Bank Of England
Swati Dikshit
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About the Bank
• The Bank of England is the central bank of the United
Kingdom. Sometimes known as the 'Old Lady' , the Bank
was founded in 1694, nationalized on 1 March 1946, and
gained independence in 1997.
• Standing at the centre of the UK's financial system, the
Bank is committed to promoting and maintaining
monetary and financial stability as its contribution to a
healthy economy.
Contd..
• Since its foundation, it has been the Government's banker
and, since the late 18th century, it has been banker to the
banking system more generally - the bankers' bank. As well as
providing banking services to its customers, the Bank of
England manages the UK's foreign exchange and gold
reserves.
• The Bank has two core purposes - monetary stability and
financial stability. The Bank has had a monopoly on the issue
of banknotes in England and Wales since the early 20th
century. But it is only since 1997 that the Bank has had
statutory responsibility for setting the UK's official interest
rate.
• Interest rates decisions are taken by the Bank's Monetary
Policy Committee. The MPC has to judge what interest
rate is necessary to meet a target for overall inflation in
the economy.
Monetary Policy
• One of the Bank of England's two core purposes is monetary
stability. Monetary stability means stable prices - low inflation -
and confidence in the currency. Stable prices are defined by the
Government's inflation target, which the Bank seeks to meet
through the decisions taken by the Monetary Policy Committee.
• A principal objective of any central bank is to safeguard the
value of the currency in terms of what it will purchase. Rising
prices – inflation – reduces the value of money. Monetary policy
is directed to achieving this objective and providing a
framework for non-inflationary economic growth.
Monetary Policy Committee
• Interest rates are set by the Bank’s Monetary Policy
Committee. The Bank's Monetary Policy Committee
(MPC) is made up of nine members –
• The Governor, the two Deputy Governors, the Bank's
Chief Economist, the Executive Director for Markets
and four external members appointed directly by the
Chancellor.
• The appointment of external members is designed to
ensure that the MPC benefits from thinking and
expertise in addition to that gained inside the Bank
of England.
Voting
• Each member of the MPC has expertise in the field of economics
and monetary policy. Members do not represent individual
groups or areas. They are independent. Each member of the
Committee has a vote to set interest rates .The MPC's decision is
made on the basis of one-person, one vote.
• A representative from the Treasury also sits with the Committee
at its meetings. The Treasury representative can discuss policy
issues but is not allowed to vote. The purpose is to ensure that
the MPC is fully briefed on fiscal policy developments and other
aspects of the Government's economic policies, and that the
Chancellor is kept fully informed about monetary policy.
Meetings and Accountability
• The MPC meets every month to set the interest rate.
Throughout the month, the MPC receives extensive briefing
on the economy from Bank of England staff. This includes a
half-day meeting – known as the pre-MPC meeting – which
usually takes place on the Friday before the MPC's interest
rate setting meeting.
• The MPC goes to great lengths to explain its thinking and
decisions. The minutes of the MPC meetings are published
two weeks after the interest rate decision. They also record
the votes of the individual members of the Committee. The
Committee has to explain its actions regularly to
parliamentary committees, particularly the Treasury
Committee.
Legislation& Governance
• The Bank was established as a corporate body by Royal
Charter under the Bank of England Act 1694. Various
statutory provisions remain in force which are concerned
with the Bank’s organization, governance, powers and
functions.
• The framework for governance and accountability is set
by the 1998 Bank of England Act. In some respects the
framework was modified by the 2009 Banking Act, the
relevant provisions of which came into force on 1 June
2009.
The Committee
• Court of Directors
• Monetary Policy Committee
• Financial Stability Committee
• Remuneration Committee
• Risk and Audit Committee
The People
• Governors and Directors
• Mervyn King
Governor
• Charles Bean
Deputy Governor
Monetary Policy
• Paul Tucker
Deputy Governor
Financial Stability
Executive Directors
• Andrew Bailey
• Spencer Dale
• John Footman
• Andy Haldane
• Paul Fisher
• Warwick Jones
• Graham Nicholson
• Jenny Scott
