Behind The Doors of the Bank of England
Day 6: “ The Old lady of T street”
As I have already said in Day5 in this blog I am going to briefly go through the major events in the Bank of England’s history. I will then summaries what the Bank of England does today and what its powers are.
The History of the Bank “1694–2019"
.“27 July 1694”
On the 27th of July in 1694, the Bank of England was founded. It started life as a private bank and it would act as a banker to the Government. Its initial use was to primarily fund the war against France. The monarchs of the time, King William and Queen Mary were the first two stockholders. It was founded to “Promote the public Good and Benefit of our Peoples.” The bank opened for business on the 1st of August 1694 in a temporary home in the Mercers’ Hall in Cheapside. It originally only had 17 clerks and 2 gatekeepers as staff.
In 1694 Sir John Houblon became the first Governor of the Bank of England. The issues of the time where funding for wars and a new coinage for England. The bank also started to accept deposits. Between 1994 and 2014 Sir John Houblon was honoured on the £50 note.
In 1720 the Bank of England had its first financial crisis in the banks history. The South Sea Company threatened the banks position as the national debt. The company exchanged loans to the government for training rights in the South Seas. The company set its sights on servicing the national debt which was the Bank of England’s job at the time. The company in 1720 was given part of the national debt and stock prices rose dramatically. However prices then crashed and thousands where ruined.
In 1725 the first denominated banknotes were issued. The notes where often hand written for specific amounts being deposited in the bank. The denominations on notes were £20, £30 £40 £50 £60 £70 £80 and £90.
In 1734 the Bank of England moved to Threadneedle Street. Over the next 100 years the bank bought all adjacent properties so it now owns the total of 3.5-acres in the heart of London. It cost around £268, 17 and two shillings.
In October 1788 the architect Sir John Soane was appointed to create the Bank of England. He, over his 45 year career at the bank, doubled the size of the bank and in 1828 enclosed the property with a windowless wall.
In 1797 due to France declaring war on England the amount of gold reserves in the bank dropped from £16 to 2 million due to the fact that people could exchange notes in to gold from the vaults at the bank. This caused the prime minister of the time to Placed a Privy Council Order on the Bank of England.
This cartoon lead to the Bank of England being known as the “Old lady of Threadneedle street.”
Between the years of 1797 and 1821 during the restriction period forgeries where punishable by death. Over 300 people where hanged during this period. The forgeries that were attempted where more of the nature of trying to turn a £10 note, that were already in circulation, into a £20 by alterations rather than making totally new banknotes.
In 1826 the first Bank of England branch opened. This branch was opened in response to the financial crisis at the time. It also allowed the bank to have more control of banknote circulation throughout the country. The first branch was opened in Gloucester on the 19th of July in 1826. This branch was then transferred to the Bristol branch in 1849.
In 1834 the Bank of England Plymouth branch opened. One of the major reasons for the opening of the Plymouth branch was because the Navy wanted to have easy access to banknotes. The branch closed in 1949.
In 1844 the Bank of England drew up the “Bank Charter Act of 1844,” which gave the Bank of England many more powers. One of the major laws was that no other bank persons or companies could produce banknotes.
.“9–10 May 1866”
Between the 9th and 10th of may in 1866 the discount house of Overend Gurney entered into a crisis called, “The Overend Gurney financial crisis.” The Overend Gurney was the largest discount house at that time. Due to bad loans and the company suffered significant losses an on the tenth of May in 1866 it suspended all payments indefinitely.
In 1870 banknotes started to be signed by the Chief Cashiers. The only person who can sign banknotes is the chief cashier. This tradition has continued to this day.
In 1894 the first woman was officially employed by the Bank of England. The Woman was called Janet Hogarth. She started on the wages of £157.10.0 per annum . At those time that was a very respectable wage. Six years previous she received a first from Oxford. She then employed Miss Elsse on a salary of £105 per annum.
In 1908 the Bank of England Sports Centre opened in Roehampton. This opened in connection with the fact that the Olympics where being held in London in 1908. The sports club is still in use to this day.
Between the years of 1914 and 1918 world war I was fought. During the war the governor at the time granted pay leave to as many clerks as the bank could possible spare to serve in the defence forces of the country. 71 Bank of England staff lost their lives in world war I. The bank also help fund most of the war efforts and it had to use most of its reserves however to keep the populations spirits up it claimed that the money came from donations frim the public.
In 1920 Montagu Norman became Governor of the Bank of England. He served until 1944 and is the longest serving governor in the banks history. He played a key role in rebuilding the English monetary system after world war I and he help beat the Bank foe International Settlements and the League of Nations.
In 1925 the old Bank of England was rebuilt. Sir Herbert Baker Demolished Sir John Soane’s old Bank of England. The new Bank of England was built n the same 3.5-acre plot however instead of 3 floors it now stands at 7 floors tall.
In 1931 the gold standard was suspended. As the confidence in the sterling had collapsed the Bank of England lost much of its reserves as the value of the UK currency directly was linked to the gold in the vaults.
Between the years of 1939 and 1945 world war II was fought. During the blitz the Bank was never hit however there was some minor damage reported on the outside of one of the walls of the building as the road outside near the royal exchange suffered a direct hit.
Around the 1940s Germany started to create banknote forgeries to destabilize the pound sterling. The Bank of England found that Germany had made £9million notes with a face vale of £134million. The Germans had been able to coppice the £5 notes very well as the Bank of England hadn't changes the way they had made them for many years.
In 1946 the Bank of England was nationalised. Throughout the history of England the bank has been always seen as a private institution. Now the bank is owned buy the government and not individual shareholders. This allows the government to control the bank and the laws surrounding the bank.
A). In 1960 the Queen became the first monarch to appear on a banknote. This feature has become very popular and the queen now features on all banknotes. It also is helpful to stop forgeries as it is harder to replicate a face on a counterfeit rather than a pictorial image.
B). In 1960 the first quarterly bulletin was published. It contained the governor Cameron Cobbold’s “Mansion House” speech. It also consisted of the monetary statistics of the day.
In 1968 the first Giant banknote was printed. This note have a face value of £1 million. These note will never leave the four walls of the bank of England. They are similar to the bank note named “Titan.” These have a face value of £100 Million. They both play an important role in backing the value of Scottish and Northern Ireland banknotes.
.“9 September 1970”
On the 9th of September in 1970 the Bank of England issued its first pictorial note. The £20 note features William Shakespeare including the Romeo and Juliet balcony scene. It marked the beginning of series D of bank notes. The £20 note was the work of Harry Norman Eccleston MBE.
.“16 September 1992”
On the 16th of September in 1992 the UK crashed out of the European exchange rate. The UK joined in 1990 but unfortunately due to lots of raises in interest rates and a intervention in the foreign exchange that did not move the sterling from the floor of ERM. then this lead to the government making he decision to pull out as they deemed the cost of keeping within the boundaries where too costly. The financial crash cost the HM Treasury over £3 Billion.
In February of 1993 the first inflation report was published. This was instigated when the chancellor invited the Bank of England to provide regular reports on the progress being made towards the Government’s inflation objective. This publication is still published to this day and now is followed by a press conference.
In 1994 the Bank of England turned 300. This is the bank’s tercentenary. celebrated by inviting 130 central bank governors to a symposium on the future of central banking. This ended with a panel session involving lord Richardson, Paul Volcker, Jacques de Larosiere and Karl Otto Pohl. The celebration climaxed with a ceremony at St Paul’s Cathedral which was attended by the queen, prime minister and the mayor or London. A 2 pond coin was minted to mark the occasion.
In October of 1996 the Bank of England launched the Financial Stability Review (FSR). This new publication called (FSR) has heightened developments affecting the stability of the financial system. In 2006 the name was changed from (CREST) to (FSR) to reflect the advancements in the publication.
In 1996 real-time gross settlement began. This allows two or more institutions to settle payments without settlement risk. The (RTGS) also allows institutions, predominantly banks, to settle payments in many ways. On average the (RTGS) system settles around £600 billion between worldwide banks and foundations.
In 1997 the Bank of England agency opened. The banks branches were replaced by 12 regional agencies. The Leeds branch became a cash centre where banknotes are distributed across the country. Agency's collect data on trends and new developments in the economic sector of England economy. They are the eyes and ears of the Bank of England.
In 2012 the prudential regulation Authority (PRA) and the Financial Policy Committee (FPC) were formed. They formed these policies in response to the 2007–08 financial crisis.
.“13 September 2016”
On the 13th of September in 2016 the first polymer banknote was released. The new Five pound note was made out of polymer and features Winston Churchill. The polymer notes last longer and are harder to counterfeit than paper notes.
.“26 June 2019”
On the 26th of June in 2019 the BBC launched a Bank of England documentary. The documentary was two hours and I showed the insides of the Bank of England and how the make decisions like what should interest rates be and how they can change peoples mortgages. In the documentary it is also covered on how the bank keeps the economy safe from threat.
This above information is a very quick summation of the banks history, so I have added the link to the sight of origin of this knowledge. You can then read the bank of England history in more depth if you wish.
The Banks jobs today
The Bank of England is the only bank that is allowed to make genuine English banknotes. they make £5, £10, £20 and £50 notes. The new polymer gen of banknotes are far harder to counterfeit and the new £20 note is the banks most secure. The Bank also facilitates easy and safe payments for the general public. It also runs the core service that enables business and banks to make large transfers like CHAPS, and banks to settle balances among themselves. The bank of England is also the only bank in England and Wales that can distribute notes however it does regulate banknotes in Scotland and Ireland. The bank deals with £600 billion worth of transfers every day.
The Bank of England keeps the value of peoples money by keeping prices stable. They control the level of inflation. The government asks the Bank of England to keep the rate of inflation at 2% as it is a very good level for the UK’s economy. The bank does this by setting core interest rates at which we lend to the banks, and by buying or selling assets. this is called Monetary Policy.
Safe and sound banks
The Banks Prudential Regulation Authority system regulate sand supervises all major banks, building society's and credit unions to keep all banks and companies safe financially and physically.
A resilient financial system
The bank connects people who want to save, invest or borrow which makes up a vital part of our economy. The bank of England keeps a close eye on any risks and then it will take any according action in response to these levels or risk in the economy. For example the Bank can lend to banks to ensure that they can lend to businesses. they can also make sure that failing banks do not damage the economy or cost the taxpayer or any depositors. The risk in the economy is identified by the (FPC) Financial Policy Committee. Every 6 months the report is published in order to highlight risks and to clearly lay out what the Bank of England is doing about these risks.
Understanding the Bank of England
That's all for Day 6, I hope that you have enjoyed this fact heavy and interesting blog on the Bank of England. I personally find it really interesting to look at ,in brief, how our leading bank has evolved and what it does for our economy in England. Day 7 will be called, “ Double edged benefits.”