Role of the Bank of England - Research Paper Example

Bank of England Introduction The modern world would not be able to function without the presence of an important form of financial institution. These institutions are present in every part of the world and thus form an integral part of the society. In Britain, there are several types of these institutions that provide the basis of the economy and service to the communities, namely; banks, insurance firms, money markets etc. Some of the prominent banks in the country are Bank of England, HSBC and Barclays. 2. Bank of England 2.

1 Company Profile Bank of England is the most well-known bank of Britain. According to Bank of England (2010), it is the central bank of the country that established as early as 1694 by Act of Parliament and then got nationalized in 1946. The bank provides monetary and financial stability to the whole system of banking in Britain. It has the status of being the national bank of the country. 2.2 Important function of Bank of England Bank of England possesses the gold reserves of the country as well as foreign currencies.

It is also responsible for issuing notes and coins; however this responsibility is limited till the region of England and Wales. Bank of England has the authority to set the interest rates so that the inflation in the country can be controlled. Farlex Encyclopedia Inc (2010) stated that it is also responsible for receiving the tax revenues from the residents of the country and implements the monetary policy. Last Name of the Instructor (2010) stated that this money might be utilized later in the payments of the government expenses.

Another important function of Bank of England is to act as a banker for the other clearing banks in the country. 2.3 Clearing Banks Clearing banks tend to offer their customers saving and current accounts. They give their customers loans and financial advice about the management of their assets. They are termed as clearing banks because they tend to clear and cash cheques. They also transfer money from one bank to the other. Amadeo (2010) provided a formal definition of clearing; a method which is adapted by banks for exchanging cheques with each other and settling their accounts.

HSBC, Lloys TBS, NatWest and Barclays are among the prominent clearing banks in the country. 3. Difference between Bank of England and Others Although all of these above mentioned banks tend to provide financial services to their customers yet Bank of England is considered to have a more creditable role in the economy of Britain. The reason for this is that it is the national bank of Britain and performs many more functions than the other private banks for example; handling government payments, keeping track of the monetary needs of the other banks in their respective regions and hence fulfilling them.

Amadeo (2010) stated that interest rates tend to control the monetary flow in the society. Bank of England has a great responsibility for managing the fluctuating rates of interest in the economy to ensure that the lives of the common people do not get affected to a great extent. According to an article in BBC News (5 March 2009); Bank of England lowered the interest rate to 0.5% in the first quarter of 2009. References Amadeo, K 2010, A Primer on the Role of Interest Rates in the Economy, About.

com, viewed 26 November 2010, Bank of England 2010, About the Bank, viewed 26 November 2010, BBC News 2009, ‘UK interest rates lowered to 0.5%’, 5 March Farlex Encyclopedia Inc., 2010, Bank of England, viewed 26 November 2010, Name of the Instructor, 2010, Financial Institutions in Britain, Name of the University