Central banks these days are all-powerful behemoths, pulling the strings of the world’s economies. But they didn’t start out like that.
The world’s first central bank was Sweden’s Riksbank, famous these days for being among the first to bring in negative interest rates after the 2008 financial crisis. That was established in 1668.
Then, 26 years later, came the Bank of England.
As with income tax, the Bank was born out of war with, inevitably, France. Uncharacteristically, the French had secured victory against an English and Dutch fleet in the Battle of Beachy Head. England spent a fortune rebuilding its navy and was (again) running out of money. Something had to be done.
And so, with £1.2m having been raised from investors and loaned to the government at a fairly profitable 8% rate of interest, King William III (star of the Glorious Revolution), sealed a Royal Charter on this day in 1694, creating the Bank of England.
The charter gave the Governor and Company of the Bank of England a banking monopoly over the kingdom.
It opened for business a few days later in Mercers’ Hall, Cheapside, soon moving to the Grocers’Hall, then in 1734, to Threadneedle Street.
As well as acting as the government’s banker and debt manager, it carried out normal retail banking – taking deposits, making loans, and issuing coins. It rode out the South Sea Bubble in the 1720s when so many others went to the wall, and became the ‘lender of last resort’.
In 1797, it issued its first pound note (again as a result of war with France). And in 1844, it was granted a monopoly to print banknotes in England and Wales.
It was nationalised in 1946 by the government of Clement Attlee, and in 1997, it was given responsibility for monetary policy.