Bank Of England

Standing tall for over 300 years now is the Bank of England, which serves as the central bank of the United Kingdom. The bank is commonly referred to as the “old lady” of the street on where it stands since its inception in 1694. Serving as the center of financial system, the bank has played an important role in making UK as one of the economic superpowers in the world by sticking to its main task of keeping inflation low, issuing the proper supply of bank notes and maintaining the financial stability of the British country. On why a pound is more valuable than the dollar, Bank of England has the answer.

In 1694, Scotsman William Paterson founded Bank of England to serve as the official banker of the English government. Through the Royal Charter, the 1694 Tonnage Act was approved creating the Governor and Company of the Bank of England.

In the official Bank of England website, the bank reveals its evolving and changing role in the English economy. From being the banker of the government, Bank of England eventually became the nation’s central bank, which main role is to secure or maintain the economic health of England. So after serving as the government’s banker, it became the banker’s bank during the late years of the 18th century until it was tasked to manage the foreign exchange and gold reserves of UK. And the bank was quite successful on its role as UK takes the lead in economic wealth and stability among the great economies of the world.

For the general public, Bank of England is better known for its power to decide interest rates in the country. Its name also rings a bell every time a new bank note is released. But to better get to know the “old lady” of financial system, it would be more helpful to understand the functions it performs that brought UK to great heights of economic power.

Monetary Policy

Bank of England designs monetary policy that would stabilize market prices, which is influenced by interest and inflation rates that are determined by the central bank. Interest rates are said to affect the spending and saving in the economy as well as the prices people pay for the goods and services they acquire. Inflation rate, on the other hand, affects the value of our currency, which serves as a barometer of the overall stability of the country. Thus, the bank tries to control these rates as low as possible that it will achieve its economic goals.

Financial Stability

If a good monetary policy is in place, a good financial system is also assured. The financial system serves as a channel for savings to become investment money. Financial institutions, such as banks, act as middlemen in bringing together savers and investors. This way money becomes more economically productive. So a financial is stable if more people can set aside some money for savings, which can be loaned to other people in low interest rates. This way a productive flow of money can be achieved to the benefit of the economy.

Bank Notes

Bank notes are essential in our daily lives. A piece of paper that is equivalent to a certain amount of money makes spending and business more convenient. The role of Bank of England is to ensure a steady supply of bank notes that is reflective of the true health of the economy. Keeping the bank notes of higher value is also one of its roles in keeping the economy healthy.

Bank of England has gone a long way in keeping UK on high grounds. Keeping informed and vigilant on its functions and policies can help you decide where to put your money.