Text 8. Central Banking in the United Kingdom

A central bankis that organization which has one prime function — the regulation of money and credit in an economy. Although particular central banks may carry out a variety of different functions, many of them are not necessary functions of a central bank and could well be carried out by other institutions within the economy. For example, the issue of bank notes is usually a central banking function, but it can be fulfilled by privately owned banks (as in Hong Kong) or by a government department (as in the period 1914—28 in the United Kingdom, when the Treasury Issued notes as well as the Bank of England).

However, we shall find that central banks do tend to have many common features and the Bank of England is not atypical in this respect.

One important question regarding central banks concerns their relationship with the government. How independent of the central government is the central bank? To what extent can a central bank carry out policies which may not be consistent with those of the government? In some countries, such as the United States and West Germany, the central bank enjoys a considerable degree of independence and there may be constitutional provisions which ensure the independence of the central bank. At the other extreme, in some centrally-planned economies the central bank often plays a very minor role in the general conduct of economic policy.

In the case of the Bank of England it is clear that, in formal terms, its role is subordinate to the Treasury; this is a relationship which is explicitly set out in the Bank of England Act, 1946. In the final analysis, the Bank must conform to the wishes of the government and carry out the policies which the government lays down.

The Bank of England was nationalized in 1946 and its capital is now owned by the Treasury. Before 1946 it was privately-owned institution but for many years it had been acknowledged as the UK's central bank, the act of nationalization merely confirming in law a situation which already existed in practice. It is run by a Court of Directors, consisting of the Governor, Deputy Governor, four full-time Executive Directors and twelve part-time directors, all the members of the Court being appointed by the Crown (i. e. the government of the day).

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Text 7. Developing a Business Plan	\|	Text 10. Business letters

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