The Bank of England is founded

The Bank of England was born of a war. By 1694 England had been fighting Louis XIV's France for five years, led by William III, the Dutch prince who had taken the throne with his wife Mary II in the revolution of 1688. The war was ruinously expensive, and the government found it ever harder to borrow: London's goldsmith bankers remembered how Charles II had stopped paying interest on his debts to them in 1672. Among the many money-raising schemes sent to the Treasury, one came from a group of City merchants. William Paterson, a Scottish merchant and promoter, Michael Godfrey and their friends offered to lend the state a large sum with no date for repayment, in return for a fixed yearly interest paid out of taxes, if Parliament would let the lenders form a bank. Charles Montagu, a Lord of the Treasury and soon Chancellor of the Exchequer, took up the plan.

It was written into a tax law, the Tonnage Act, which received the royal assent on 25 April 1694. The Act put new duties on ships and on beer and other drinks, to reward those who would lend £1.5 million towards 'carrying on the War against France'. Of that sum, £1.2 million was to come from subscribers who could be made a company called 'the Governor and Company of the Bank of England'. They would receive £100,000 a year: eight per cent interest plus £4,000 for running the business. No one could put in more than £20,000, and a quarter had to be paid at once. The books opened at Mercers' Hall on Cheapside on 21 June, and the whole £1.2 million was promised in under two weeks by 1,272 people, with King William and Queen Mary down for £10,000. The Royal Charter was sealed on 27 July, Sir John Houblon became the first Governor and Godfrey his deputy, and on 1 August the Bank opened for business at Mercers' Hall with seventeen clerks and two gatekeepers. Before the year was out it had paid almost the whole loan into the Exchequer and moved to the larger Grocers' Hall in the Poultry, where it stayed for forty years.

Banking itself was not new: London's goldsmiths kept deposits and wrote notes, and public banks already existed in Genoa and in Stockholm, where Sweden's Riksbank dates from 1668. What was new was the tie between a bank and Parliament. The loan was secured on taxes that Parliament voted, so it was a debt of the nation rather than the private debt of a king who could refuse to pay. The Act also limited the Bank: it could not lend to the Crown without Parliament's consent or trade in goods, though it could deal in bills of exchange and in gold and silver. From the first weeks it took deposits and handed out 'running cash notes', promises to pay the bearer on demand, written by hand on forms the directors ordered printed on 31 July 1694; the oldest notes that survive date from 1697. The young Bank nearly failed in May 1696, when a run on it during the recoinage of England's worn silver, the work Isaac Newton had just joined the Mint to help with, forced it to pay its notes only in part.

It survived, and grew with every war. The Bank managed the government's accounts and its debt, raised money for the long wars against France, and became the bank that other banks kept their money with. In 1734 it moved into its own building on Threadneedle Street, enlarged by Sir John Soane from 1788 and rebuilt inside Soane's outer wall by Sir Herbert Baker between 1925 and 1939. In 1797, at war with France again, it was ordered to stop paying gold for its notes, and James Gillray's cartoon of the Prime Minister courting 'the Old Lady of Threadneedle Street' gave it the nickname it still carries. The Bank Charter Act of 1844 stopped any new bank from issuing notes, the Bank was nationalised in 1946, and in 1997 it was given the power to set interest rates. Founded as a private company to lend to a king at war, it is today the United Kingdom's central bank, on the same site, and its stated mission still echoes its charter's promise to 'promote the public Good and Benefit of our People'.