Bank of England 1694. Bank of England. Main functions of the Bank of England

The UK banking system is one of the oldest. It is characterized by a high degree of concentration and specialization, a well-developed banking infrastructure, and close connections with the international loan capital market. As a global financial center, London has more foreign banks than English ones. These are primarily American and Japanese banks. The share of foreign currency deposits in UK banks is significantly higher than in other countries. The English banking system has the world's largest network of foreign branches.

Until 1979, there was no special legislation regulating banking in the UK, no official list of banks was ever published, and there was no legal definition of a bank. The central bank's control over banks was informal.

With the passing of the Banking Act in 1979, all credit institutions that accept deposits are classified by the Bank of England as either "recognized banks" or "licensed deposit taking companies". Banks do not require a license, but they must be “recognized” by the Bank of England. The Bank of England recognizes as a “bank” a credit institution that has an impeccable reputation in financial circles and provides a wide range of banking services or specializes in a particular category of services.

The most significant credit institutions that have received bank status are depository banks (London and Scottish clearing banks, banks in Northern Ireland), trading, foreign, savings banks, and accounting houses. The UK banking system is two-tier. At the top level is the central bank, at the bottom are other banks: commercial (deposit) and specialized - trading, foreign, savings banks, accounting houses.

Central Bank of England (Bank of England)

The central bank of Great Britain - the Bank of England - was founded by a special act of parliament. It was created in 1694 for the purpose of providing loans to the king to fight the war with France as a joint stock company. It included 1,268 shareholders, whose first contribution was £1,200.

This was the amount of the Bank of England's first loan to the English government. The loan was issued to the king at 8% per annum in the form of notes and bills. The Bank of England was allowed to sell and buy gold and silver, issue bills of exchange, carry out transactions with commercial bills, and provide loans against collateral, including goods. The bank was not, however, allowed to make loans to the king without the approval of parliament.

In 1946 the Bank of England was nationalized. The share capital of the Bank of England was transferred to the Treasury, and the former shareholders were compensated in the form of government bonds. Nationalization legislated the close ties between the government and the bank that had developed historically: the Bank of England served as the government’s banker even before its nationalization. The Bank of England currently works closely with the Treasury.

According to the Robert Peel Act (1844), the Bank of England must publish its balance sheet weekly. After nationalization, the Bank also began to publish an annual report on its activities, and since 1961, a quarterly bulletin.

The balance sheet of the Bank of England is divided into two parts in accordance with the Act, introduced by Robert Peel, dividing the Bank into two departments (Issuing and Banking), which serves purely accounting purposes. The accounts of the Issuing Department are related only to the issue of banknotes and their security; the net profit of this department is transferred to the National Loan Fund. All other activities of the Bank of England are reflected in the accounts of the Banking Department, the profits from which are transferred once every six months to the Treasury.

The liability of the Issue Department consists of two articles: “Banknotes in circulation” and “Banknotes in the Banking Department”. Banknotes issued by the Issue Department are transferred to the Banking Department, where they are kept as a reserve until they are needed by customers. The issue of banknotes is entirely fiduciary, i.e. is secured not by gold, but by various obligations, which are reflected in the assets of the Issue Department. The first asset item is “Government Obligations”, which consists mainly of government bonds and treasury bills. The second item of the asset - "Other liabilities" - includes commercial bills, obligations of local authorities, as well as promissory notes for the refinancing of export credits and loans to shipbuilding companies.

The first liability item of the Banking Department is “Reserves and other accounts”, it includes: the equity capital of the Bank of England (since 1844 it has been a constant amount of 14.5 million pounds sterling), accounts of foreign central banks, the International Monetary Fund, the International Bank for Reconstruction and Development. Other liability items are “Government deposits” and “Bank deposits”.

The assets of the balance sheet of the Banking Department reflect “Government liabilities” (which includes treasury bills and government bonds that do not serve as security for the issue of banknotes), “Bills of account”, “Loans”. The asset also holds a reserve of banknotes received from the Issue Department, as well as coins purchased by the Bank of England from the Treasury.

The key role of the Bank of England in the credit system is determined primarily by the fact that it serves as the country's issuing and cash center. The Bank has a monopoly on the issue of banknotes. Its liabilities (both in the form of banknotes and in the form of deposits from other banks) are the monetary base of the entire credit system. Any bank considers deposits with the Bank of England as its cash reserve, since, if necessary, it can always withdraw funds from its account with the Bank. By reducing or expanding the volume of its liabilities, the Bank of England influences the amount of cash reserves of banks and the money supply in circulation.

The Bank of England is the government's adviser on monetary policy and its conductor. In the post-war period, he used almost all the main methods of monetary policy (both general and selective). In the 1940s Monetary policy, in accordance with Keynesian recipes, was considered as an addition to financial policy and was aimed mainly at maximizing the cost of public debt: a policy of “cheap” money was pursued. In the 1950s-1960s. Monetary policy was carried out on the basis of neo-Keynesian concepts of countercyclical regulation. In 1971, the conservatives who came to power proclaimed a “new approach” to monetary regulation, based on neoconservative concepts. Direct credit restrictions were abolished and measures were taken to increase competition in the banking sector. This was accompanied by a sharp increase in the money supply and prices, and already in 1973 the Bank of England returned to the active use of the previously used direct methods of limiting credit.

With the coming to power in 1979 of the conservative government of M. Thatcher, who proclaimed itself “monetarist,” monetary policy became the main instrument for implementing the economic strategy; the government abandoned the short-term “stop-and-go” policy. The direction of monetary policy began to be determined by the deviation of the growth rate of the money supply from the established limits. The main method of the Bank of England's control over the growth of the money supply was its operations for the purchase and sale of bills, mainly commercial, not treasury bills, and the placement of government obligations outside the banking system. In the 1990s. The main instrument of monetary policy in the UK, as in other developed countries, was open market operations.

Carrying out its foreign economic function, the Bank of England, on behalf of the Treasury, carries out operations to manage official gold and foreign exchange reserves, which have been transferred to the Equalization Monetary Fund since 1939. The Bank of England conducts currency interventions to regulate the exchange rate of the pound sterling and actively participates on behalf of the government in international monetary and financial organizations.

The Bank of England is the banker of all other banks. Almost all banks in the country have accounts with the Bank of England. The most important of these are the accounts of the London clearing banks, which keep a significant portion of their cash reserves in the form of deposits with the Bank of England. Through entries in these accounts, the settlements of banks with each other are regulated. The Bank of England provides lending to the banking system either by purchasing debt from banks or through a mechanism for issuing loans secured by government obligations.

In 1979, the Banking Act gave the Bank of England, for the first time in British history, statutory powers and responsibilities to supervise the banking system. Prior to this, the regulation of the activities of credit institutions was carried out in the manner of “gentlemen’s agreements” between them and the Bank of England, and the latter was based more on traditions than on legal norms. The 1987 Act expanded the powers and responsibilities of the Bank of England to supervise the banking system. At the end of 1997, it was announced that the Bank of England would transfer banking supervision functions to a newly created supervisory authority. The Bank of England is the government's bank. It opens accounts for the government and government departments. All government revenues go into the Treasury account at the Bank of England, and expenses are met from this account. The most important function of the Bank of England is the management of public debt. Although the Bank of England holds some government liabilities in its portfolio, most of the government's fund requirements are met through the market, i.e. placement by the Bank on behalf of the Treasury of government obligations on the loan capital market.

Current government expenditures are financed through short-term government lending, the main instrument of which is treasury bills. Treasury bills are issued by the Bank of England on behalf of the Treasury on a weekly basis and are issued partly through a system of trading between banks and brokers, partly at a fixed price between public law (i.e. government) organizations, including state-owned and government-controlled savings banks, government insurance funds, the Bank of England's Issue Department and the Monetary Equalization Fund. In addition to treasury bills, short-term government bonds serve as short-term lending instruments. In the UK, short-term bonds are considered to be bonds with a maturity of up to 5 years.

To meet the long-term financial needs of the state, long-term bonds (for a period of more than 15 years) are issued. Most of the new issue of such bonds is bought by the Bank of England, which then gradually sells them on the open market. A minority of bonds are traded through the stock exchange, mainly among non-financial companies.

At the same time, the Bank is engaged in the repurchase of bonds whose maturity is approaching. The Bank of England is always ready to buy bonds from holders if they mature within a year. At the same time, the Bank can buy bonds or offer longer-term ones in return, i.e. carry out consolidation of public debt. The Bank of England also pays interest on bonds, registers bonds of the central government, nationalized industries and some local authorities.

Commercial banks in England

Commercial banks in the UK are called depository banks. They form the basis of the banking system. Most of the depository banks' operations are concentrated in 6 London clearing banks. They are so called because they are members of the London Clearing House. Four dominate: National Westminster, Barclays, Midland and Lloyd's (the big four). These banks are among the largest banks in the world.

Deposit banks are often called “retail” banks because they serve not only industrial companies and financial institutions, but also individuals, carrying out both large and small transactions. Modern depository banks perform almost all types of banking operations. The main type of their passive operations is the acceptance of deposits, or deposits: demand, fixed-term, savings. Demand deposits play a special role in the country's economy, since banks issue checks and other credit instruments on their basis. Since the early 1980s. The practice of paying interest on demand deposits has become widespread.

Demand deposits are credited to current accounts, which serve as the basis for the bank to provide various services. In the 1960s In Great Britain, so-called budget accounts appeared, closely related to current ones. The client calculates the amount of his annual expenses (such as electricity, gas, season tickets, vacations, insurance payments) and divides it into 12 parts. The received amount is transferred monthly from the current account to the budget account using the client’s order once made. The bank pays these expenses from the budget account. If the client does not have enough money, the bank can provide him with a loan.

Savings deposits are designed to mobilize even the smallest savings. Savings accounts can be opened for amounts as small as 25 pence. Bank interest begins to be paid when the amount in the savings account reaches a certain minimum.

Among the active operations of depository banks, accounting and lending operations and investments in securities, traditional for commercial banks, prevail. The most common form of lending in the UK is an overdraft. Traditionally, depository banks specialized in providing short-term loans to finance working capital in trade. In the post-war period, the provision of medium- and long-term loans expanded: from 2 to 7 years, and sometimes up to 20 years. Lending terms are primarily extended by extending the overdraft. Although formally an overdraft is a demand loan, for large clients banks extend it from year to year, turning it into a medium- and even long-term loan.

Along with the extension of terms, there is an expansion of lending facilities for depository banks. Since the 1960s depository banks began to provide medium- and long-term loans to finance the export of machinery and equipment. Such loans are provided directly to foreign importers, who thereby are able to pay for British exports. Lending is carried out under government guarantees. By lending to foreign trade, depository banks are invading the traditional sphere of activity of merchant banks.

Since the 1980s. The provision of loans to the population for the purchase and construction of houses and apartments (for mortgages, life insurance policies) is significantly expanding.

Extending the terms and expanding lending facilities is one of the ways to increase the range of operations of depository banks, their penetration into the areas of activity of other banks and financial institutions in the face of increased competition from the latter. Another way to invade the spheres of action of other financial institutions is to create branches, divisions, representative offices, and specialized subsidiaries. Thus, depository banks invest their capital in shares of companies. engaged in medium- and long-term lending to industry and agriculture, shares of financial houses, create their own branches that specialize in providing medium-term loans for the purchase of durable goods. Deposit banks are also actively introducing themselves into the spheres of operation of foreign banks, opening their branches in various countries. In the 1960s depository banks became major participants in the money market, performing the traditional operations of discount houses.

Other banks in England

Unlike "retail" depository banks, other UK banks (except savings banks) are "wholesale" banks, as they carry out large transactions primarily with companies and institutions rather than with individuals.

Merchant banks trace their origins to trading firms that specialized in accepting bills. The basis of their activity was an excellent knowledge of the solvency of individual firms in different parts of the world. Acceptance operations turned out to be so profitable that eventually these firms abandoned trading, turned into banks specializing in providing acceptance credit, and were called acceptance houses.

Acceptance houses have expanded their international operations over time. They began to place long-term bonds of foreign governments and companies on the London market, purchased by investors in the UK and other countries. Gradually London became the main center of international long-term credit.

After the global economic crisis of 1929-1933, which led to a reduction in international trade and financial transactions, acceptance houses began to increasingly expand operations on the national market. This applies to both acceptance operations and bond placement operations.

Modern acceptance houses combine international operations with activities in the national capital market, and for most of them the latter is predominant.

Acceptance houses represent a group of the largest and most influential merchant banks - the “elite” of merchant banks. Together with some of the largest of the other merchant banks, they are members of the "Committee of Acceptance Houses" and the "Association of Houses of Issue."

Merchant banks, even the largest ones, carry out a small volume of transactions compared to the "big four" clearing banks. However, they... play an important role in certain areas of banking.

The operations of merchant banks are very diverse. They provide a wide range of services for industrial and trading corporations and carry out various international financial and credit operations. Despite the differences that exist between individual commercial banks, four common areas of activity can be distinguished: issuing and founding activities and organizational and consulting services to corporations; international financial and credit operations; trust operations; traditional banking operations (accepting deposits, issuing loans, acceptance operations).

The two largest and oldest trading banks, Rohlschild and Samuel Montagu, are active participants in the gold market.

Foreign banks are credit institutions established in the UK, whose capital belongs to other countries. These banks are, of course, major competitors of English banks. However, the Bank of England welcomes their opening, since, firstly, it leads to the strengthening of London’s position as a global financial center, and secondly, foreign banks bring to the London market certain national features of banking techniques, which are gradually adopted by English banks . For example, in the 60s. American banks introduced into circulation on the London market such a new type of securities as certificates of deposit, which, following the American ones, English banks began to issue.

Foreign banks began to establish their offices in London in the 19th century. Since the late 1950s. The number of foreign banks in the UK begins to grow sharply. If in the late 1950s. there were about 80 of them, then at the end of the 1960s - already more than 150, currently - more than 450. Most foreign banks are open in London, others in Birmingham, Liverpool, Aberdeen.

American banks are the largest group of foreign banks, followed by Japanese, French, and German. A separate group consists of banking consortia, the capital of which belongs to banks in different countries.

Foreign banks specialize in operations on the European market, lend to foreign and transnational companies, and finance foreign trade. In addition, they advise companies on foreign investment and other problems arising during various international operations, provide them with economic and financial information, and give advice on choosing partners.

Since 1986, a single joint-stock Trust and Savings Bank (Trust Savings Bank - TSB) has been operating in the UK. It consolidated trust savings banks that had originated in the 19th century as savings banks rather than banks. The banks' name comes from the fact that they were managed by trustees appointed by local authorities. Since the late 1970s. The purely banking operations of these institutions are expanding, and above all, the provision of loans. In 1976, a law was passed that authorized trust savings banks to make loans to both corporations and individual borrowers. The Trust and Savings Bank performs all the basic operations of commercial banks.

The National Savings Bank (NSB) was established in 1861 as the State Savings Bank. Post offices are used as its branches. In terms of the number of deposits, NSB is one of the largest savings institutions in the world.

Until the 1980s The only credit institutions in Great Britain that enjoyed the right to receive a loan from the Bank of England were accounting houses. Thanks to this privilege, they played a special role in the UK banking system. Accounting houses got their name in connection with their traditional specialization in bill accounting. Along with bills of exchange, accounting houses have long been selling and buying short-term government bonds and obligations of local authorities. The main source of resources for accounting houses are bank loans: mainly overnight and demand loans.

Based on materials from the book "Money. Credit. Banks: Textbook for universities / E.F. Zhukov, L.M. Maksimova, A.V. Pechnikova, etc.; Edited by Prof. E.F. Zhukov" - M.: Banks and exchanges, UNITY, 1999. - 622 p.

The background to the creation of the Bank of England is as follows.

Under the influence of the Reformation, which was just beginning to unfold in Europe, the English king Henry VIII (1509-1547) significantly weakened the laws regarding usury. In the first half of the 16th century. Moneylenders significantly expanded the supply of gold and silver coins, and the country experienced a revival of economic activity. But then Henry VIII’s daughter, Queen Mary Tudor (1553-1558), came to power and again tightened the usury laws. The supply of coins decreased significantly, and a depression hit the country. After a five-year reign, power passed from Mary to her sister, Queen Elizabeth I (1558-1603). In order to put the country's disorganized economy in order, she decided to take control of the issue of money into her own hands. First of all, she decided to make the minting of gold and silver coins the exclusive prerogative of the Royal Treasury.

The need for moneylenders has sharply decreased, and the interest rates on their loans have become minimal. Queen Elizabeth I entered into direct confrontation with moneylenders.

The moneylenders began to prepare a revolution, making Oliver Cromwell their protege. It all ended, as we know, with the overthrow of King Charles I, the dissolution of parliament, and the execution of the monarch. Of course, these events cannot be explained solely by the fact that the royal power took control of coinage, but it is an important reason for the English Revolution. James Stuart (1685-1688) was placed on the throne. A civil war broke out in the country, which did not give the moneylenders the opportunity to fully establish their power. And then William (William) of Orange appears on the scene - a reliable protege of the moneylenders. According to historians, his rise to power was supported by Dutch and English moneylenders. The Stuarts were dethroned, and James's place was taken by William of Orange, who became known as William III (1688-1702). On behalf of and on behalf of a group of moneylenders, negotiations with the new king were conducted by the then-famous swindler William Patterson (before that, he tried to make a lot of money by colonizing the Isthmus of Panama, but to no avail).

For their “service” in providing a loan, they demanded a counter “service” from William of Orange:

firstly, agree to the creation of a special bank, which would be a monopoly issuer of paper money circulating throughout the country;
secondly, this bank was supposed to become the exclusive creditor of the government, issuing loans at 8% per annum in exchange for government IOUs (bonds);
thirdly, allow the bank to partially reserve its obligations, i.e. actually allow you to make money “out of thin air”;
fourthly, it was proposed to make the main “reserve” of the bank not gold, but government bonds;
the latter should ensure full government lending, as well as the issuance of other loans.

In fact, W. Paterson’s “project” contained all the basic elements of the modern mechanism for issuing money by central banks of developed countries (except that the “project” also provided for the use of gold, although its role was already secondary).

Basically, all the demands of the moneylenders were satisfied (although not completely - for example, the rights to issue national money were retained by other banks). This is how the Bank of England arose, and it had the right to issue credit money (paper pounds sterling) twice as much as there was gold in reserves. In the first year, the Bank of England issued a loan to the king in the amount of £1,200,000, with gold in the bank's vaults worth £720.00. Loans to the government and interest on them were repaid through taxes.

This system suited both the moneylenders - shareholders of the Bank of England, and government officials, because they gained access to a constant source of credit. Under this system, profits to Bank of England shareholders and government debt grew rapidly. The system gave rise to unlimited corruption and contributed to the merging of the financial power of moneylenders and the “administrative resource” of government officials.

The only losers were the English people: they bore the tax burden generated by the debt. In addition, he bore all the brunt of the crises that were inevitable with the rapid growth of debt. Finally, it must be taken into account that some of the Bank of England's loans were not backed by either gold or goods. Therefore, contrary to the established ideas that “there could be no inflation in those days,” there was a rise in prices in the country, which primarily hit ordinary Englishmen.

The “flight” from the paper pound into gold began. Therefore, already in 1696, the king passed a law prohibiting the Bank of England from paying “in kind,” i.e. gold. Thus, just a few years after the founding of the Bank of England, the mechanism for issuing money became what it is today in the USA and other developed countries.

Very soon, however, the “glorious time” ended for the government: debts grew so rapidly that there were no longer enough taxes to service and repay them. The only way for the authorities to get out of this “deadlock” was to start a war.

Indeed, a series of wars began in England for the seizure of colonies and world dominion...

The result of these wars was an even greater weakening of the authorities while simultaneously strengthening the positions of the shareholders of the Bank of England and other moneylenders. At the end of the 18th century, the Bank of England's gold reserves were so depleted by the war that in 1797 the government banned all payments in gold. In 1816, after the Napoleonic Wars, a gold standard was introduced in England, which provided for the free exchange of paper pounds for the yellow metal by the Bank of England. However, the Bank of England immediately began to issue significantly more banknotes than there was gold in its vaults, which contributed to the crisis of 1825.

After this, a fairly influential group of supporters of “curbing” the issuing activity of the Bank of England appeared in England - the so-called “monetary school”, whose representatives believed that the crisis of 1825. arose due to the “separation” of the issue of money by the Bank of England from its metal reserves. And the sad experience of King William in actually “disconnecting” the issue of money from gold, which ended in rampant inflation at the end of the 17th and beginning of the 18th centuries, was also remembered.

Representatives of the “monetary school” were opposed by the so-called “banking school,” whose representatives believed that the issue of money by the central bank should not be determined by gold reserves, but linked to the economy’s needs for money. This linkage should be ensured by the issuance of banknotes secured by bills of exchange, i.e. ultimately, goods. Without going into details of the then discussion between the two schools, we note that it affected only the activities of the Bank of England. And almost no one remembered the full reservation of commercial banks.

In 1844, a new milestone arrived in the development of the Bank of England. We have already mentioned above that in this year the so-called Peel Act was adopted, which introduced a number of innovations in the activities of the country’s central bank.

Firstly, it was established that the Bank of England received exclusive rights in issuing banknotes in the country. At the same time, however, other banks were not deprived of the right to issue, but the maximum volume of their issue was fixed at the level of 1844. From this moment on, the Bank of England actually received the right to 2/3 of the entire issue of banknotes in the country, and every year this share increased. Other banks gradually “left the game”: from 1844 to 1921. All banks except the Bank of England stopped issuing activities (207 private banking houses and 72 joint-stock banks). This did not mean, of course, a weakening of the positions of other banks. Many of them continued to increase their capital and assets. But now they began to engage exclusively in issuing non-cash (deposit) money.

Secondly, the high level of gold coverage of banknotes issued by the Bank of England was determined. To a certain extent, the step to ensure a high degree of gold coverage of the issue was not only an internal matter for the Bank of England. After all, Great Britain was the initiator of the spread of the gold standard throughout the world, and it was doomed to show by its own example what a real gold standard is. At the same time, it should be noted that the Peel Act was repeatedly suspended until the abolition of the gold standard in 1930, which made it possible for the country's central bank to significantly increase the issue of paper money.

Concluding the conversation about the Bank of England, it should be said that from the very beginning it was private enterprise, owned not by the state, but by individuals.

Among the founding shareholders were the King and Queen, who made a down payment of £10,000. A further 633 people then contributed sums that amounted to more than £500, giving them the right to vote at shareholders' meetings.

In 1946, i.e. two and a half centuries after its creation, the Bank of England was nationalized by the Labor government (by the way, the list of shareholders still remains secret). Even earlier, in 1931, when England abolished the gold standard, the Bank of England's gold reserves were transferred to the Treasury (Ministry of Finance).

However, today the Bank of England is de facto controlled not by the government, but by private banks in the City of London:

“The Bank of England has been, and continues to be, a private bank pursuing the interests of a specific, very narrow group of individuals.”

The Bank of England is the oldest central bank in the world. This institution appeared at the end of the seventeenth century in England, as a result of the so-called deal between an almost bankrupt government and a group of financiers. The banking system in England in the 1690s consisted of moneylender bankers, who provided loans from borrowed funds, and goldsmiths, who accepted gold deposits and then made loans. In 1688, the costly civil war finally ended and William and Mary ascended the throne of England. A political party came to power that pursued a policy of mercantilism and predatory seizure of colonies. England's most serious enemy was the French Empire and soon launched a half-century war. The policy of militarism turned out to be very costly, and in the 1690s the English government found that the treasury was depleted and there was no money. It proved impossible for the government to induce people to buy its bonds after so many years of war. It was also not possible to collect taxes at higher rates.

Then in 1693 a House of Commons committee was formed to find ways to raise money for the government. At the same time, the Scottish financier William Peterson appeared, proposing a completely new plan to the government on behalf of his financial group. In exchange for certain government privileges, Peterson proposed creating a Bank of England that would issue new banknotes and cover the deficit. Thus, a deal was struck. Immediately after the Bank was approved by Parliament in 1694, King William himself and some members of Parliament rushed to become shareholders of the new “money factory”.

William Peterson demanded that the British government give the new banknotes the status of legal tender. The British government refused, saying it "went too far", but Parliament gave the new Bank the privilege of holding government deposits and issuing new securities to pay the government debt. The Bank of England immediately issued £760,000 of new money, which was used to pay off the debt. This caused a surge in inflation, and within two years the Bank was completely insolvent, which gave certain advantages to private jewelers. Bank of England notes could be freely exchanged for circulating metal coins.

In 1696, the Bank of England, run by magnates from the ruling Whig political party, faced the threat of competition. The Tory Party attempted to establish a new National Land Bank and although the venture failed, the Bank of England immediately took action. The following year, Parliament passed a law prohibiting the establishment of large banks in England. Under the same law, counterfeiting Bank of England notes was punishable by death.

In 1708 the law became even more stringent. It has now become illegal to issue bearer bills (this right was given only to the Bank of England) and to create companies consisting of more than 6 people (partners), as well as to provide short-term loans for a period of up to 6 months. Thus, small banks with fewer than seven participants could become competitors of the Bank of England. Despite these conditions, the Bank of England still faced strong competition from the Tory party during Queen Anne's reign. In 1711, the South Sea Company was created, headed by Prime Minister Robert Harley, which became a strong competitor to the Bank of England, but it went bankrupt within nine years. This bankruptcy exposed the Bank of England to pressure from depositors, and the bank was given the power to suspend coin payments. The Bank of England was subjected to a similar onslaught during the accession of Bonnie Prince Charlie to the throne in Scotland. Once again the Bank of England suspended payments.

In the second half of the 18th century, private banks appeared that issued bills. By 1793 there were about 400. The financing of the generation-long wars with France that began in the 1790s led to the suspension of coin payments by a third of the banks of England in 1793, and then by the Bank of England itself in 1797. Later other banks joined them.

This suspension lasted 24 years until the end of the war with France. During this period until 1821, Bank of England notes served as real money (although not yet legalized), and after 1812 until the end of this period they became legal tender. As one might expect, a number of unreliable banks appeared during this period. In 1797 there were about 280 "country" banks in England and Wales, and by 1813 the number exceeded 900. By 1816 the total number of bank notes was 24 million pounds sterling, doubling the 1797 figure. This period could not but affect the state of affairs of the Bank of England. Its income declined, and when payments resumed in 1821, the Bank's shares fell 16%.

In 1826, as a result of the liberalization of banking, corporations were allowed to issue bearer bills, but this freedom was limited to a radius of 65 miles. Thus, the monopoly of the Bank of England was maintained, and there was almost no competition. In 1833, deposit-taking services were allowed. Subsequently, "country" banks, which previously could exchange their notes for specie, were given the right to exchange them for Bank of England notes. All these changes strengthened the position of the Bank of England, and from that moment on it functioned as a full-fledged universal bank, and "country" banks kept their reserves in the Bank. The intensive development of capitalism led to the fact that the Bank of England received a monopoly on the issue of banknotes by law in 1844. Thus, an institution was created that could ensure higher stability of monetary circulation at that stage of the development of capitalism when the massive creation of new joint-stock companies and the development of trade both within the country and abroad at an accelerated pace. The old notes still in circulation were gradually withdrawn and replaced by new ones issued by the Bank of England. The 1844 Act established the amount of money expressed in banknotes and not backed by gold coins or gold bullion held in the Bank of England vault. Thanks to this, the excessive issue of banknotes should have been prevented, which would have contributed to adequately meeting the needs of the economic system in the money supply. This development led to the issue of banknotes being separated from the bank's other commercial activities (for example, lending against collateral such as land holdings), which were gradually reduced, and the Bank of England became increasingly central bank-like in nature.

In 1946, Labour's nationalization of the bank brought it into the category of "public corporations". The share capital was transferred to the Treasury, and its former owners received generous compensation in the form of government bonds, which amounted to four times the nominal value of the shares. The bank thus did not become part of the government apparatus, but was authorized to "request information from bankers and make recommendations to them." With the approval of the Treasury, the Bank of England could "issue directions to any bank for the purpose of ensuring compliance with such recommendations or requests." Over the past years (until 1976), the bank has never exercised this right, since all “requests” are fulfilled, in the words of one American banker, with “religious rigor.”

The Bank of England is the oldest central bank in the world. It arose four centuries ago as the result of a deal between a nearly bankrupt government and a group of financier creditors.
By the end of the 17th century. England was on the verge of financial collapse. 50 years of almost continuous wars with France depleted the country's economy. Government officials then entered into negotiations with creditor financiers to obtain money to finance the military campaign. Scottish financier William Peterson proposed a different plan to the government on behalf of his financial group. In exchange for privileges from the state, he advised the creation of a bank that would issue new banknotes and cover the deficit. The Bank of England was founded by Act of Parliament on July 27, 1694. It initially had 19 employees. The Bank's capital represented Britain's first public debt.
The bank operated as a joint stock company with 1,268 shareholders. Like any private bank, at the time of its establishment it placed its shares on the market. The investors, whose names were never made public, were required to pay £1.25 million Art. gold per share. However, in reality the first payment was £1,200. Art., and in total 750 thousand f. were paid. Art. which caused a surge in inflation, and within two years the Bank found itself. With the approval of the Treasury, the Bank of England could issue directives to any bank to ensure compliance with its recommendations or requests.
The law gave the government the right to approve the board of the Bank of England, consisting of a governor and his deputy, appointed for 5 years, and 16 directors. Directors are appointed for a term of four years, with four of the 16 changing annually. Four executive directors work in the Bank on a permanent basis, and the remaining 12 represent commercial banks, industry, academia, and trade unions.
On April 4, 1979, England's first comprehensive banking law received Royal Assent and came into force on October 1, 1979. This law gave the Bank of England the rights and responsibilities to supervise the banking system. Since 1 October 1979, the establishment of a depository institution to which the Act may apply requires permission from the Bank of England. This requires the provision of detailed statistics about the activities of the depository institution to determine compliance with the criteria, and information about those who are responsible for maintaining them. Where the applicant institution has its principal activities outside the UK and raises deposits through a branch in the UK, the Bank of England must obtain confirmation from the relevant foreign supervisory authority that it is satisfied with the management of the bank and its overall financial strength.
In 1987, the Bank of England received additional rights and responsibilities for banking supervision. However, a decade later, in 1997, the banking supervision function was transferred to a newly created supervisory authority.
Currently, the Bank of England operates based on three priority goals.

supporting the value of the national currency;
ensuring the stability of the financial system;
ensuring and increasing the efficiency and competitiveness of the financial system within the country and in the international arena.

The Bank of England performs the following functions:
* serves as a bank for commercial and other central banks, as well as for the government;
* implements monetary policy;
* is an issuer of banknotes and others.
In performing the first function, the Bank of England serves three large groups of clients.
The first is commercial banks. All clearing banks have accounts with the Bank of England. Clearing operations use clearing bank accounts with the Bank of England. Banks are required to have a certain amount in the account and are not allowed to exceed it. All banks operating in the UK maintain 0.35% of the value of all their deposits in an account (deposit) with the Bank of England. This reserve rate is the main source of income for the Bank of England.
The second group is the central banks of other countries. Foreign central banks have accounts and hold gold at the Bank of England and can conduct business in London through the Bank of England.
The third is the government. The government holds accounts at the Bank of England. Thus, payments, taxes to the budget and payments from the budget for social needs pass through the accounts of the Bank of England.
The main goal of UK monetary policy is to achieve price stability. Maintaining an optimal price level currently has two directions: achieving an inflation rate of 2.5% or less and a more open (free) monetary policy regime. The most important instrument of England's monetary policy is the regulation of interest rates.
One of the instruments of monetary policy is the Bank of England's open market operations. It first began to be used in the early 30s. XX century and gradually reduced the share of Bank of England accounting operations. An instrument such as currency intervention is also actively used, but it has its own specifics in the UK. The Bank of England widely publicizes its participation in these events. The point of such almost advertising is to convince other participants in the foreign exchange market to reduce the consumption of their own currency. Sometimes the central bank tries to maintain the market through “verbal interventions”, i.e. informing participants of their interest regarding the trend in the exchange rate. Along with the Bank of England, monetary policy in the UK is carried out by the Treasury. The Bank of England, unlike other banks, cannot act independently of the government. The Bank of England Act of 1946 gives the Treasury the power to give directions to the Bank of England, and although the Treasury has never exercised this power, the relationship between them is such that the final decision on interest rates rests with the Chancellor of the Exchequer. However, the Bank of England plays an important role in the decision. It publishes a quarterly inflation report, which contains a detailed analysis of the information, as well as minutes of a meeting between the Minister of Finance and the Governor of the Bank (published six weeks after their meeting) regarding interest rates. When preparing its report on inflation and interest rates, the Bank of England takes into account domestic and external economic and monetary factors that may affect inflation over the next two years. The Bank's interest rate advice contains information about changes affecting industry and trade in different parts of England, provided by Bank of England agents.

Bank of England 1694. Bank of England. Main functions of the Bank of England

Central Bank of England (Bank of England)

Commercial banks in England

Other banks in England

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