FOUNDATION AND GROWTH OF THE BANK OF ENGLAND
In tracing the history of our financial system we now come to the important event of the establishment of the Bank of England.
About the year 1691 the Government of William and Mary experienced considerable difficulty in raising the necessary funds to prosecute the war with France; but “the hour brings the man.” The man on this occasion was William Paterson, a merchant of Scotland, who had been educated for the Church, but had led a varied and adventurous life. The scheme he presented for the consideration of the Government for the relief of the situation was the foundation of a public joint-stock bank; which, in return for certain powers and privileges to be conferred, should advance money to the Government. His scheme, though well received in official circles, produced very great opposition from many classes of the public, who thought they would be prejudiced by such an institution.
The goldsmiths thought they saw in it the destruction of their business, the money-lenders a reduction in the rates of interest obtainable, certain merchants a reduction of their profits on Government contracts, while the political opponents of the Government and the king saw that the scheme, if efficiently carried out, would naturally strengthen the former and give the latter a firmer position than he occupied at that time; and all these interested parties with one accord joined forces and condemned the scheme.
But in spite of all opposition the Bill establishing the Bank of England was successfully carried through Parliament, and obtained the royal assent on the 25th April, 1694.
The basis of the Bill was that £1,200,000 should be voluntarily subscribed by the public, and that the subscribers should be incorporated into a body, to be known as “The Governor and Company of the Bank of England.”
The whole of the sum forming the capital of the Bank was to be lent to the Government, for which the Bank was to receive interest at the rate of 8 per cent. per annum, together with an allowance of £4,000 per annum for management and expenses; making in all £100,000 per annum. It was also provided that the sum of £300,000 was to be raised by public subscription, for which the contributors were to receive certain terminable annuities.