The Bank of England, affectionately known as 'Old Lady of Threadneedle Street
' was brought into existence July 27th 1694 by William of Orange
in an attempt to organise public financing after the the lax financial management of the Stuart kings. Inspired by the Dutch
's Amsterdam Wisselbank
, which had been founded in 1609, the idea of a central national bank had become a popular method of stabilisation.
The bank was initally funded by William Paterson to the tune of £1,200,000 in return for its subscribers being incorporated via a Royal Charter as the 'Governor and Company of the Bank of England'. The banks premises temporarily opened at the Mercers' Hall in Cheapside, with a staff of 17 people a few days later, before moving, more permanently to the Grocers' Hall on Princes Street later on that year. The bank was to stay on this site for the next forty years.
In its early days the bank was occupied with the Governments demands for financing, as well the issue of a new coinage. The initial notes were each given an individual value in pounds, shillings and pence as was demanded, but as this method became cumbersome, a standard set of denominations was agreed.
In 1734 the bank moved to its current location on Threadneedle Street, and aquired its military guard after the Gordon Riots in 1780, which were only removed relatively recently, in 1973.
By the end of the 18th century, the national debt had ballooned to £850 million pounds, due in part to the ongoing Napoleonic Wars, and due to a shortage of gold the bank stopped exchanging its notes for the metal. This 'Restriction Period' continued until 1821, and was responsible for rampant inflation. These difficult times also saw the bank to open branches of its own in provincial towns.
In 1844, in an attempt to restabilise the economy, an Act of Parliament was passed giving the Bank of England the sole right to issue coinage in England and Wales. This Bank Charter Act also required the bank to increase its gold reserves in an attempt to reduce inflation, but gave it the right to set interest rates in London at what it judged to be the right level. The other effect of this act was to curb the Banks commercial activities, and it switched to a role of guardian for the nations gold.
The First World War saw the second break with the gold standard due to the borrowing of the government to fund the conflict. They tried to return to it in 1925, but by 1931 it was realised that this would be impossible. and the reserves were transferred to the Treasury.
In 1997 the Government announced its intention to transfer full operational responsibility for monetary policy to the Bank of England