A question that I have asked myself for a while is who owns the Bank of England? This post is dedicated to shedding some light on the matter.

BANK OF ENGLAND ACT 1946 (9 & 10 Geo. 6 c. 27)

An Act to bring the capital stock of the Bank of England into public ownership and bring the Bank under public control, to make provision with respect to the relations between the Treasury, the Bank of England and other banks and for purposes connected with the matters aforesaid.

[14 February 1946]

Or in other words, the Bank of England (formally the Governor and Company of the Bank of England) (est. 1694) was brought under state control in 1946, through the issuing of “stocks and share”. Effectively this brought the BoE into a quasi-governmental body, before it has been a commercial bank with special permission to print money, which up until 1797 kept enough gold in its vaults to pay notes out on demand. BoE who has now become the central bank prints money in England and Wales and now (since 1998) also decides monetary policy (Interest rates, quantity of money in circulation). Note: The Government has licensed other commercial banks in the UK to be able print bank notes, namely the Bank of Scotland, Ulster Band and others, with the controls being number of notes printed and the denomination must be approved by parliament. Incidentally the Bank decided to sell its bank note printing operations to De La Rue in December 2002, they print, while the Bank of England hold the right to print, I guess.

So far it looks like the Bank of England is held by the Crown, in which case is owned by the state, and monies collected in the Consolidated Funds, are that the Crown (Government) demands money, the House of Commons grants it, and the House of Lords assents to the grant. The idea of shares interest me.

The shares are owned by the Treasury and held in trust by the Treasury Solicitor. But who did it pay money to, to get these shares? it seems like it didn’t to me, so instead they issued government bonds/shares on which interest is payable?

The other bit that confuses me is that a central bank prints money for circulation, this money is backed by sold government bonds, which are traded in the markets. Theses bonds must have a return attached to them, interest being a prime example. So surely for every £1 we create in a system there is some interest of debt attached to it!? Right?

Please add your comments if you have any more information on this. I feel like I’m scraping the surface here.

*slightly off topic* In 1948 the Bank of England produced 9 million pound notes, only 2 of which survive today. The were created as internal records of money movement, during the time on the Marshall plan, which saw Europe indebted to USA by a considerable controlling amount