's new mandate on financial stability. The
Financial Services Act 2012 gave the bank additional functions and bodies, including an independent FPC, the
Prudential Regulation Authority (PRA), and more powers to supervise financial market infrastructure providers. At Government request, his term was extended to 2019, then again to 2020. , the bank also had four
Deputy Governors. BOEN was dissolved, following liquidation, in July 2017.
Andrew Bailey succeeded Carney as the Governor of the Bank of England on 16 March 2020.
Asset purchase facility 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 £895B 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 £37.1B of government bonds matured, reducing the outstanding stock from £875.0B at the end of 2021 to £837.9B. In addition, a total of £1.1B of corporate bonds matured, reducing the stock from £20.0B to £18.9B, with sales of the remaining stock planned to begin on 27 September. ==Banknote issues==