What Is the Bank of England?
The Bank of England is the UK’s central bank, and around the world, other central banks have based their financial infrastructure model on this one. It was established in 1694 so that the bank could act as the English Government’s banker. It is the 8th oldest bank in the world and was nationalised in 1946 by the Attlee ministry.
The headquarters are in London, England, and the current Governor is Andrew Bailey. It has reserves of $101.59 billion, and it regulates the Pound Sterling currency.
The Bank of England is not a regular bank for consumers to use for depositing money, international transfers and receiving money from abroad. Instead, they are a central bank and regulator responsible for ensuring the UK’s economy runs smoothly.
What Is the Bank of England Responsible for?
This section takes a closer look at the responsibilities of the Bank of England. They are the most crucial entity in the UK’s economy since they make the critical decision regarding monetary policy. Understanding their responsibilities gives you a better idea of why you can trust the UK economy as a customer of money transfer companies.
Bank of England responsibilities:
Monetary policy: the BOE sets the monetary policy to make critical adjustments to the financial markets. For example, they can change the bank rate, which is the lending rate for commercial banks. At the time of writing, the bank rate is at 1.25%, but it usually sits at 1%. Overall, the BOE changes the monetary policy eight times per year.
Inflation target: the inflation target rate is 2%, but at the time of writing, the rate is 9.1%. It is the responsibility of the Bank of England to reduce the high inflation rate so that it falls to the target level. They can do this through various financial mechanisms viable to them.
Issues currency: the BOE is the financial entity responsible for issuing banknotes. Pound Sterling is the UK’s currency, and there are four denominations, which include £5, £10, £20 and £50. Recently, the size of denominations has decreased since the UK’s government wants to encourage people to use cashless forms of payment.
Regulates banks: the Bank of England regulates the banks in the UK, which includes ensuring they comply with the relevant laws. This work promotes trust in the banking system so that consumers can feel confident about using banks.
The Bank of England also has a Monetary Policy Committee that aims to ensure the annual inflation rate is stabilised to 2%. They meet several times per year to discuss what monetary policy suggestions they should give to the UK’s regulators that hold powers to make rule changes.
The government’s target inflation rate is 2%, and when it deviates by more than 1%, the BOE has to provide a public explanation of what action is being taken quarterly.
What Is the Importance of the Bank of England?
Now let us turn our attention toward the importance of the BOE. This section highlights why money transfer customers should appreciate the work that BOE does in stabilising the economy.
Confidence in the economy: the Bank of England promotes confidence in the UK’s economy by keeping it stable. Consumers can believe that their bank has the funds to pay out their deposits and provide the financial services advertised. Confidence in the economy contributes to more spending and investments, which is excellent for the financial markets.
Helps facilitate payments: since the BOE is in charge of printing banknotes, they have the role of ensuring that people can pay for goods in person. They make sure that there are enough banknotes of all denominations. Also, the BOE updates the banknotes to reduce the chances of fraud through forgery. In fact, they recently released an updated version with crucial security features. These include a large see-through window, a portrait of the Queen with the numerical value of the note and twice around the edges of the note; you can read “Bank of England”.
Enforce banking regulation: the BOE monitors banks to ensure they comply with the regulation, which means consumers can have more confidence in financial services. Since high street banks are accountable to the BOE, customers know their bank is safe and sound.
Gold: the BOE has the vital task of looking after the gold reserves, which are around 400,000 gold bars. The gold mostly belongs to the central banks of other nations as the UK owns very little of its own.
A case study of the Bank of England enforcing banking practices involves the Metro Bank. They fined Metro Bank $7.13 million for failures in regulatory reporting due to an accounting error. The accusation was that an inaccurate picture of its regulatory capital was provided because incorrect risk weights were given. The offence took place between May 2016 and Jan 2019.
Bank of England Regulations
This section provides the key Bank of England information at a glance. You will learn about the relevant regulations, crimes they stop and industries they are involved in.
Regulations: the Financial Services Act of 2012 reformed the UK’s government financial regulation. Many of the new policies were a response to the 2008 global financial crisis, and it created the Financial Policy Committee.
The Bank of England enforces its regulatory power through the Prudential Regulation Authority. They regulate all types of financial services, which include banks and money transfer companies.
Crimes: the Bank of England does not deal with crimes committed by the general public – other entities are responsible for dealing with such matters. Instead, they focus on instances where financial institutions do not follow the rules of the UK’s financial markets.
Industries: The BOE mainly deals with the financial sector. They act to enforce the regulations on financial services companies and banks. However, the monetary policies they make impact all industries in the UK.
Accountability: the Bank of England is accountable to the UK Government since they act as their banker. This means they have strong powers to make changes to the UK economy.
What Regions Does the Bank of England Cover?
The bank of England is mainly there to oversee the UK economy and the financial institutions that operate in its markets. However, they also work with international financial institutions. For example, they hold the gold reserves of central banks from other countries.
When Might You Encounter the Bank of England?
The Bank of England has limited direct contact with the general public. However, they provide education resources, publications, speeches, statistical releases and research support programs. They even have a museum open to the general public that is free of charge. At the museum, you can learn about the economy and the work of the Bank of England and take pictures in front of gold bars.
Can the Bank of England Make New Rules?
The Bank of England has the power to make new rules for how the UK’s economy functions. For example, they can change the bank rate and regulations regarding how financial institutions in the UK must provide services to the general public.
Also, they use the Prudential Regulation Authority to make new rules that must be followed by financial services taking part in the UK’s economy. The PRA Rulebook is the mechanism used to create new policies for the banks and money transfer companies to follow.
How to Contact the Bank of England?
You may wish to contact the BOE to learn more about the work they do or take advantage of their educational material. This enables money transfer customers to understand how the UK’s economy functions proactively.
Phone: the primary contact number is 020 3461 4444 (Monday to Friday, 9 am to 5 pm).
Email: the general enquiries email is enquiries@bankofengland.co.uk
Fax: 020 3461 4771
Other Regulators
Bottom Line
To conclude, the Bank of England is the most important financial institution in the UK. This is because they make macro-level decisions such as setting the bank rate to balance the UK’s economy and offer consumer stability. However, they also regulate banks and money transfer companies to ensure they provide fair services to the general public.
We recommend that you continue learning about the process of sending money to the UK by checking out the other guides on our website. For example, you can start with Send Money To the UK and Send Money to the USA from the United Kingdom. Reading through these guides will inform you about the process of choosing the best companies for saving money on fees and currency conversion rates.
