Bank of England
The Bank of England was founded in 1694 to lend money to the government to fund the rebuilding of the navy, and other military pursuits against the French by London merchants and financiers. It was allowed to be the first incorporated bank in the country, rather than being limited to 6 partners, as all banks were 1826, meaning it could issue shares to raise finance. It began as a private commercial bank, but was later nationalized in 1946. The Governor of the Bank of England, currently Mark Carney, is responsible for the management of the bank, along with the Executive Team of deputy governors and directors. As a commercial bank and the central bank of the United Kingdom ...view middle of the document...
A key function of the Bank of England that separates it from others is it’s role in the implementation and management of monetary policy, through manipulating interest rates and through quantitative easing. The Monetary Policy Committee is a team of internal and external economic experts who meet on a monthly basis to determine interest rates. The committee is formed of the Governor, deputy governors, the bank’s chief economist, and four external experts, and vote on changes or maintenance of the rate of interest, except the Governor who will only vote in the event of a tie. Also a representative from the Treasury attends meetings and makes presentations, but does not get a vote to keep monetary policy from being abused by politicians. The bank is also responsible for quantitative easing which is purchasing securities and assets from the banks and institutions to increase the money supply and encourage lending.
The Bank of England operates as a bank to the other banks in the UK as banks wishing to operate here must hold deposits at the bank as a percentage of liabilities to ensure the means to trade at the level they are, and to repay savers. As well as this they have operational accounts through which payments through the clearing system are made. This is to fund transactions between individuals and banks to settle transactions that are made on a daily basis. This arises to prevent there having to be a physical transfer every time a payment is made from one account to another, so instead they are just transferred from one bank to another but then taken from or assigned to an account within the bank.
An important function of the Bank of England is it’s role as a lender of last resort. In this role the bank offers loans to other banks or financial institutions experiencing difficulties meeting operating costs or repaying it’s lenders or savers. These loans often have a higher rate of interest as they show a great risk, as to resort to this service an institution would be suffering great difficulties. It is important to protect individuals against the collapse of banks, costing them through loss of savings held, and also to prevent a ‘run on the bank’, or panic withdrawing, where savers all rush to withdraw their funds as a bank runs into financial trouble, meaning the problem is exacerbated by a further lack of funds.
Retail banks, or high street banks, offer a variety of types of deposit accounts to individuals, where the account holder can withdraw or deposit funds. Deposit accounts come in several different types such as a sight deposit. This type of account is meant for short term access to funds, rather than saving or earning interest, and as such tend to have low rates of interest but can be accessed at any time without notice or penalties, and no time period set for the account. An example of this is the Santander 123 Current Account. This account charges £2 a month for the service, but offers a 3%...