The Bank of England: an overview

The Bank of England (BoE) is the United Kingdom’s central bank. The Bank of England issues the notes that British citizens use to conduct their day to day activities. With billions of notes in circulation, it controls currency circulation, monetary policy and more. The Bank of England also plays a significant role in regulating financial services companies within the UK. These functions ensure the UK financial system stays buoyant and is well equipped to manage financial crises.

History of the Bank of England

The Bank of England was created in 1694 as a private bank. It provided loans and other services to the British government in times of economic distress. In fact, it is the 8th oldest bank in the world and, in 1725, issued its first bank notes.

It wasn’t until 1844 that the Bank of England started to really integrate with the British government. The Bank Charter Act of 1844 restricted any new banks from issuing bank notes and the BoE’s bank notes became formalized in the UK. Over the next 100 years, the Bank of England played a crucial role in establishing the financial infrastructure of the UK and navigating crises like World War I and II.

Today, the BoE is a public entity and it answers directly to UK Parliament. It provides many public services like issuing bank notes, designing monetary policy and holding the gold reserves for the UK.

Key provisions and powers

Currency management and inflation: The Bank of England is responsible for all currency management and preventing the inflation of currency in England. All of the currencies that are in circulation are produced and controlled directly by the Bank. There are more than 4.5 billion notes in circulation today with a total worth of over $80 billion.

Supervision over banks operating in the UK: The Bank of England also plays a supervisory role over all banks operating in the UK. The Bank sets all of the regulatory requirements that other banks need to follow. Banks, investment firms and other prominent financial institutions must complete regulatory reporting to the BoE on their operations.

Custodian of gold reserves: The Bank of England is the official custodian of gold reserve for the United Kingdom and several other countries. It’s estimated that it holds roughly 3% of all of the gold that was mined in human history.

Who must comply?

Banking sector: The banking sector is the primary sector that the Bank of England governs. The banking sector includes banks, building societies, credit firms, savings associations and more.

Insurance sector: The insurance sector is another key demographic that has to comply. The insurance sector provides key services for the public like health insurance, car insurance, etc. Since the insurance sector has access to extensive consumer funds, the BoE regulates them to ensure they are not misusing those funds or being overly leveraged.

Public: The public must also comply with the Bank of England. Since it serves as the central bank of the UK, it has power over all citizens when it comes to monetary activities. Citizens that engage in currency manipulation or destruction will be held responsible. The public is also expected to follow the monetary guidelines set by the Bank.