English banking may be traced back to the dealings in money carried on by the goldsmiths of London and thus certainly to the 16th century; but it has been so greatly influenced by the working of the Bank of England and by the Foundation of the Bank of England. acts of parliament connected with that institution, that a reference to this bank's foundation and development must precede any attempt at a detailed history of banking in the United Kingdom. The Bank of England was founded in 1694. As in the case of some of the earlier continental banks, a loan to the government was the origin of its establishment. The loan, which was £1,200,000, was subscribed in little more than ten days, between Thursday, 21st June, and noon of Monday, 2nd July 1694. On Tuesday, 10th July, the subscribers appointed Sir John Houblon the governor, and Michael Godfrey (who was killed during the siege of Namur on the 17th of July 1695) deputy-governor. Michael Godfrey wrote a pamphlet explaining the purposes for which the bank was established and the use it would be to the country.
The pamphlet supplies some curious illustrations of the dangers which some persons had imagined might arise from the establishment of the bank and its connexion with William III., deprecating the fear "lest it should hereafter joyn with the prince to make him absolute and so render parliaments useless."
The governor and the deputy-governor, having thus been appointed, the first twenty-four directors were elected on Wednesday, 11th July 1694. Two of them were brothers of the governor, Sir John Houblon. They were descended from James Houblon, a Flemish refugee who had escaped from the persecution of Alva. All the directors were men of high mercantile standing. The business of the bank was first carried on in the Mercers' chapel. It continued there till the 28th of September, when they moved to Grocers' Hall. They were tenants of the Grocers' Hall till 1732. The first stone of the building now occupied by the bank was laid on the 1st of August 1732. The bank has remained on the same site ever since. The structure occupied the space previously covered by the house and gardens of Sir John Houblon, the first governor, which had been bought for the purpose. Between 1764 and 1788 the wings were erected. In 1780 the directors, alarmed at the dangerous facilities which the adjacent church of St Christopher le Stocks might give to a mob, obtained parliamentary powers and acquired the fabric, on the site of which much of the present building stands.
The structure was developed to its present form about the commencement of the 19th century.
The bank commenced business with fifty-four assistants, the salaries of whom amounted to £4350. The total number employed in 1847 was upwards of nine hundred and their salaries exceeded £210,000. Mr Thomson Hankey stated that in 1867 upwards of one thousand persons were employed, and the salaries and wages amounted to nearly £260,000, besides pensions to superannuated clerks of about £20,000 more. The number of persons of all classes employed in 1906 (head office and eleven branches) was about 1400.
Originally established to advance the government a loan of £1,200,000, the management of the British national debt has been confided to the Bank of England from the date of its foundation, and it has remained the banker of the government ever since. The interest on the stock in which the debt is inscribed has always been paid by the bank, originally half-yearly, now quarterly, and the registration of all transfers of the stock itself is carried on by the bank, which assumes the responsibility of the correctness of these transfers. The dignity which the position of banker to the government gives; the monopoly granted to it of being the only joint-stock bank allowed to exist in England and Wales till 1826, while the liability of its shareholders was limited to the amount of their holdings, an advantage which alone of English banks it possessed till 1862; the privilege of issuing notes which since 1833 have been legal tender in England and Wales everywhere except at the bank itself; the fact that it is the banker of the other banks of the country and for many years had the control of far larger deposits than any one of them individually - all these privileges gave it early a pre-eminence which it still maintains, though more than one competitor now holds larger deposits, and though, collectively, the deposits of the other banks of the country which have offices in London many times overpass its own.
Some idea of the strength of its position may be gained from the fact that stocks are now inscribed in the bank books to an amount exceeding 1250 millions sterling.
In one sense, the power of the Bank of England is greater Bank Charter Act. now than ever. By the act of 1844, regulating the note-issue of the country, the Bank of England became the sole source from which legal tender notes can be obtained; a power important at all times, but pre-eminently so in times of pressure. The authority to supply the notes required, when the notes needed by the public exceed in amount the limit fixed by the act of 1844, was granted by the government at the request of the bank on three occasions only between 1844 and 1906. Hence the Bank of England becomes the centre of interest in times of pressure when a "treasury letter" permitting an excess issue is required, and holds then a power the force of which can hardly be estimated.
One main feature of the act of 1844 was the manner in which the issue of notes was dealt with, as described by Sir Robert Peel in parliament on the 6th of May 1844: - "Two departments of the bank will be constituted: one for the issue of notes, the other for the transaction of the ordinary business of banking. The bullion now in the possession of the bank will be transferred to the issue department. The issue of notes will be restricted to an issue of £14,000,000 upon securities - the remainder being issued upon bullion and governed in amount by the fluctuations in the stock of bullion." The bank was required to issue weekly returns in a specified form (previously to the act of 1844 it was necessary only to publish every month a balance-sheet for the previous quarter), and the first of such returns was issued on the 7th of September 1844. The old form of return contained merely a statement of the liabilities and assets of the bank, but in the new form the balance-sheets of the Issue Department and the Banking Department are shown separately.