Business, Legal & Accounting Glossary
The Bank of England ( www.bankofengland.co.uk ) is the UK’s central bank. Originally founded in 1694 by a group of private bankers to raise money for the Crown, it was recognised as the central banknote issuer in the UK in 1844 and was recognised as responsible for interest rate policy in 1870 but it was only in 1946, 272 years after it was first set up, that the Bank of England was actually nationalised!
The bank plays a key role in the fight to keep inflation under control having been given more independence than ever before by the former Chancellor, Gordon Brown.
One of Brown’s first actions as Chancellor in May 1997 was to give more power to the Bank with the formation of the Monetary Policy Committee on which the government does not have a vote.
The Treasury sets the inflation target and the Bank of England has operational responsibility for setting interest rates to achieve those aims.
In the past, the Bank of England was also responsible for the regulation of the banking industry although with mixed results, as the banking scandals that punctuated the 1970s (secondary banking crisis, Johnson Matthey), 1980s (BCCI) and 1990s (Barings) might suggest.
Although the Financial Services Authority (FSA) took over the responsibility for the prudential supervision of banks in 1998, one of the Bank’s continuing core functions is to maintain financial stability which entails detecting and reducing threats to the financial system as a whole. The Bank works closely with the FSA and HM Treasury and other institutions.
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This glossary post was last updated: 1st April, 2020 | 0 Views.