The Bank of England was incorporated by act of Parliament in 1694 with
the immediate purpose of raising funds to allow the English government to wage
war against France in the Low Countries (see). A royal allowed the bank to operate as a joint-stock bank with limited liability. No other
joint-stock banks were permitted in
England and Wales until 1826. This special status and its position as the
government's banker gave the bank
considerable competitive advantages.
The bank was located first in Mercers' Hall and then in Grocers' Hall,
but it was moved to its permanent location on Threadneedle Street in the 1730s.
By that time it had become the largest and most prestigious financial
institution in England, and its bank
notes were widely circulated. As a result, it became banker to other banks, which, by maintaining balances
with the Bank of England, could
settle debts among themselves. The bank
was threatened by the economic instability that accompanied the, but its
standing 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 of a central bank.
In 1833 it began to print legal tender, and it undertook the roles of lender of
last resort and guardian of the nation's gold reserves in the following few
The bank was privately owned until 1946, when it was nationalized. It
funds public borrowing, issues bank
notes, and manages the country's gold and foreign exchange reserves. It is an
important adviser to the government on monetary policy and is largely
responsible for implementing the chosen policy by its dealings in the money,
bond, and foreign exchange markets. The bank's
freedom of action in this regard was considerably enhanced when it 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,