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27 July 2008

On this day in history: Bank of England founded, 1694

The stability promised by the 'Glorious Revolution' of 1688 fostered economic growth in England. Nevertheless, the public finances were still weakened from over fifty years of turbulence and mismanagement. As a result, political pressure grew for the creation of a national bank. Consequently the government received many proposals to a create such an institution that could mobilise the nation's wealth.

In 1691, the Scotsman, William Paterson, who had experience banking from his time in Amsterdam, was part of a group that made one such proposal; however, the government rejected it. Undeterred, he made another proposal three years later along with the merchant Michael Godfrey. This time the government accepted the plan to create a bank to administer a fund for public borrowing.

An Act of Parliament passed through the Houses of Parliament, and on 27th July 1694 the investors were incorporated as the Governor and Company of the Bank of England after being granted their Royal Charter. Paterson became one of its directors; Godfrey became the deputy governor; with another London merchant, John Houblon, as the bank's first governor. Within a few days the bank opened for business at the Mercers' Hall in Cheapside, London, having lent the government £1.2 million.

The Bank of England site includes a pdf file of the Tonnage Act of 1694 that founded the bank.