The Bank of England is the central bank of the United Kingdom.

Sometimes known as
the 'Old Lady' of Threadneedle Street, the Bank was founded in 1694, nationalised 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.

The Bank's roles and functions have evolved and changed over its three-hundred year
history. 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 is
perhaps most visible to the general public through its banknotes and, more recently, its
interest rate decisions. 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. The inflation target is set each year by the Chancellor of the Exchequer. The
Bank implements its interest rate decisions through its financial market operations - it
sets the interest rate at which the Bank lends to banks and other financial institutions. The
Bank has close links with financial markets and institutions. This contact informs a great
deal of its work, including its financial stability role and the collation and publication of
monetary and banking statistics.
The Bank of England is committed to increasing awareness and understanding of its
activities and responsibilities, across both general and specialist audiences alike. It
produces a large number of regular and ad hoc publications on key aspects of its work
and offers a range of educational materials. The Bank offers technical assistance and
advice to other central banks through its Centre for Central Banking Studies, and has a
museum at its premises in Threadneedle Street in the City of London, open to members
of the public free of charge.
Core Purposes
In pursuing its goal of maintaining a stable and efficient monetary and financial
framework as its contribution to a healthy economy, the Bank has two core purposes;
achieving them depends on the work of the Bank as whole. This part of the website
describes and explains each core purpose and some of the work that is undertaken to
achieve them. This material adds to that provided on the 'About the Bank' main page.
Other parts of the website provide more information about each of the Bank's activities.

The Bank's core purposes are determined by Court as part of its role in setting the Bank's
objectives and strategy. The statement below was endorsed by Court in June 2008.

The Bank of England exists to ensure monetary stability and to contribute to financial
stability.

Core Purpose 1 - Monetary Stability

Monetary stability means stable prices and confidence in the currency. Stable prices are
defined by the Government's inflation target, which the Bank seeks to meet through the
decisions on interest rates taken by the Monetary Policy Committee, explaining those
decisions transparently and implementing them effectively in the money markets.
More

Core Purpose 2 - Financial Stability

Financial stability entails detecting and reducing threats to the financial system as a
whole. Such threats are detected through the Bank's surveillance and market intelligence
functions. They are reduced by strengthening infrastructure, and by financial and other
operations.
More

In pursuit of both purposes the Bank is open in communicating its views and analysis and
works closely with others, including:

• Other central banks and international organisations to improve the international

monetary system.

• HM Treasury and the Financial Services Authority, under the terms of the
Memorandum of Understanding, to pursue financial stability.
o HM Treasury, in full Her Majesty's Treasury, informally The
Treasury, is the United Kingdom government department responsible for
developing and executing the British government's public finance policy
and economic policy.
Core Purposes - Monetary Stability
Price stability and monetary policy

The first objective of any central bank is to safeguard the value of the currency in terms
of what it will purchase at home and in terms of other currencies. Monetary policy is
directed to achieving this objective and to providing a framework for non-inflationary
economic growth. As in most other developed countries, monetary policy operates in the
UK mainly through influencing the price of money, in other words the interest rate.

The Bank's price stability objective is made explicit in the present monetary policy
framework. It has two main elements: an annual inflation target set each year by the
Government and a commitment to an open and accountable policy-making regime.

Setting monetary policy - deciding on the level of short-term interest rates necessary to
meet the Government's inflation target - is the responsibility of the Bank. In May 1997
the Government gave the Bank operational independence to set monetary policy by
deciding the short-term level of interest rates to meet the Government's stated inflation
target - currently 2%.
Core Purposes - Financial Stability
The Bank of England has played a key role in maintaining the stability of the United
Kingdom's financial system for 300 years and it is now a core function of most central
banks. A sound and stable financial system is important in its own right and vital to the
efficient conduct of monetary policy.

Since 1997, the Bank of England has had responsibility for the stability of the financial
system as a whole, while the Financial Services Authority (FSA) supervises individual
banks and other financial organisations including recognised financial exchanges such as
the London Stock Exchange.

Memorandum of Understanding

In October 1997, a Memorandum of Understanding between the Bank, Her Majesty's

Treasury and the FSA was agreed. This formalised the allocation of responsibilities for
regulation and financial stability in the UK. It made provisions for the establishment of a
high level Standing Committee to provide a forum in which the three organisations could
develop a common position on any problems which may emerge. An updated
Memorandum was issued in March 2006 (see Key Resouces below).

The Bank's contribution to the Standing Committee on financial stability issues is

informed by the operations of the Bank's Financial Stability Board - a high-level internal
body providing guidance on priorities and the direction of work in the Financial Stability
area. The Board is chaired by the Bank's Deputy Governor for Financial Stability and
generally meets on a monthly basis.

Substantial work is underway in the light of the recent financial market turmoil to help
rebuild confidence in financial institutions, and to reduce the likelihood and impact of a
recurrence.
The Bank's Strategy
The strategic priorities endorsed by Court for 2008/09 are:

1. The Bank should continue to improve the quality and efficiency of the processes
supporting the Monetary Policy Committee, advance the analysis, practice and
communication of inflation targeting, and enhance its understanding of the
changing inflation process.
2. Money market operations should ensure stable overnight sterling interest rates and
support improved banking system liquidity management, including by providing
longer-term finance through open market operations.
3. Banking operations should be focused on ensuring monetary and financial
stability, thus eliminating activities that do not contribute to those activities, while
also being efficient and resilient, in large part to be achieved by continuing to
deliver the Customer Banking Transition Programme and developing clear plans
for future systems and processes required to run the remaining business.
4. The Bank should ensure that its banknotes are designed and produced in order to
maintain a high level of security against counterfeiting, and that distribution of
notes ensures a secure and efficient circulation that meets the Bank's objectives
for integrity and quality.
5. The Bank should draw on its upgraded analytical and market intelligence
capabilities to deepen its understanding of the major risks to the UK financial
system, to promote wider understanding of these risks among financial market
practitioners and work effectively with others to lower them.
6. The Bank should continue to manage the consequences of the recent financial
crisis within the Standing Committee framework, and continue to work with
others to strengthen international crisis management preparations. The Bank will
contribute to work towards a special resolution scheme for Banks and will
contribute to a review of the Tripartite arrangements in the light of recent events
in financial markets.
7. The Bank should promote safe and efficient payments and settlements systems,
clarifying and implementing a revised remit for its payment systems oversight
work following the conclusion of the statutory consultation process, whilst
remaining at the forefront of best practice in operational and policy areas.
8. To deliver these strategic priorities, the Bank will aim for the highest professional
standards and will continuously improve its internal business processes.

Enabling priorities for 2008/9 are:

• Delivering changes to HR services to focus on providing efficient, value-added

support to business areas.
• Developing an improved system of performance measurement.
• Implementing a new business-led IT operating mode
Bank of England Legislation
The Bank was established as a corporate body by Royal Charter under the Bank of
England Act 1694. Since then there have been a number of enactments directly affecting
the Bank and its organisation. Various statutory provisions remain in force which are
concerned with the Bank’s organisation, governance, powers and functions.
The most recent legislation is the Bank of England Act 1998 which established the
arrangements for the Bank’s current monetary policy responsibilities. Under the 1998
Act, the Banking Supervision function that had previously been undertaken by the Bank
was transferred to the newly formed Financial Services Authority. As a result
responsibility for overall financial stability issues effectively spanned three separate legal
entities – the Bank, the Financial Services Authority and HM Treasury. Whilst there is no
legislation that formally sets out the respective responsibilities of the three bodies on
financial stability, a Memorandum of Understanding between the three parties was
established.
Governance
The current governance and accountability framework is set by the 1998 Bank of
England Act, which provides for a Court of Directors, a Committee of Non-executive
Directors within Court, and a Monetary Policy Committee.

The Court of Directors

Court consists of the Governor, two Deputy Governors and 16 Directors. The Directors
are all non-executive. The Governors are appointed by the Crown for five years and the
Directors for three years.

Under the Act, the responsibilities of Court are to manage the Bank's affairs, other than
the formulation of monetary policy, which is the responsibility of the Monetary Policy
Committee. Court's responsibilities include determining the Bank's objectives and
strategy, and ensuring the effective discharge of the Bank's functions and the most
efficient use of the Bank's resources.

Members of Court have been indemnified by the Bank against personal civil liability
arising out of the carrying out or purported carrying out of their functions, provided they
have acted honestly and in good faith and have not acted recklessly. These indemnities
were granted in 2000 and approved by HM Treasury in accordance with the practice of
the Government in relation to board members of Non-Departmental Public Bodies.

The Monetary Policy Committee (MPC)

The Bank of England Act establishes the MPC as a Committee of the Bank, subject to the
oversight of NedCo, and sets a framework for its operations. Under the Act, the Bank's
objectives in relation to monetary policy are to maintain price stability and, subject to
that, to support the Government's economic policies, including its objectives for growth
and employment. At least once a year, the Government specifies the price stability target
and its growth and employment objectives. The MPC must meet at least monthly; its
members comprise the Governor and Deputy Governors, two of the Bank's Executive
Directors and four members appointed by the Chancellor. In June 2008 the Chancellor of
the Exchequer announced that the Government will advertise future vacancies for the
Governor and Deputy Governors of the Bank of England and also for external members
of the MPC. At the same time the Bank of England announced that it intends to advertise
externally the executive appointments to the MPC that are its responsibility - Executive
Director for Monetary Analysis and Statistics and Executive Director, Markets - when
they become vacant in future.
NedCo

The Act provides for a Committee of Court ('NedCo') consisting of all the Non-executive
Directors, with a chairman designated by the Chancellor of the Exchequer. The chairman
of NedCo is also Deputy Chairman of Court. NedCo has responsibilities for reviewing
the Bank's performance in relation to its objectives and strategy, and monitoring the
extent to which the Bank's financial management objectives are met. NedCo is also
responsible for reviewing the procedures of the MPC, and in particular whether the
Committee has collected the regional, sectoral and other information necessary for
formulating monetary policy. Other functions of NedCo - in which it is supported by the
Audit and Remuneration Committees - include reviewing the Bank's internal controls and
determining the Governor's and Deputy Governors' remuneration and the terms and
conditions of the service of the four members of the MPC appointed by the Chancellor.
NedCo is required to make a report as part of the Bank's Annual Report.

Since 2004 the normal practice has been for the business of Court to be discussed in
meetings of NedCo, with the Executive present. Formal decisions are then taken in Court.
NedCo also holds meetings from time to time without the Executive, so that it can fulfil
its reviewing role.

Audit Committee

The functions of the Audit Committee are to:

• Assist Court in meeting its responsibilities for an effective system of financial

reporting, internal control and risk management.
• Receive reports from, and review the work of, the internal and external auditors.
The Committee also considers and makes recommendations on the appointment
of the external auditors, their independence and their fees.
• Review the annual financial statements prior to their submission to Court,
including consideration of the appropriateness of the accounting policies and
procedures adopted. The Committee reports its conclusions to Court.

The Committee normally meets four times a year.

Management structure

The executive management of the Bank lies with the Governors and Executive Directors.

The Bank's management structure, heads of function and the responsibilities of each area
are described in more detail under Structure of the Bank area of the website.
Structure
In working towards its core purposes, the Bank is organised into four main operational
areas - Monetary Analysis and Statistics, Markets, Financial Stability and Banking
Services, supported by a Central Services area. This structure was introduced in June
1998 to reflect the Bank's new responsibilities in the light of the 1998 Bank of England
Act. The Centre for Central Banking Studies offers teaching and technical assistance to
other Central Banks.

Monetary Analysis and Statistics

Spencer Dale

Peter Westaway - Senior Research Adviser

Martin Brooke - Conjunctural Assessment & Projections
Mark Cornelius - International Economic Analysis
Neal Hatch - Structural Economic Analysis
Gareth Ramsey - Inflation Report & Bulletin
Jo Paisley - Monetary & Financial Statistics
James Proudman - Monetary Assessment & Strategy
Jens Larsen - Monetary Instruments & Markets

The Monetary Analysis (MA) divisions are responsible for providing the Bank with the
economic analysis it needs to discharge its monetary policy responsibilities.

Its economists conduct research and analysis of current and prospective developments in
the United Kingdom and international economies. The MA divisions produce the
Quarterly Bulletin and the Inflation Report, which set out the Monetary Policy
Committee's assessment of the current monetary and economic situation in the United
Kingdom and of the outlook for inflation and growth.

The work of the MA divisions, including reports from the twelve regional Agencies,
provides analytical information for the interest rate decisions taken each month by the
Monetary Policy Committee to achieve the Government's inflation target. The Monetary
and Financial Statistics Division compiles, publishes and briefs on financial statistics, in
particular the monetary aggregates and banking statistics. Special studies directed at
international harmonisation and improvements to the statistics are also a feature of the
work.
Markets

Paul Fisher

Sarah Breeden - Risk Management

Roger Clews - Special Adviser
Chris Salmon - Sterling Markets & Market Intelligence
Michael Cross - Foreign Exchange

The main functions of the Markets area include conducting operations in the sterling
money markets to implement the Monetary Policy Committee's interest rate decisions,
while meeting the day-to-day demand for reserves of the banking system as a whole;
managing the Bank of England's balance sheet; managing the United Kingdom's foreign
exchange reserves, as the agent of HM Treasury; delivering financial market analysis and
intelligence in support of the Bank's monetary and financial stability missions; and
contributing to the management of financial and business continuity crises.

In delivering its functions, the area draws on a wide range of financial markets contacts in
the United Kingdom and overseas, and also contributes to facilitating efficient core
wholesale markets, including via practitioner committees.

The Risk Management Division is responsible for identifying, measuring and, with the
front office divisions, managing risks from financial operations. Market intelligence is
co-ordinated, under a Head, by a dedicated team. Area-wide management is supported by
a Chief Operating Office and Unit.

Financial Stability

Andy Haldane

Ian Bond - Financial Resilience

Peter Brierley - Special Adviser
Phil Evans - International Finance
Nicola Anderson/Simon Hall - Systemic Risk Assessment

The Financial Stability area has the main responsibility for discharging the Bank's remit
to contribute to the maintenance of the stability of the financial system as a whole. It
works closely with HM Treasury and the FSA under the terms of the Memorandum of
Understanding which was revised in March 2006.

Internally, a high-level Financial Stability Board guides the work of the area identifying
and prioritising potential risks to UK financial stability and judging which warrant
follow-up action. The Board is chaired by the Deputy Governor for Financial Stability.

The area seeks to detect risks to the structure and functioning of the UK financial system
and to develop measures to strengthen the financial infrastructure at home and abroad to
reduce those risks. In addition it undertakes work with HM Treasury and the FSA, to
improve the arrangements for managing a financial crisis. The area also contributes to the
monetary policy process, and promotes public understanding of issues relating to
financial stability through, for instance, the regular Financial Stability Report.

Banking Services

Andrew Bailey

Lee Dobney - Notes

David Ingram - Special Adviser
Joanna Place - Customer Banking
Alastair Wilson - Market Services

Customer Banking Division provides banking services to the Government and other
customers, principally central banks and other financial institutions.

Notes Division manages the note issue, including the relationship with De La Rue, the
supplier of notes to the Bank.

Market Services Division operates the Real Time Gross Settlement (RTGS) system
through which payments relating to the major UK payments and securities settlement
systems are settled and, from this operational role, contributes analysis to the Bank's
continuing work in developing safe and efficient payment and settlement systems. It also
provides the back-office functions to support the Bank's sterling and foreign currency
transactions including settling the Bank's Open Market (monetary policy) Operations.

Central Services

John Footman

Louise Redmond - HR Director

Stephen Collins - Business Continuity
Jonathan Curtiss - HR Services
John Heath - Legal
Peter Higgs - Facilities & Procurement
Simon Moorhead - Information Systems & Technology
Don Randall - Security Division
Andrew Wardlow - Secretary of the Bank

The Central Services divisions encompass a range of support functions that underpin the
Bank's activities and help to ensure that the Bank's reputation is maintained. These
include IT, property, HR, the Governors' private offices, press and public relations, and
legal services.
Finance

Warwick Jones, Finance Director

Simon Politzer - Projects, Risk & Performance

Tim Porter - Financial & Management Accounting

Finance is responsible for budgeting, financial accounting and monitoring the

performance of the Bank in its attainment of its strategic priorities. In addition it provides
project support, risk oversight and is responsible for the support of the Pension Fund
trustees.

Internal Audit

Stephen Brown

Internal Audit assists the Court of Directors and Executive Management in protecting the
Bank, and its reputation, by independently and objectively evaluating the effectiveness of
internal controls, risk management and governance processes. As part of this assurance
Internal Audit recommends cost effective improvements which are agreed with
management and tracked until implementation.

Centre for Central Banking Studies

Gill Hammond

The CCBS acts as a forum where central banks and academic experts from all over the
world can exchange views on the latest thinking in central bank policies and operations.
The CCBS supports the Bank of England's core purposes by promoting monetary and
financial stability in the international context. It does this by building capacity in central
banks around the world and promoting the sharing of best practice and new ideas among
all central bankers. Its goal is to be recognised internationally as a centre of intellectual
excellence for the study of central banking.

CCBS provides an extensive programme of seminars, workshops and conferences both in

London and abroad, attended by central bankers from more than 130 countries.
Governors, Advisers and Directors

• Mervyn King
Governor
• Charles Bean
Deputy Governor
Monetary Policy
• Paul Tucker
Deputy Governor
Financial Stability

Adviser to the Governor

• Graham Nicholson
• Nigel Jenkinson

Executive Directors

• Andrew Bailey
• Spencer Dale
• John Footman
• Andy Haldane
• Paul Fisher
• Warwick Jones
History
The Bank of England was founded in 1694 to act as the Government's banker and debt-
manager. Since then its role has developed and evolved, centred on the management of
the nation's currency and its position at the centre of the UK's financial system.

The history of the Bank is naturally one of interest, but also of continuing relevance to
the Bank today. Events and circumstances over the past three hundred or so years have
shaped and influenced the role and responsibilities of the Bank. They have moulded the
culture and traditions, as well as the expertise, of the Bank which are relevant to its
reputation and effectiveness as a central bank in the early years of the 21st century. At the
same time, much of the history of the Bank runs parallel to the economic and financial
history, and often the political history, of the United Kingdom more generally.

If you want to get closer to the Bank's history and are visiting London, the Bank's
Museum provides a unique insight into the history of the Bank and its business, alongside
a great deal of material about the Bank today.

Key moments in the Bank's history

King William & Queen Mary

When William and Mary came to the throne in 1688, public finances were weak. The
system of money and credit was in disarray. A national bank was needed to mobilise the
nation's resources.

William Paterson
William Paterson proposed a loan of £1,200,000 to the Government. In return the
subscribers would be incorporated as the Governor and Company of the Bank of
England.

The Royal Charter

The money was raised in a few weeks and the Royal Charter was sealed on 27th July
1694. The Bank started life as the Government's banker and debt-manager, with 17 clerks
and 2 gatekeepers. In 1734 the Bank moved to Thread-needle Street, gradually acquiring
land and premises to create the site seen today.

Commercial functions
The Bank managed the Government's accounts and made loans to finance spending at
times of peace and war. A commercial bank too, it took deposits and issued notes.

The 18th Century

During the 18th Century the Government borrowed more and more money. These
outstanding loans were called the National Debt.
1781: renewal of the Bank's Charter
Reliance on the Bank of England was such that when its charter was renewed in 1781 it
was described as ' the public exchequer'.

The bankers' bank

By now the Bank was acting as the bankers' bank too. It was liable to fail if all its
depositors decided to withdraw their money at the same time. But the Bank made sure it
kept enough gold to pay its notes on demand.

The 'Restriction Period'

By 1797 war with France had drained the gold reserves. The Government prohibited the
Bank from paying its notes in gold. This Restriction Period lasted until 1821.

The 19th Century

The 1844 Bank Charter Act tied the note issue to the Bank's gold reserves. The Bank was
required to keep the accounts of the note issue separate from those of its banking
operations and produce a weekly summary of both accounts.

Lender of last resort

The Bank Return, as it's called, is still published every week.

In the 19th Century the Bank took on the role of lender of last resort, providing stability
during several financial crises.

The First World War: 1914-18

During the First World War the National Debt jumped to £7 billion. The Bank helped
manage Government borrowing and resist inflationary pressures.

Gold
In 1931 the United Kingdom left the gold standard; its gold and foreign exchange
reserves were transferred to the Treasury. But their management was still handled by the
Bank and this remains the case today.

Nationalisation 1946
After the Second World War the bank was nationalised. It remained the Treasury's
adviser, agent and debt manager.

Financial crises
During the 1970s, the Bank played a key role during several banking crises. The Bank
was at the fore when monetary policy again became a central part of Government policy
in the 1980s.

Operational independence May 1997

In May 1997 the Government gave the Bank responsibility for setting interest rates to
meet the Government's stated inflation target.
Managing the modern bank
The 1998 Bank of England Act made changes to the Bank's governing body too. The
Court of Directors, as it's known, is now made up of the Bank's Governor and 2 Deputy
Governors, and 16 Non-Executive Directors.

Banknote issues

The Bank of England has issued banknotes since 1694. Notes were originally hand-
written; although they were partially printed from 1725 onwards, cashiers still had to sign
each note and make them payable to someone. Notes were fully printed from 1855. Until
1928 all notes were "White Notes", printed in black and with a blank reverse. In the 18th
and 19th centuries White Notes were issued in £1 and £2 denominations. During the 20th
century White Notes were issued in denominations between £5 and £1000. The Bank
issued notes for ten shillings and one pound for the first time on 22 November 1928 when
the Bank took over responsibility for these denominations from the Treasury which had
issued notes of these denominations three days after the declaration of war in 1914 in
order to remove gold coins from circulation.

During the Second World War the German Operation Bernhard attempted to counterfeit
various denominations between £5 and £50 producing 500,000 notes each month in 1943.
The original plan was to parachute the money on Britain in an attempt to destabilise the
British economy, but it was found more useful to use the notes to pay German agents
operating throughout Europe — although most fell into Allied hands at the end of the
war, forgeries frequently appeared for years afterwards, which led banknote
denominations above £5 to be removed from circulation.

In 2006, a sum in excess of £53 million in banknotes belonging to the bank was stolen
from a depot in Tonbridge, Kent.

Banknotes
The Bank of England has been issuing banknotes for over 300 years. During that time,
both the notes themselves and their role in society have undergone continual change.
From today's perspective, it is easy to accept that a piece of paper that costs a few pence
to produce is worth five, ten, twenty or fifty pounds. Gaining and maintaining public
confidence in the currency is a key role of the Bank of England and one which is
essential to the proper functioning of the economy.
A brief history of banknotes
The first recorded use of paper money was in the 7th century in China. However,
the practice did not become widespread in Europe for nearly a thousand years.

In the 16th century the goldsmith-bankers began to accept deposits, make loans and
transfer funds. They also gave receipts for cash, that is to say gold coins, deposited with
them. These receipts, known as “running cash notes”, were made out in the name of the
depositor and promised to pay him on demand.

Many also carried the words “or bearer” after the name of the depositor, which allowed
them to circulate in a limited way. In 1694 the Bank of England was established in order
to raise money for King William III’s war against France. Almost immediately the Bank
started to issue notes in return for deposits. Like the goldsmiths’ notes, the crucial feature
that made Bank of England notes a means of exchange was the promise to pay the bearer
the sum of the note on demand. This meant that the note could be redeemed at the Bank
for gold or coinage by anyone presenting it for payment; if it was not redeemed in full, it
was endorsed with the amount withdrawn. These notes were initially handwritten on
Bank paper and signed by one of the Bank’s cashiers. They were made out for the precise
sum deposited in pounds, shillings and pence. However, after the recoinage of 1696
reduced the need for small denomination notes, it was decided not to issue any notes for
sums of less than £50. Since the average income in this period was less than £20 a year,
most people went through life without ever coming into contact with banknotes.

During the 18th century there was a gradual move toward fixed denomination notes.
From 1725 the Bank was issuing partly printed notes for completion in manuscript. The £
sign and the first digit were printed but other numerals were added by hand, as were the
name of the payee, the cashier’s signature, the date and the number. Notes could be for
uneven amounts, but the majority were for round sums. By 1745 notes were being part
printed in denominations ranging from £20 to £1,000.

In 1759, gold shortages caused by the Seven Years War forced the Bank to issue a £10
note for the first time. The first £5 notes followed in 1793 at the start of the war against
Revolutionary France. This remained the lowest denomination until 1797, when a series
of runs on the Bank, caused by the uncertainty of the war, drained its bullion reserve to
the point where it was forced to stop paying out gold for its notes. Instead, it issued £1
and £2 notes. The Restriction Period, as it was known, lasted until 1821 after which gold
sovereigns took the place of the £1 and £2 notes. The Restriction Period prompted the
Irish playwright and MP, Richard Brinsley Sheridan, to refer angrily to the Bank as “…
an elderly lady in the City”. This was quickly changed by cartoonist, James Gillray, to the
Old Lady of Threadneedle Street, a name that has stuck ever since.

The first fully printed notes appeared in 1855 relieving the cashiers of the task of filling
in the name of the payee and signing each note individually. The practice of writing the
name of the Chief Cashier as the payee on notes was halted in favour of the anonymous
“I promise to pay the bearer on demand the sum of …”, which has remained unchanged
on notes to this day. The printed signature on the note continued to be that of one of three
cashiers until 1870, since when it has always been that of the Chief Cashier.

The First World War saw the link with gold broken once again; the Government needed
to preserve its stock of bullion and the Bank ceased to pay out gold for its notes. In 1914
the Treasury printed and issued 10 shilling and £1 notes, a task which the Bank took over
in 1928. The gold standard was partially restored in 1925 and the Bank was again obliged
to exchange its notes for gold, but only in multiples of 400 ounces or more. Britain finally
left the gold standard in 1931 and the note issue became entirely fiduciary, that is wholly
backed by securities instead of gold.

The Bank has not always been the sole issuer of bank notes in England and Wales. Acts
of 1708 and 1709 had given it a partial monopoly by making it unlawful for companies or
partnerships of more than six people to set up banks and issue notes. The ban did not
extend to the many provincial bankers – the so-called country bankers – who were all
either individuals or small family concerns. However, the Country Bankers’ Act of 1826
allowed the establishment of note issuing joint-stock banks with more than six partners,
but not within 65 miles of London. The Act also allowed the Bank of England to open
branches in major provincial cities, which gave it more outlets for its notes.

In 1833 the Bank’s notes were made legal tender for all sums above £5 in England and
Wales so that, in the event of a crisis, the public would still be willing to accept the
Bank’s notes and its bullion reserves would be safeguarded. It was the 1844 Bank Charter
Act which was the key to the Bank achieving its gradual monopoly of the note issue in
England and Wales. Under the Act no new banks of issue could be established and
existing note issuing banks were barred from expanding their issue. Those, whose issues
lapsed, because, for example, they merged with a non-issuing bank, forfeited their right
of issue. The last private bank notes in England and Wales were issued by the Somerset
bank, Fox, Fowler and Co in 1921.