Kavan Choksi Discusses the Structure and Functions of the Bank of England
The Bank of England (BoE) is the central bank of the United Kingdom, which oversees the monetary policy of the country and issues its currency. As Kavan Choksi / カヴァン・チョクシ says, the BOE is also responsible for regulating banks, financial institutions, and payment systems in the United Kingdom. It basically is the U.K. equivalent of the Federal Reserve in the U.S. Similar to the central banks of other countries, the BoE may act as a lender of last resort in a financial crisis.
Kavan Choksi / カヴァン・チョクシ briefly talks about the structure and functions of the Bank of England
The Bank of England is the eighth oldest bank in the world, as well as a structural model for most central banks across the globe. It was established in 1694 as a private entity and stayed private for more than two centuries, prior to getting nationalized in 1946. The Bank of England evolved to become an independent public organisation that was wholly owned by the Treasury Solicitor in 1998. The BoE also acts as the official gold custodian of the United Kingdom and certain other central banks. The gold vaults of the BoE are estimated to hold about 400,000 gold bars that are likely to be worth over £200 billion. This gold represents about 3% of all gold mined in history.
Being the top monetary and financial authority in the United Kingdom, the BoE is tasked with the duty of guarding the well-being of the British economy as well as the financial system. The hierarchical structure of this central bank comprises of the Governor, the Court of Directors, and a few subcommittees. The Governor of BoE is selected from within the bank. This Governor holds the most senior executive position and takes part in all its committees. The Court of Directors is the primary administrative body of the BoE. It oversees the operations, strategies, and resource allocations of the Bank. The most important subcommittees of the BoE are:
- Monetary Policy Committee (MPC) that implements monetary policy and sets the interest rates
- Financial Policy Committee (FPC) provides assurance of stability in the financial system
- Prudential Regulation Authority (PRA) that regulates the Financials industry
As Kavan Choksi / カヴァン・チョクシ mentions, the prime function of the BoE is to ensure and maintain monetary and financial stability in the United Kingdom. Financial stability is achieved by the cooperation of the FPC and the PRA, while monetary stability is the responsibility of the MPC.
By efficiently identifying systemic risks and supporting the economic policy of the government, the Financial Policy Committee strives to maintain the operational health of the national finance system. The Prudential Regulation Authority, on the other hand, regulates financial institutions and markets to ensure fairness and integrity in the financial services provided to British consumers.
The responsibility of the Monetary Policy Committee largely focuses on maintaining stable prices in the economy and controlling the GBP value. Setting the United Kingdom’s interest rates and planning the country’s monetary policy are the two key methods used by the MPC to reach its objectives.