The Bank of England. The Bank of England was established privately in 1694 and chartered by the government in return for a loan

The Bank of England was established privately in 1694 and chartered by the government in return for a loan. The bank was also allowed to issue its own notes. Although started as a private bank, it gradually evolved into a Central Bank.

The Bank of England was the first central bank. It serves as the banker to the government to the United Kingdom, with sole authority to issue notes in England and Wales, and also as the banker to the country’s commercial banks. Until 1946 the bank was privately owned, but it had long governed its operations in the national interest.

From its founding in 1694 it acted as the government's banker, lending it money to fund the national debt. It soon acquired a practical monopoly of the note issue; eventually other banks began keeping deposits with the Bank of England and using it as a clearinghouse for their transactions with one another. By the 19th century, the Bank of England had become a "banker's bank." It had also acquired another function associated with central banking—that of being the "lender of last resort," to which other banks could turn for aid when they were hard pressed.

During the 19th century the Bank of England developed techniques for regulating interest rates and the amount of credit issued by itself and by the banking system generally. As the leading bank in the world's leading financial center, its actions were considered critical in maintaining the international gold standard. By adjusting its discount rate—that is, the interest it charged on loans to commercial borrowers—it was able to affect the international flow of short-term capital. The Bank of England was nationalized in 1946.

Today the bank conducts monetary policy by affecting the country’s supply of money through the purchase and sale of securities (open market securities). It also controls interest rates and sets limits on the amount of bank credit (reserve requirements).