Read the text “The Bank of England” and be ready to do the following assignments.

The Bank of England, formally the Governor and Company of the Bank of England, is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world, after the Sveriges Riksbank, and the world's 8th oldest bank. It was established to act as the English Government's banker and is still the banker for the Government of the United Kingdom. The Bank was privately owned by stockholders from its foundation until nationalized in 1946.

The Bank is one of eight banks authorized to issue banknotes in the United Kingdom, but has a monopoly on the issue of banknotes in England and Wales and regulates the issue of banknotes by commercial banks in Scotland and Northern Ireland banks. Since 1998, the Monetary Policy Committee (MPC) has had the responsibility for setting the official interest rate.

The Bank's Monetary Policy Committee has devolved responsibility for managing monetary policy. The Treasury has reserve powers to give orders to the committee "if they are required in the public interest and by extreme economic circumstances" but such orders must be endorsed by Parliament within 28 days.

The Bank's headquarters have been in London's main financial district, the City of London.

Mark Carney assumed the post of Governor of the Bank of England on 1 July 2013. Carney, a Canadian, will serve an initial five-year term rather than the typical eight, and will seek UK citizenship. He is the first non-British citizen to hold the post. As of January 2014, the Bank also has four Deputy Governors.

The Bank performs all the functions of a central bank. The most important of these are maintaining price stability, and supporting the economic policies of the Government, thus promoting economic growth.

Stable prices and confidence in the currency are the two main criteria for monetary stability. Stable prices are maintained by making sure price increases meet the Government's inflation target. The Bank aims to meet this target by adjusting the base interest rate, which is decided by the Monetary Policy Committee.

Maintaining financial stability involves protecting against threats to the whole financial system. Threats are detected by the Bank's investigation and market intelligence functions. The threats are dealt with through financial and other operations, both at home and abroad. In exceptional circumstances, the Bank may act as the lender of last resort by extending credit when no other institution will.

The Bank works together with other institutions: the other central banks and international organizations, with the aim of improving the international financial system to secure both monetary and financial stability. The Bank acts as the government's banker, and it maintains the government's Consolidated Fund account. It also manages the country's foreign exchange and gold reserves. The Bank also acts as the bankers' bank, especially in its capacity as a lender of last resort.

The Bank used to be responsible for the regulation and supervision of the banking and insurance industries, although this responsibility was transferred to the Financial Services Authority in June 1998. After the financial crises in 2008 new banking legislation transferred the responsibility for regulation and supervision of the banking and insurance industries back to the Bank.

Understanding main points of the text

Which of these statements gives the best summary of the ideas in the text?

a) The Bank performs all the functions of a central bank.

b)The Bank of England is the second oldest central bank in the world.

Mark these statements T (true) or F (false) according to the information in the text. Find the part of the text that gives the correct information.

1. The Bank of England was privately owned by stockholders.

2. The Bank is one of eight banks authorized to issue banknotes in in England and Wales.

3. The Bank's Monetary Policy Committee has devolved responsibility for managing monetary policy.

4. The Bank performs all the functions of a central bank.

5. The Bank does not work together with other institutions.

6. Stable prices are not maintained by making sure price increases meet the Government's inflation target.

7. The Bank of England also manages the country's foreign exchange and gold reserves.

8. The Bank has a monopoly on the issue of banknotes in England and Wales and does not regulate the issue of banknotes by commercial banks in Scotland and Northern Ireland banks.

9. The Bank used to be responsible for the regulation and supervision of the banking and insurance industries.

10. The Bank may not act as the lender of last resort.

 

Understanding details of the text

1. What exactly do the authors mean speaking about a concept of the “monetary stability”?

2. Explain the meaning of “maintaining financial stability”.

 

 

L I S T E N I N G

Monetary Policy

You are going to listen to Kate Barker, an economist and a member of the Bank of England’s Monetary Policy Committee, talking about monetary policy. Before you listen, try to answer the questions below.

1. What is the aim of monetary policy?

2. What tools does a central bank use to control supply and demand for money?

3. What tends to happen when interest rates rise?

4. What tends to happen when interest rates fall?

5. What do commercial banks do after the central bank changes the base rate at which it lends them money?