The Bank of England is the central bank of the United Kingdom. Historically, it has been a model for banks all over the world. It was first established in 1694 to act as the English Government banker. The bank was moved to Thread needle Street in 1734, which is situated in the city of London.
It was nationalized in 1946 while it achieved independence in 1997. The financial system of England is based on the Bank of England. It has the responsibility of conducting several functions but the most important amongst all is to maintain financial stability in the entire country. The very first concern of this bank is to devise such an effective fiscal policy to prevent price fluctuation. The financial conditions of a country depend upon the price fluctuations.
The most important attribute of the Bank of England is to lend money to the other banks of the country in times of trouble. When any of the banks within the country is going through financial turmoil, the Bank of England lends loan in order to prevent the bank from going bankrupt. In this way, it plays its role of maintaining economic stability in the country.
The Bank of England comprises gold reserves as insurance, and its value is nearly 4 billion. These gold reserves are held with this bank for over 300 years. In 1999, major part of these gold reserves was sold off in order to improve the bank reputation in the country. This has also helped in increasing the currency storage of the bank. Moreover, nearly 400 tonnes of gold were auctioned in this regard.
The year 2007 turned out to be the worst period in the bankk’s history and the news staggered the whole world as the appearance of cracks in gold was reported. Thus, it was believed to make the god sale a bit difficult with decrease in its sale price as well. The bank had gold reserves in the form of gold bars and coins.
Such a condition made it difficult for the gold to be traded in the market. Since the bank of England is the central bank, its actions affect the entire economy. The gold prices at that time were at a height since its demand was increasing day by day.
Nevertheless, this action lead to a drop in the price, and caused many investors to lose money. Since the gold was not in mint condition, the bank had to dispose it off at a lower price.
The Bank of England has been heavily criticised for this action, as it would affect the economy of the world for many years to come. Gordon Brown, the Chancellor of the Exchequer, was able to sell a large proportion of the Britain gold reserves at the lowest price for a quarter of the century, despite being advised against it. It was estimated that these sales caused the bank to lose 3.8 billion pounds. However, the Bank was able to overcome the loss with efficient portfolio management and is now in a stable financial position.
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