To discern the public and private motivations behind the establishment and continuance of the Bank of England, we analyze the timing of legislation that renewed the Bank’s charter. The Bank’s original 1694 charter specified a life of only eleven years; at the end of that time, the government could exercise an option to repay its loan to the Bank and dissolve the charter. In fact, the government did not exercise the option, and the Bank’s charter was periodically renewed. We argue that the rechartering process reflected the needs of the government to respond to unforeseen contingencies. The government initiated new charters when budgetary circumstances–shaped largely by wars–required new loans, and when the monopoly value of the Bank’s charter rose. The Bank gained from renegotiating its contract with the government when it faced new and unforeseen competition.
Working Paper 01–05, Weatherhead Center for International Affairs, Harvard University, 2001.