The Main Roles Of The Bank Of England
The Bank of England was built in 1694, making it the second oldest central banks in the world. The concept and basis of the Bank of England has been followed by many countries to establish their own central bank. It was primarily established to carter for the banking needs of the government, and it still plays that pivotal role even today. The Bank of England performs several fiscal and monetary roles both to the government and other financial institutions in England. The most important roles of the bank would be supporting government economic policy and maintaining price stability in the economy. These roles and others will be explained below:
Monetary stability
One of the most vital duties of the Bank of England is to ensure price stability through its monetary policies. Without a stable price, there won’t be much confidence placed in the currency. The bank ensures that prices are stable by regulating interest rates in such a way that it will be in line with Government’s inflation target.
Financial stability
It is the duty of the Bank of England to ensure there are no financial threats within the nation’s financial system. These financial threats are detected by the market intelligent functions of the bank. They are then handled through financial operations within and abroad. The Bank also performs some roles together with other financial institutions to make sure there is financial and monetary stability.
Issuing of Bank notes
This is the primary role of the bank, which has been issuing bank notes since 1694, although they were handwritten at that time. Today, the Bank of England bears the sole responsibility of printing and making bank notes available to the public. Apart from issuing bank notes, it also withdraws notes in circulation when the need arises. The action taken by the Bank (issuing or withdrawing notes) generally depends on the monetary situation in the economy.
It serves as the banker for the government
The Central Bank of England is the government’s banker and maintains its Consolidated Funds Account. Apart from this role, the Bank equally manages the country’s gold reserves and foreign exchange. It also aids other bankers and aid other banks as well. This means that when any commercial bank falls, it is the role of the Bank of England to serve as a last resort to the distressed bank. These roles of the Bank of England are similar to the roles performed by other central banks in most countries.
The Bank of England was built in 1694, making it the second oldest central banks in the world. The concept and basis of the Bank of England has been followed by many countries to establish their own central bank. It was primarily established to carter for the banking needs of the government, and it still plays that pivotal role even today. The Bank of England performs several fiscal and monetary roles both to the government and other financial institutions in England. The most important roles of the bank would be supporting government economic policy and maintaining price stability in the economy. These roles and others will be explained below:
Monetary stability
One of the most vital duties of the Bank of England is to ensure price stability through its monetary policies. Without a stable price, there won’t be much confidence placed in the currency. The bank ensures that prices are stable by regulating interest rates in such a way that it will be in line with Government’s inflation target.
Financial stability
It is the duty of the Bank of England to ensure there are no financial threats within the nation’s financial system. These financial threats are detected by the market intelligent functions of the bank. They are then handled through financial operations within and abroad. The Bank also performs some roles together with other financial institutions to make sure there is financial and monetary stability.
Issuing of Bank notes
This is the primary role of the bank, which has been issuing bank notes since 1694, although they were handwritten at that time. Today, the Bank of England bears the sole responsibility of printing and making bank notes available to the public. Apart from issuing bank notes, it also withdraws notes in circulation when the need arises. The action taken by the Bank (issuing or withdrawing notes) generally depends on the monetary situation in the economy.
It serves as the banker for the government
The Central Bank of England is the government’s banker and maintains its Consolidated Funds Account. Apart from this role, the Bank equally manages the country’s gold reserves and foreign exchange. It also aids other bankers and aid other banks as well. This means that when any commercial bank falls, it is the role of the Bank of England to serve as a last resort to the distressed bank. These roles of the Bank of England are similar to the roles performed by other central banks in most countries.