The Bank of England is the UK’s central bank, responsible for overseeing the country’s money markets. It also prints and issues British currency.
The Bank of England began operating on the 27th July 1694 when it was given a royal charter by William III to help finance his war with Louis XIV of France. Two wealthy merchants called William Paterson and Michael Godfrey oversaw its creation, and within a year 1,268 individuals had purchased £1.2 million pounds worth of shares. This was then loaned to the government at a rate of 8% per annum.
Problems arose almost immediately, as the government pressed it for more and more money. London’s goldsmiths also took a dim view, as the institution stole away their trade. Rival banks were created, and some even started issuing their own notes.
The government stepped in in 1708 and banned companies with more than six partners from issuing currency, which in effect wiped out the competition – as smaller companies had less capital.
In 1751 the Bank was given the extra task of overseeing the National Debt.
The Bank came under sustained attack during the Gordon Riots of 1780, as angry mobs attempted to raid the place of money. Clerks had to melt down their inkwells to furnish themselves with ammo. Security was soon introduced, but other problems soon materialised…
The French Revolution saw the country’s first run on funds, when panicky investors reacted to a rumoured invasion of Wales by withdrawing their cash. It was during this time that a cartoon appeared in the national press, depicting the Bank as a haggard old lady. It was probably this that gave rise to its nickname – the Old Lady of Threadneedle Street.
1833 saw promissory notes become legal tender – i.e. they had to be accepted as payment for goods. Other banks were allowed to swap these notes for gold, so the Bank of England became keeper of the nation’s gold reserves.
This ‘Gold Standard’ (swapping currency for gold) was dropped in 1928, and ownership was passed into public hands. A new royal charter was drawn up allowing the Crown (after taking advise from the government) to appoint a governor, deputy governor, and sixteen directors.
The Bank of England has been housed in numerous buildings throughout its history, and started life at the Mercers’ Hall in Cheapside. It soon moved to the Grocers’ Hall in Princes Street, and in 1734 transferred to its present location in Threadneedle Street. It has now stood on the same site for 270 years.
Much reconstruction work has since been carried out, of course, mainly by Sir John Soane in the late 18th-century. Only his outer wall now remains. Most of what we see today dates from the 1920s, when it was rebuilt by Sir Herbert Baker.
You can visit the Bank of England Museum around the corner in Bartholomew Lane, which contains examples of banking machines and video presentations.
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