Bank of England
The Bank of England is the central bank of the United Kingdom.
History
Banking in the modern sense originated in about the middle of the seventeenth century, when merchants took to depositing their balances of coin and bullion with the goldsmiths. The goldsmiths began to offer interest on deposits, since they could re-lend them at higher rates, and the receipts they gave in acknowledgment of the deposits began to circulate as money. And so arose a number of small private firms, all having equal rights, and carrying on the issue of notes unrestricted and free from Government control.[1]
Charles II relied to a very large extent for his financial needs on loans from the London bankers. He ran heavily into debt and in 1672 suspended Exchequer payments and so the repayment of bankers' advances. The King's credit was ruined by this for several decades. To substitute for these sources of income, William III and his government founded with a Scottish financier William Patterson the 'Governor and Company of the Bank of England'. Its establishment was a small matter in the many clauses of the Tunnage Act of 1694. The Bank was founded with a capital of £1,200,000, immediately lent to the Government. In return the Bank could issue notes to the same amount.[1]
The Bank of England went bankrupt after two years of operation, in 1696, and survived because of government help. The English Crown, remained its main customer and granted additional privileges, such as suspension of payments, and legal protection against the competition of other banks.[2]
Milestones in the Development of the Bank of England
| Year | Legal action | Bank's action |
| 1694 | First charter | Loan to the government |
| 1696 | Suspension of payments | Maintenance of government credit |
| 1697 |
|
Loan to the government |
| 1709 |
|
Loan to the government |
...[2]
References
- ↑ 1.0 1.1 Smith, Vera C. "The Rationale of Central Banking and the Free Banking Alternative", Chapter II - The Development of Central Banking in England, online version, referenced 2009-07-30.
- ↑ 2.0 2.1 Jörg Guido Hülsmann. "The Ethics of Money Production", online version, Chapter 15. Fiat Monetary Systems in the Realm of the Nation-State p.199-203, referenced 2009-07-30.
External links
- Bank of England, home page
- Bank of England on Wikipedia
- British History Online, Statutes of the Realm, Volume 6.
- John H. Clapham, The Bank of England: A History, 1694–1914, (archived)