Kavan Choksi Business Consultant Talks About The Bank of England (BoE) and Its Responsibilities

The Bank of England (BoE) serves as the central bank and ultimate national monetary authority of the United Kingdom. This bank is headquartered in London and was established way back in the year of 1694. It initially was held privately by shareholders. BoE was nationalized in 1946. As Kavan Choksi Business Consultant mentions, this bank became an independent public organization in 1998. This change granted the BoE with more operational independence in regard to carrying out its functions.

Kavan Choksi Business Consultant sheds light on the functions and responsibilities of the BoE

The Bank Of England is responsible for managing and issuing the currency of the United Kingdom. It is also responsible for maintaining financial stability in the country and implementing monetary policies. Also referred to as the Bank of Banks in the UK, it supervises and controls the lending, borrowing, and daily operations of other banking institutions in the country. Over centuries, the ownership of the BoE has shifted from private to public, and it has experienced a series of centralization and decentralization of its functions.

The base rate of the Bank of England, commonly known as the Bank Rate or official interest rate, basically represents the interest rate at which the BoE offers loans to commercial banks and financial institutions operating within the United Kingdom. It functions as a fundamental instrument for shaping interest rates across the entire UK economy. Changes in the base rate have a direct effect on the expenses associated with borrowing for individuals, businesses, and financial institutions. The interest rates set by the Bank of England play a crucial role in defining the monetary policy of the UK and exerting an influence on the borrowing expenses incurred by individuals and businesses. The Bank Of England has played quite an active role in maintaining financial resilience and stability during the financial crisis of 2008, Brexit, and many other economic fluctuations.

Here are some of the major functions of the BoE in the British economy:

• Monetary stability is among the prime concerns of the Bank of England. It achieves this goal by instilling confidence in the currency and maintaining stable prices.
• Bank of England has a monopoly in printing and issuing the Great Britain pound in the UK. It is also responsible for overseeing payments made by the GBP with the use of credit or debit cards, as well as digital payment systems.
• As a central bank, BoE manages inflation through the manipulation of base interest rates. The Monetary Planning Committee of the Bank of England bears the responsibility of determining official interest rates and overseeing measures to control inflation.
• The Bank of England serves as the government’s banker. It is responsible for facilitating national transactions and overseeing government accounts, including the management of the country’s gold and foreign exchange reserves. Additionally, the Bank of England functions as the lender of last resort in the United Kingdom, offering support to both private and public banks to prevent bankruptcy and safeguard their clients.

As Kavan Choksi Business Consultant points out, the BoE also manages manages market liquidity through its asset purchase facility, utilizing funds obtained through the issuance of government bonds and cash from the debt management office.