Kavan Choksi Business Consultant Provides an Insight into the Structure and Functions of the Bank of England (BoE)

The Bank of England (BoE) is the central bank of the United Kingdom. It serves the U.K. government as the official banking institution for monetary affairs. As Kavan Choksi Business Consultant mentions, the Bank of England is the eighth oldest bank on the planet, and has been a structural model for most central banks around the world. This bank was established as a private entity in 1694, and stayed private for more than two hundred years prior to being nationalized in 1946. BoE additionally evolved to become an independent public organization entirely owned by the Treasury Solicitor in 1998. It also acts as the official gold custodian of the U.K. and other central banks worldwide.

Kavan Choksi Business Consultant sheds light on the structure and functions of the Bank of England

The hierarchical structure of the Bank of England comprises of the Governor, the Court of Directors, as well as a few subcommittees. The Governor of BoE is chosen from within the bank, and holds the most executive position and takes part in all committees.

The Court of Directors additionally is the prime administrative body. They are responsible for overseeing the resource allocations, strategies and operations of the bank. The important subcommittees of the Bank of England are:

  • The Monetary Policy Committee (MPC) that implements monetary policy and sets the interest rates
  • The Financial Policy Committee (FPC) that ensures stability in the financial system
  • Prudential Regulation Authority (PRA) that regulates the Financials industry

The prime functions of the Bank of England are to ensure and maintain monetary and financial stability in the country.

  • Financial Stability: The Financial Policy Committee focuses on maintaining the operational health of the national finance system by supporting the economic policy of the government and identifying systemic risks. Prudential Regulation Authority, on the other hand, regulated the financial markets, financial institutions and banks to ensure fairness and integrity of the financial services provided to the citizens of the country.
  • Monetary Stability: The responsibility of the MPC for monetary policy tends to involve maintaining stable prices in the economy, while also controlling the GBP value. It manages to reach the objectives by orderly planning the monetary policy of nation, setting the interests and intervening in the economy when required. The Monetary Policy Committee comprises of nine members. This committee is led by the governor and includes three deputy governors, chief economist of the BoE and four other non-executive members. Each of these members has an equal-weight vote, and the decisions made by them tend to be finalized with simple majority votes. The MPC has full autonomy on the monetary policy, even though the economic policy of the government is commonly taken into account for strategic coherency. However, the autonomy of the committee on interest rates tends to be limited by the Treasury, which has the power to enforce the MPC to make specific decisions if necessary.

As Kavan Choksi Business Consultant underlines, the influence of the BoE on the U.K. economy is largely based on the interest rate decisions and other economic interventions by the Monetary Policy Committee.