The Bank of England, founded in 1694, is the head and central figure of the English banking system, having the full support of the Government and receiving such support whenever it feels it necessary to have it The Central Bank of England is managed by a Board of Directors. It maintains eleven branches, two located within the confines of London and nine within the provinces. The Bank of England is the holder of the country's reserves, in the same way in which in this country, the Federal Reserve banks are the holders of a certain percentage of the reserves of the national and member banks of the System. In England, however, the central bank is not by any means the only reserve depository. Some of the outlying banks in country places deposit their reserves with the central institutions in their respective localities, which, in turn, may lodge their reserves with the metropolitan banks, which again may deposit their own reserves with the Bank of England. In this connection, the Bank of England may be said to be a bank for bankers, as are the Federal Reserve banks in the United States.

The Bank of England has many clients of its own, thus coming into direct competition with the other banks of the country. Competition in English banking is very keen. The Bank of England, furthermore, is the only note issuing bank in the country, enjoying practically monopolistic powers. It is engaged principally in the business of re-discounting, and lending on the paper of banks, firms, individuals and others.

Joint Stock Banks. Branch Banking

Joint Stock banks exist in London. The largest of these joint stock banks, to the extent of about twelve in all, together with the Bank of England, are said to control the banking operations of the country. This is made possible by the establishment and maintenance of many hundreds of branches throughout the world, controlled by such large Joint Stock companies. In England, the business of these Joint Stock companies and other incorporated banking institutions is mainly that of receiving deposits and making loans and discounts.

Private Bankers. Merchant Banks. Acceptance Firms

Private bankers exist in England in large numbers, these being very powerful. There are also in existence various so-called "merchant banks" and "acceptance firms," the business of the latter being confined mainly to the acceptance of bills on commission, though at times, they engage in the business of lending money in the English market.

Discount Houses

Discount houses follow, being important factors in the English discount market. As they specialize in their operations in the business of discounting bills of exchange and acceptances, they render a very important service to the English banks and commercial firms. The private bankers of the country, at times, deposit large sums of money with these discount houses to be loaned out and used in the business of discounting commercial paper. The discount houses also engage in syndicate operations and in lending on stock exchange collateral.

Investing And Finance Houses

Another important class of institutions in the English banking system comprises the "investing and finance houses," which are very numerous throughout the country, being situated principally in London. They engage extensively in foreign financing, exchange operations, and general investing operations. They finance industrial and mercantile firms, public utilities, and other enterprises. As a class they have at their command large sums of money which find their way into the English money market.

Commercial Paper In England

Classes Of Eligible Bills

The system of credit expansion in England involves both discounts and loans. The Bank of England may determine without interference what is acceptable paper for rediscount. It is a well established fact that the Bank will buy only paper with two British names, one of which must be that of the acceptor, and the maturity of which bills are not more than four months from date of acceptance. This is the only class of eligible paper. In extreme cases, however, the banks may purchase six months' bills.