UK banking law

United Kingdom banking law refers to banking law in the United Kingdom, to control the activities of banks.

The Bank of England was originally established as a corporation with private shareholders under the Bank of England Act 1694, to raise money for war with Louis XIV, King of France. After the South Sea Company collapsed in a speculative bubble in 1720, the Bank of England became the dominant financial institution, and acted as a banker to the UK government and other private banks.

The Bank of England could simply by being the biggest financial institution, it could influence interest rates that other banks charged to businesses and consumers by altering its interest rate for the banks' bank accounts. The Bank of England Act 1716 widened its borrowing power. The Bank Restriction Act 1797 removed a requirement to convert notes to gold on demand. The Bank Charter Act 1844 gave the bank sole rights to issue notes and coins. It also acted as a lender through the 19th century in emergencies to finance banks facing collapse. Because of its power, many believed the Bank of England should have more public duties and supervision. The Bank of England Act 1946 nationalised it. Its current constitution, and guarantees of a degree of operational independence from government, is found in the Bank of England Act 1998.

UK banking has two main parts. First, the Bank of England administers monetary policy, influencing interest rates, inflation and employment, and it regulates the banking market with HM Treasury, the Prudential Regulation Authority and Financial Conduct Authority. Second, there are private banks, and some non-shareholder banks (co-operatives, mutual or building societies), that provide credit to consumer and business clients. Borrowing money on credit (and repaying the debt later) is important for people expand a business, invest in a new enterprise, or purchase valuable assets more quickly than by saving. Every day, banks estimate the prospects of a borrower succeeding or failing, and set interest rates for debt repayments according their predictions of the risk (or average risk of ventures like it). If all banks together lend more money, this means enterprises will do more, potentially employ more people, and if business ventures are productive in the long run, society's prosperity will increase. If banks charge interest that people cannot afford, or if banks lend too much money to ventures that are unproductive, economic growth will slow, stagnate, and sometimes crash. Although UK banks, except the Bank of England, are shareholder or mutually owned, many countries operate public retail banks (for consumers) and public investment banks (for business). The UK used to run Girobank for consumers, and there have been many proposals for a "British Investment Bank" (like the Nordic Investment Bank or KfW in Germany) since the global financial crisis of 2007-2008, but these proposals have not yet been accepted.

...
Wikipedia