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The bank did not have a monopoly on lending to the government, however: the South Sea Company had been established in 1711, and in 1720 it too became responsible for part of the UK's national debt, becoming a major competitor to the Bank of England. While the "South Sea Bubble" disaster soon ensued, the company continued managing part of the UK ...
Certificates of indebtedness – i.e. government war time debt – had been paid with government securities at face value plus arrears of interest under the terms of Hamilton's First Report on the Public Credit. [30] [31] The new securities were accepted by the Bank to purchase its stock, up to three-quarters (75%) of the value. [5]
At the time, the Bank of England was not a central bank but a public, for-profit bank with three loyalties: its shareholders, the British government, and its correspondent commercial bankers. The Bank of England raised the lending rate to protect its investors, instead of lowering it to protect the public.
Interest payments on UK national debt as percentage of GDP from 1900 to 2011. The history of the British national debt can be traced back to the reign of William III, who engaged a syndicate of City traders and merchants to offer for an issue of government debt, which evolved into the Bank of England.
Because of its power, many believed the Bank of England should have more public duties and supervision. The Bank of England Act 1946 nationalised it. Its current constitution, and guarantees of a degree of operational independence from government, is found in the Bank of England Act 1998. Macmillan Committee (1929)
The Bank of England has kept its original name of 1694, even though the Act of Union 1707 and Acts of Union 1800 expanded its remit to the broader United Kingdom. "National Bank": e.g. National Bank of Belgium (1850), Bulgarian National Bank (1879), Swiss National Bank (1907), National Bank of Poland (1945), National Bank of Ukraine (1991).
The reforms were based in part on Dutch economic and financial innovations that were brought to England by William III. New institutions were created: a public debt (first government bonds were issued in 1693) and the Bank of England (1694). Soon thereafter, English joint-stock companies began going public. [2]
The Bank Restriction Act 1797 (37 Geo. 3. c. 45) was an Act of the Parliament of Great Britain which removed the requirement for the Bank of England to convert banknotes into gold. The period lasted until 1821, when convertibility was restored. The period between these two dates is known as the Restriction period.