Bank of England

The Bank of England was established by an Act of Parliament in 1694. Since its beginning, the Bank (as it is known in British financial circles) has been extremely important in supporting Britain's economic growth. There are many ways in which it does this; below is a list of five major roles the Bank plays:

1. One of its major priorities is to maintain monetary stability. 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. To achieve this, the Bank sets a monetary policy to provide a framework for non-inflationary economic growth. The monetary policy in the UK operates mainly through influencing the price of money, in other words the interest rate. It is the Bank's responsibility to decide on the level of short-term interest rates necessary to meet the Government's inflation target, which is currently around 2%.

2. Another way the Bank supports Britain's economic growth is by maintaining its financial stability. To do this, the overall system must be safe and secure and all threats to financial stability must be detected and reduced; the Bank must make sure that these two objectives are met. It does so by monitoring and analyzing the behavior of participants in the financial system and the wider financial and economic environment. Also, by overseeing the payment and settlement systems, the Bank makes sure that the banking system as a whole flows smoothly.

3. The Bank also acts as a "lender of last resort" to financial institutions in difficulty by lending them tax payers' money in order to prevent a loss of confidence spreading through the financial system as a whole. This supports economic growth by ensuring against crisis and making sure the system remains stable.

4. Reliance by government on the Bank for economic growth and stability has developed from the 18th century. As such, the Bank acts as banker to the government and keeps the main government accounts, receives tax revenues, and facilitates payments in respect of government expenditure.

5. The last role (for this list) that the Bank plays in supporting Britain's economic growth is acting as the care-taker of the nation's gold supply. Although Britain's gold and foreign exchange reserves were transferred to the Treasury, their day-to-day management was and still is handled by the Bank.