LeoGlossary: Bank of England
The central bank of the United Kingdom. The structure is similar to other central banks such as the the Federal Reserve and Bank of Japan.
It was established in 1694 to serve as the banker for the English government. This was set up as a private institution and owned by the stockholders under 1946. The Bank of England is the world's 8th oldest bank.
In 1998, the bank became a public independent organization owned by the Treasury Solicitor which operates on behalf on behalf of the government. The bank is responsible for supporting the economic policies of the government while also maintaining its independent regarding price stability.
This bank differs a bit from the The Fed in the services it provides. Until 2016, personal banking services were offered to employees. It will also managed superseded banknotes.
With the currency, it handles all banknotes issued in Wales and Britain. It is also the regulator for all banknotes issued in Scotland and Northern Ireland.
Monetary Policy Committee
The committee that is responsible for determining and implementing the monetary policy of the bank. It meets 8 times a year, for 3.5 days. At this meeting, it decides the interest rate for the United Kingdom, called the Bank of England Base Rate. This is the rate the bank charges the commercial banks for loans that mature in one day. It is similar to the Fed's discount rate.
Like the United States counterpart, this lending is through repurchase agreements. It is a collateralized loans with the security typically being gilts, bonds issued by the UK Government.
This committee is also responsible for any quantitative easing (or tightening) that is to take place. The members also provide the forward guidance.
Again like its counterpart across the ocean, the committee targets the CPI of 2%. It is also responsible for fostering growth along with employment.
There are 9 member, one of whom is the Governor for the Bank of England.
In 1997, Gordon Brown game the Monetary Policy Committee independence regarding the setting of interest rates. Before that, it was either under the Treasury or done by the committee yet not free from government. This was done to give more confidence to the rates that were set, removing the accusation of politics playing into monetary policy. This is a concern across all of the major central banks.
Guidelines for the committee were spelled out in the Bank of England Act 1998. It set forth:
- it would meet monthly
- the membership comprise the Governor, two Deputy Governors, two of the Bank's Executive Directors and four members appointed by the Chancellor (9 members)
- minutes of all meetings were to be published within six weeks
- the government has responsibility for specifying its price stability target and growth and employment objectives at least annually.
History
After the defeat by France in the late 1600s, there was a need to raise £1,200,000
Governors (Since the start of the 20th century)
| Governor | Term |
|---|---|
| Samuel Gladstone | 1899–1901 |
| Augustus Prevost | 1901–1903 |
| Samuel Morley | 1903–1905 |
| Alexander Wallace | 1905–1907 |
| William Campbell | 1907–1909 |
| Reginald Eden Johnston | 1909–1911 |
| Alfred Cole | 1911–1913 |
| Walter Cunliffe | 1913–1918 |
| Brien Cokayne | 1918–1920 |
| Montagu Norman | 1920–1944 |
| Thomas Catto | 1944–1949 |
| Cameron Cobbold | 1949–1961 |
| Rowland Baring (3rd Earl of Cromer) | 1961–1966 |
| Leslie O'Brien | 1966–1973 |
| Gordon Richardson | 1973–1983 |
| Robert Leigh-Pemberton | 1983–1993 |
| Edward George | 1993–2003 |
| Mervyn King | 2003–2013 |
| Mark Carney | 2013–2020 |
| Andrew Bailey | 2020–present |
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