Bank of England (BoE)

What is the Bank of England?

The Bank of England, also known as the BoE, is the central bank of the United Kingdom. The BoE was first established in 1694 as a private bank, being the world’s eighth oldest bank.

Sometimes referred to as “the Old Lady of Threadneedle Street” due to the location where it has been placed since 1734, the BoE was set up by a group of London merchants in order to deal with the national debt, as well as a way of lending money to the government, usually through the issuing of national bonds and IOUs.

In 1946, right after WWII, the bank was nationalised and has been acting as the government’s bank ever since. It represents the model in which modern central banks, such as the American Federal Reserve or the European Central Bank, are inspired.

Its main duty is securing financial stability of the country’s economy, but also preventing private and commercial banks from failing, as occurred with Northern Rock.

It acts as a “last resort” lender for the government and, since the Labour reform in 1997, the BoE is in charge of keeping the inflation at, or close, to 2%. That year, monetary policy was transferred from the government, allowing it to work independently for the first time.

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Category: Financial Glossary

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