CHAPTER XXII
THE ENGLISH BANKING SYSTEM
Foundation and Growth of the Bank of England
[150]About the year 1691 the Government of William and Mary experienced considerable difficulty in raising the necessary funds to prosecute the war with France; but "the hour brings the man." The man on this occasion was William Paterson, a merchant of Scotland, who had been educated for the Church, but had led a varied and adventurous life. The scheme he presented for the consideration of the Government for the relief of the situation was the foundation of a public joint-stock bank; which, in return for certain powers and privileges to be conferred, should advance money to the Government....
... the bill establishing the Bank of England was successfully carried through Parliament, and obtained the royal assent on the 25th April, 1694.
The basis of the bill was that £1,200,000 should be voluntarily subscribed by the public, and that the subscribers should be incorporated into a body, to be known as "The Governor and Company of the Bank of England."
The whole of the sum forming the capital of the bank was to be lent to the Government, for which the bank was to receive interest at the rate of 8 per cent. per annum, together with an allowance of £4,000 per annum for management and expenses; making in all £100,000 per annum. It was also provided that the sum of £300,000 was to be raised by public subscription, for which the contributors were to receive certain terminable annuities.
By its first charter, which was for ten years only, the Bank of England was not allowed to borrow or owe more than the amount of its capital; which meant that it could issue notes to the extent of its capital and no more. If this amount were exceeded the members were liable for such excess, in their private capacities, in proportion to their holding of stock.