Bank of England
The United Kingdom's central bank
| Bank of England
| |
|---|---|
| Type | Central bank[1] |
| Founded | 1694[2] |
| Headquarters | Threadneedle Street, London, EC2R 8AH[2] |
| Area served | United Kingdom[1] |
| Services | Monetary policy, financial stability, prudential supervision and payment settlement[1][3] |
| Key people | Andrew Bailey (governor)[4] |
The Bank of England is the central bank of the United Kingdom. Its responsibilities include monetary policy, financial stability, supervising banks and other financial institutions, issuing banknotes for England and Wales and operating core payment infrastructure.[1][3]
The Bank was founded by Royal Charter in 1694 as a privately owned bank financing the government, initially to help fund war with France. It was nationalised in 1946 and is wholly owned by the UK government, with its capital held by the Treasury Solicitor on behalf of HM Treasury.[5]
Public ownership coexists with operational independence in parts of its work. The government granted the Bank independence in 1997, while the Monetary Policy Committee sets policy to meet a government-defined inflation target.[4][3]
History and public ownership
The Bank opened for business on 1 August 1694 at Mercers' Hall in Cheapside and moved to Threadneedle Street in 1734. Its history records that it began as a private bank acting as banker to government, before gradually acquiring its central-banking responsibilities.[2]
Nationalisation in 1946 transferred ownership from private shareholders to the government. The Bank's account of nationalisation states that the change gave government the power to appoint governors and directors and issue directions to the Bank.[2]
The Bank's governance page identifies the Bank of England Act 1998 and its Charters as its principal governing legislation.[4]
Monetary policy
The Monetary Policy Committee (MPC) decides monetary policy, with the primary objective of keeping inflation at the government's target of 2 per cent over the medium term. The Bank describes its principal instrument as Bank Rate, the interest paid on eligible firms' overnight deposits with it. It can also purchase bonds through quantitative easing to influence longer-term interest rates.[3]
The MPC has nine members and announces policy eight times a year. Decisions are taken by majority vote, with each member having a vote and the governor casting the deciding vote in a tie. Minutes and the quarterly Monetary Policy Report explain the Bank's policy decisions.[3]
Financial regulation and infrastructure
The Bank's Prudential Regulation Authority supervises banks, building societies, credit unions, insurers and major investment firms. The Bank also monitors risks across the financial system and operates systems supporting large transfers between financial institutions.[1]
Its governance structure includes the Financial Policy Committee, Prudential Regulation Committee and Financial Market Infrastructure Committee, alongside the Monetary Policy Committee. The Bank states that all four policy committees are chaired by the governor and include external members.[4]
Governance and accountability
The Court of Directors sets strategy and takes major decisions on expenditure and appointments. The Bank's published governance page describes a court consisting of the governor, four deputy governors and eight non-executive directors.[4]
The House of Commons Treasury Committee holds public evidence sessions with senior Bank representatives about monetary policy, financial stability and prudential regulation. The Bank also publishes memorandums of understanding governing its relationships with HM Treasury, the Financial Conduct Authority and other institutions.[4]
Funding
The Bank states that it does not receive a Treasury budget for its work. Its funding sources include the Bank of England Levy, fees charged to regulated firms, banking services, banknote production, services to government agencies and investment income. The levy replaced the Cash Ratio Deposit scheme in March 2024.[4]
It pays corporation tax on profits and a dividend to HM Treasury as shareholder. The dividend formula and the relationship between distributions and the Bank's capital are set out in a memorandum of understanding with the Treasury.[4]
See also
Notes
- ↑ 1.0 1.1 1.2 1.3 1.4 Bank of England, What does the Bank of England do? Bank of England, updated 5 November 2026, accessed 6 November 2026.
- ↑ 2.0 2.1 2.2 2.3 Bank of England, Our History Bank of England, accessed 6 November 2026.
- ↑ 3.0 3.1 3.2 3.3 3.4 Bank of England, Monetary policy Bank of England, accessed 6 November 2026.
- ↑ 4.0 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Bank of England, Governance and funding Bank of England, accessed 6 November 2026.
- ↑ Bank of England, Who owns the Bank of England? Bank of England, updated 19 May 2020, accessed 6 November 2026.