Functions of Bank of England

The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world. It was established to act as the English Government's banker, and to this day it still acts as the banker for Government. The Bank was privately owned and operated from its foundation in 1694. It was subordinated to the Treasury after 1931 in making policy and was nationalised in 1946.^[3][4]

In 1998, it became an independent public organisation, wholly owned by the Treasury Solicitor on behalf of the Government, with independence in setting monetary policy.

The Bank is one of eight banks authorised to issue banknotes in the United Kingdom, but has a monopoly on the issue of banknotes in England and Wales and regulates the issue of banknotes by commercial banks in Scotland and Northern Ireland.^[9]

The Bank's Monetary Policy Committee has devolved responsibility for managing the monetary policy of the country. The Treasury has reserve powers to give orders to the committee "if they are required in the public interest and by extreme economic circumstances" but such orders must be endorsed by Parliament within 28 days.^[10] The Bank's Financial Policy Committee held its first meeting in June 2011 as a macro prudential regulator to oversee regulation of the UK's financial sector.

The Bank's headquarters has been located in London's main financial district, the City of London, on Threadneedle Street, since 1734. It is sometimes known by the metonym The Old Lady of Threadneedle Street or simply The Old Lady, a name taken from the legend of Sarah Whitehead, whose ghost is said to haunt the bank's garden.

The current Governor of the Bank of England is Sir Mervyn King, who took over on 30 June 2003 from Sir Edward George. As well as its London offices, the Bank of England also has offices in King Street, Leeds.

The Bank of England performs all the functions of a central bank. The most important of these is supposed to be maintaining price stability and supporting the economic policies of the British Government, thus promoting economic growth. There are two main areas which are tackled by the Bank to ensure it carries out these functions efficiently:^[26]

Monetary stability

Stable prices and confidence in the currency are the two main criteria for monetary stability. Stable prices are maintained by making sure price increases meet the Government's inflation target. The Bank aims to meet this target by adjusting the base interest rate, which is decided by the Monetary Policy Committee, and through its communications strategy, such as publishing yield curves ^.

Financial stability

Maintaining financial stability involves protecting against threats to the whole financial system. Threats are detected by the Bank's surveillance and market intelligence functions. The threats are then dealt with through financial and other operations, both at home and abroad. In exceptional circumstances, the Bank may act as the lender of last resort by extending credit when no other institution will.

The Bank works together with several other institutions to secure both monetary and financial stability, including:

• HM Treasury, the Government department responsible for financial and economic policy.
• The Financial Services Authority, an independent body that regulates the financial services industry.
• Other central banks and international organisations, with the aim of improving the international financial system.

The Bank of England acts as the Government's banker, and as such it maintains the Government's Consolidated Fund account. It also manages the country's foreign exchange and gold reserves. The Bank also acts as the bankers' bank, especially in its capacity as a lender of last resort.

The Bank of England has a monopoly on the issue of banknotes in England and Wales. Scottish and Northern Irish banks retain the right to issue their own banknotes, but they must be backed one to one with deposits in the Bank of England, excepting a few million pounds representing the value of notes they had in circulation in 1845.

The Bank of England is custodian to the official gold reserves of the United Kingdom and many other countries. The vault, which is situated beneath the City of London, covers a floor space greater than that of the second-tallest building in the City, Tower 42, and needs keys that are three feet long to open.^[38] The Bank of England is the fifteenth largest custodian of gold reserves, holding around 310 tonnes.

So as we see The Bank of England has a statutory objective to “contribute to protecting and enhancing the stability of the financial systems of the United Kingdom”.

A stable financial system is a key ingredient for a healthy and successful economy. People need to have confidence that the system is safe and stable, and functions properly to provide critical services to the wider economy.

Federal reserve system

Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.

Today, the Federal Reserve’s duties fall into four general areas:

• conducting the nation’s monetary policy by inf luencing the monetary and credit conditions in the economy in pursuit of maximum employ­ment, stable prices, and moderate long-term interest rates

• supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers

• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets

• providing financial services to depository institutions, the U.S. gov­ernment, and foreign official institutions, including playing a major role in operating the nation’s payments system

Дата добавления: 2015-11-16