Kavan Choksi Briefly Discusses the Functions of the Bank of England (BoE)

Bank of England

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. The Bank of England is the eighth oldest bank in the world. It additionally has been a structural model for many central banks around the world. Kavan Choksi mentions that the Bank Of England was established in 1694 as a private entity and remained private for 250 years until it was nationalized in 1946. It additionally evolved to become an independent public organization wholly owned by the Treasury Solicitor in 1998. Today the Bank of England acts as the official gold custodian of the U.K and other central banks. Its vault is known to hold about 400,000 gold bars.

Kavan Choksi mentions the important functions of the Bank of England (BoE)

The hierarchical structure of the Bank of England comprises of the Governor, the Court of Directors, and a few subcommittees. Its governor is selected from within the bank, and is usually the person holding the most senior executive position and taking part in important committees.  The Court of Directors is the key administrative body responsible for overseeing the operations, strategies, and resource allocations of the bank. The important subcommittees of the Bank of England (BoE) additionally include:

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

The key function of the Bank of England is to maintain and ensure financial stability. This ideally is achieved with the cooperation of its important subcommittees.

  • Financial Stability: The Financial Policy Committee (FPC) of the bank focuses on maintaining the operational health of the national finance system. This is done by capably identifying systematic risks and orderly supporting the economic policy of the government. The Prudential Regulation Authority (PRA), on the other hand, regulates banks, financial institutions, and financial markets with the aim of providing assurance of the integrity and fairness of the discerning financial services provided to consumers.
  • Monetary stability: The Monetary Policy Committee (MPC) of the Bank of England is known to be responsible for monetary stability, which includes controlling GBP value and maintaining stable prices in the economy. It reaches its objectives by planning the monetary policy of the country, setting the United Kingdom interest rates, as well as timely intervening in case certain issues arise. MPC is a nine-member committee led by the governor and includes three deputy governors, the chief economist of the bank, and four other non-executive members. Each of these members has an equal-weight vote, and their decisions are finalized with simple majority votes. The MPC additionally has full autonomy over the monetary policy. However, the government’s economic policy is also taken into account very often for strategic coherency.

In the opinion of Kavan Choksi, being the top monetary and financial authority in the United Kingdom, in many ways the Bank of England assumes the role of guarding the wellbeing of the British economy. It also plays an instrumental role in protecting the financial systems of the country, and proactively plans and executes monetary policy in alignment with the government’s.

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