England, Bank of

The Bank of England was incorporated by act of Parliament in 1694 with theimmediate purpose of raising funds to allow the English government to wagewar against France in the Low Countries (see). A royal allowed the bank tooperate as a joint-stock bank with limited liability. No other joint-stockbanks were permitted in England and Wales until 1826. This special statusand its position as the government's banker gave the bank considerablecompetitive advantages.
The bank was located first in Mercers 'Hall and then in Grocers' Hall, butit was moved to its permanent location on Threadneedle Street in the 1730s.
By that time it had become the largest and most prestigious financialinstitution in England, and its bank notes were widely circulated. As aresult, it became banker to other banks, which, by maintaining balanceswith the Bank of England, could settle debts among themselves. The bank wasthreatened by the economic instability that accompanied the, but itsstanding was also considerably enhanced by its actions in raising funds for
Britain's involvement in those conflicts.
During the 19th century the bank gradually assumed the responsibilities ofa central bank. In 1833 it began to print legal tender, and it undertookthe roles of lender of last resort and guardian of the nation's goldreserves in the following few decades.
The bank was privately owned until 1946, when it was nationalized. It fundspublic borrowing, issues bank notes, and manages the country's gold andforeign exchange reserves. It is an important adviser to the government onmonetary policy and is largely responsible for implementing the chosenpolicy by its dealings in the money, bond, and foreign exchange markets.
The bank's freedom of action in this regard was considerably enhanced whenit was given the power to determine short-term interest rates in 1997

The Colonial Office in the Bank of England, unsigned watercolour by one of
Sir John Soane's draftsmen, c. 1818; in Sir John Soane's Museum, London.

By courtesy of the trustees of Sir John Soane's Museum, London; photograph,
R.B. Fleming