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27 July 2011

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

The 'Glorious Revolution' of 1688 ended over fifty years of turbulence and mismanagement of England's finances fostering economic growth in England. Yet the public finances were still weak resulting in political pressure for the creation of a national bank. The government received many proposals to establish 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.

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