Bank of England

The Bank of England is a special public law institution of Great Britain that serves as the central bank of the United Kingdom. It organizes the work of the Monetary Policy Committee, which is responsible for setting official interest rates. The Bank was established in 1694.

What Is the Bank of England?

It is the central bank of the United Kingdom, which also serves as the model on which most modern central banks are based. It was originally organized in 1694 as a private joint stock bank to support England in war with France. In 1946 it was nationalized, and in 1997 received the status of an independent public organization, which is fully owned by the Solicitor of the Ministry of Finance on behalf of the government. Since 1734, the Bank has been located on Threadneedle Street, in London's main financial district - the City of London.

Management Structure

The Bank of England is governed by a board of directors (The Court of Directors). It consists of the Governor, two Deputy Governors, and 16 Non-Executive Directors. All of them are appointed by royal decree after approval by the British Parliament.

The manager and deputies are appointed for five years, members of the Board of Directors - for up to four years. All of them can be appointed for the next terms as well.

The board of directors should meet at least once a month. Its competence includes all questions of bank management, except for monetary policy issues, which are dealt with by The Monetary Policy Committee (MPC).

The chairman of the Bank of England is also the head of the monetary policy committee. The remaining members of this body are selected from among prominent economists who do not work in the institution itself. At present, the Bank of England's manager is Mark Carney (since 2013).

Functions

The Bank of England functions as a central bank. The most important of these functions are expected to maintain price stability and support the economic policy of the Government in order to ensure economic growth. With this purpose, the institution solves problems in the following key areas:

• Maintaining the stability and purchasing power of the national currency (pound sterling). This goal is ensured by a corresponding interest rate policy, which implies that the real situation is consistent with the inflation target (for 2012 - 2% per annum) determined by the government.

• Maintaining the stability of the financial system, both national and global. This involves protection against threats to the entire financial system. Supervisors and analytical services of the institution investigate possible threats, which are then eliminated through financial and other operations, both in the national market and abroad.

• Ensuring the efficiency of the UK financial sector.

The Bank cooperates with a number of other institutions to ensure both monetary and financial stability, including the HM Treasury, Financial Services Authority, and other central banks and international organizations.

In 1997, a Memorandum of Understanding was signed between the Bank of England, HM Treasury, and Financial Services Authority, describing the conditions and principles of interaction between these organizations to ensure the overall goal of improving financial stability.

As a regulator and central bank, the institution has not offered consumer banking services for many years.

The Bank of England has a monopoly on issuing banknotes in England and Wales. The banks of Scotland and Northern Ireland retained the right to issue their own notes. But the issue of these notes must be supported by a deposit at a rate of 1:1 in the Bank of England. In 2002, the Bank decided to sell its banknote printing enterprises to De La Rue, a British company that manufactures paper and security printed products.

Since 1997, the Monetary Policy Committee has been responsible for setting official interest rates. However, along with the decision to grant the Bank operational independence, in 1998 the responsibility for managing public debt was assigned to a new structure - the UK Debt Management Office. Since 2004, the functions of the registrar for bonds of the Government of England (also known as Gilts) have been transferred to Computershare Limited, an Australian stock transfer company.

On June 2, 2016, the release of the first plastic banknotes was announced. A £5 plastic bill, featuring one of the famous British prime ministers, Winston Churchill, will appear in circulation on September 13. Later it is planned to issue plastic bills of 10 and 20 pounds.

The Bank is custodian to the official gold reserves of the United Kingdom and around 30 other countries. As of April 2016, the institution held around 400,000 bars, which is equivalent to 5,659 tons of gold. According to estimates in August 2018, these gold deposits have a current market value of approximately £200 billion, which is as much as 3% of the gold mined throughout the history of mankind.