ABSTRACT
THE DETERMINANTS OF BANK POLICY Before proceeding much further it is perhaps useful to consider in more detail the objectives of Bank policy and what determined them. The Bank's policy was a response to two sorts of pressure: on the one hand, there was pressure from the shareholders for the Bank to maximize their profits, and, while the directors could - and often did - withstand a certain amount of pressure from that direction,lS they could not defy an organized majority which was set on a definite policy. On the other hand, the Bank had a close if informal relationship with the government, and it had to take government wishes very seriously. The government would make frequent requests of the Bank, and though it was often ready to modify its requests in the light of the opinions of the Bank management, it none the less expected its requests to be obeyed. The Bank understood this, and was reluctant to flout the government openly even though the government had no formal authority over it. We have already seen how the Bank acceded to Pitt's requests in 1793-7 even though they threatened to drive the Bank into default, and eventually did.
