BANK OF ENGLAND

Te Awamutu Courier, Volume 58, Issue 4188, 24 May 1939, Page 4

BANK OF ENGLAND

GOVERNOR’S ACCOUNT OF WORK. ASSISTANCE GIVEN TO INDUSTRY. Mr Montagu Norman, Governor of the Bank of England, made his first broadcast when he spoke in the 8.8. C. programme in the series, “The City of London.” Describing the history and working of the Bank of England, he said that it printed and issued banknotes as agents for the Government, keeping clean and tidy a circulation of about 500,000,000. “I cannot abide’ a dirty note myself,” he added. Founded by merchants and citizens of London in 1694 to advance money to the Government, Mr Norman said that it was during the eighteenth century that the bank had become securely established. It had grown as the trade and industry of the country expanded, and after the Napoleonic wars branches had been opened in various large provincial towns. With the establishment of the clearing banks to provide for the direct banking needs of business, the Bank of England had withdrawn from commercial and private banking and' had confined itself to the functions which now distinguished it as a Central Bank. Its main customers could be into three main categories. First,there was the Government, with an income of £1,000,009,000 a year; second, the clearing banks, which kept some £80,000,000 to £100,000,000 with the bank as part of their reserves; and, third, the discount houses, which borrowed for short periods 'to discount bills and thus finance Government and trade. This machinery for bringing together short-term borrowers and short-term lenders was unique and an essential part of the London money market. AID TO INDUSTRY. Mr Norman went on to deal with the assistance the Bank had been able to afford in the reorganisation and re-equipment of basic industries since the war. It had been able, because of the reserves it had built up, to provide essential though temporary finance for a number of industries.

He emphasised that the bank had always been consistutionally a private body acting under charters. There were more than 15,000 owners of bank stock, and no proprietor had more than one vote irrespective of his holding of stock. He explained the constitution of the Court, consisting of Governor, Deputy-Governor, and 24 directors, which met every week. Although at one time nearly all the directors had been merchant bankers, now more than half of them were drawn from trade and commerce, and barely a quarter of them from the ranks of merchant bankers. Although in its formal constitution there was no trace of Government control of the bank, it was recognised that in practice the Government in monetary as in other matters must have the final word. The bank was in a position to give independent advice to the Government. It was not controlled by bankers, nor did it compete with them. It received full cooperation from them on matters of policy. Finally, the prestige of the bank depended upon the service it was able to provide and upon the confidence it inspired. Mr Norman gave an authoritative account of the origin of the pseudonym, “Old Lady of Threadneedle Street.”

The name, which has since become a term almost of affection, was first used sarcastically by a Member of Parliament who, in the eighteenth century, was criticising certain of the bank’s activities.