Becoming a central bank: The development of the Bank of England's private sector lending policies during the Restriction

Sissoko, Carolyn

Abstract

This paper studies in detail the changes that took place in the Bank of England’s Restriction era policies governing private sector lending. We find that the Bank was adapting to novel monetary circumstances, created both by the evolution of the English financial system and by the Restriction itself, and that, although the process was far from smooth, the Bank was learning to act as a central bank: during this period the Bank transformed its internal operating procedures to put regulation-based constraints on its private-sector lending, established regular reviews of its policies and their effects on the money market, and adopted a distinct crisis-oriented lending policy. In addition to establishing that these core central bank activities developed over this period, we also find that for 18 months starting in 1809 the Bank’s policies were destabilizing, and that the Bullion Committee likely played a role in a shift in Bank lending policies that took place in mid-1810. Overall, this paper finds that the 1810 crisis was a turning point in the Bank’s understanding of its role in the economy: the Bank directors both acknowledged privately the Bank’s duty to the public, and restructured its discount policies with a view to promoting financial and monetary stability.

• Journal Article Type: Article
• Acceptance Date: Jun 28, 2021
• Online Publication Date: Sep 18, 2021
• Publication Date: 2022-05
• Deposit Date: Jun 8, 2021
• Publicly Available Date: Sep 19, 2023
• Journal: Economic History Review
• Print ISSN: 1468-0289
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 75
• Issue: 2
• Pages: 601-632
• DOI: https://doi.org/10.1111/ehr.13110
• Keywords: Bank of England; financial stability; banking; discount market; real bills; bullionist controversy; central banking JEL codes: E58; N13; N23
• Public URL: https://uwe-repository.worktribe.com/output/7450300