ABSTRACT
The Bank of England was founded in 1694 to help to finance the French wars. Though an independent institu tion the Bank has always had intimate connections with the British Government.
Under its earlier charters the Bank enjoyed very important privileges. For one thing, no other bank of more than six partners was allowed the privilege of note issue. As in the 18th century banking outside London was entirely conducted by means of notes, this led to a host of small provincial banks, many of them of doubtful stability. In consequence, the Bank’s privilege was limited in 1826 to the area within 65 miles radius of London. In the meantime, cheque-paying banking had developed, and in 1833 the first London Joint Stock Bank (the Westminster Bank) was founded to conduct banking solely on a cheque paying basis. The first half of the 19th century was a period of great financial instability, due partly to the aftermath of the Napoleonic wars and partly to rapid industrial and commercial changes. It was held at the time that the instability was partly due to the too free granting of loans in the form of bank notes, both by the Bank of England and by other banks. In consequence of this opinion the Bank Act of 1844 was passed. The following are the chief provisions of this A c t :—
(1) . The Bank was to be divided into two departments. The Issue Department and the Banking Department.
