The origin and early history of the Bank of England have been sketched in a previous chapter. In 1709 it was granted a quasi-monopoly by a decree of Parliament that no other corporation or partnership of more than six persons should issue demand notes in England. As the issue of notes was regarded as the main business of banking, this provision was understood to prohibit any organization of more than six persons from engaging in banking, and for a number of years the Bank of England had a practical monopoly of the entire field of banking. It received public funds on deposit and acted as fiscal agent of the Government in placing loans and to some extent in collecting the revenues. The charter of the bank was renewed from time to time, usually on condition of new loans to the Government or a reduction of interest on old loans. These loans for war purposes became so large that in 1797 the bank was compelled to suspend specie payments and did not resume until 1821. A parliamentary investigation into the financial situation in 1810 resulted in the famous Bullion Report, the establishment of the gold standard and the present coinage system in 1816, and the gradual restoration of financial order.
In 1826 the monopoly of the bank was relaxed and joint stock companies were allowed to do business, including the issue of notes, beyond a radius of sixtyfive miles from London, and after 1833 they were authorized in London and vicinity, but without the note-issuing privilege. Upon the renewal of the bank's charter in 1833 its notes were made legal tender everywhere in England and Wales, except at the bank itself, so long as redeemable in gold on demand. During this period joint stock banks multiplied rapidly and the amount of note issues was greatly increased. The commercial crises of 1836 and 1839 were attributed to the over-issues of bank paper, and led to a movement for banking reform which culminated in Peel's Act of 1844.