Incorporated in 1694, the Governor and Company of the Bank of England is the world's second-oldest central bank (after Sweden's Sverige Riksbank) and the one on which most of the others for their sins are based. Dreamed up by the Earl of Halifax and Scottish banker William Patterson, the Bank was an ingenious solution to the problem of sovereign debt. The sovereign in debt was William III, who couldn't raise the £1.2m needed for a new navy. But on the promise of exclusive rights to the government's balances (plus other titbits, such as a licence to print money, or at least issue banknotes), the Bank's original subscribers ponied up the cash in just 12 days, albeit at a swingeing 8% interest rate. Later, it acquired other functions, such as managing the national debt and becoming lender of last resort. In 1946, it was nationalised, becoming the modern central bank we know and love today.
In 1997, the Bank was made the UK's politically independent interest rate-setting authority through the Monetary Policy Committee. Its role of City watchdog was given to a new body, the FSA. This so-called tripartite model conspicuously failed to foresee the crash of 2008, and in 2010 chancellor George Osborne said he would give regulation back to the Bank. It has become (in)famous for quantitative easing, a £200bn asset purchase scheme designed to free the wheels of finance and ease liquidity. Questions have also been raised about deputy governor Paul Tucker's role in the Libor scandal.
Who's the boss?
Railway worker's son Mervyn King, a former professor of economics at the LSE. He joined the Bank in 1991 and became governor in 2003. Criticised for letting the noughties house-price bubble inflate, he partly redeemed himself by cutting interest rates to 0.5% in response to the crisis. He recently said that bankers should take lessons in 'fair play' from Olympic athletes.
The secret formula?
As custodian of the nation's currency and financial probity, encouraging price stability, low inflation and economic growth, the Bank has had a chequered record of late, although it's not alone in that. Expect reform to follow hard on the heels of King's departure next June.
Don't mention ...
Candidates aren't queuing up for his job. Tucker was internal favourite until those Libor skeletons jangled. Another hot prospect, Bank of Canada governor Mark Carney, has ruled himself out. Osborne is having to advertise. What happened to the old boys network?
|Value of banknotes in circulation||£54.9bn|
|Total assets held||£329.3bn
|Net foreign currency reserves||$46.3bn|
Figures for FY 2011