The Bank of England is the UK’s central bank. It started life in 1694 as a private bank set up by London merchants as a vehicle to lend money to the government and to deal with the national debt. Since 1946 it has been publicly owned and now acts as the government’s bank as well as overseeing the operation of the Royal Mint, which issues sterling notes and coins.
The Bank is also responsible for maintaining the financial stability of the economy and can coordinate the rescue of an ailing bank, such as Barings, which was eventually sold to ING. It can even act as ‘lender of last resort’ to stop a bank such as Northern Rock from failing. Since 1997, when the Labour government came to power, the Bank of England’s main role has been to set interest rates to keep UK inflation at, or close to 2%, independently of the Treasury.
• See Tim Bennett’s video tutorial: George Osborne’s £35bn raid on the Bank of England.