Bank Of England
Bank of England (cont�d) 2012
'Bankers' deposits' refer to the joint-stock banks' credit balances at the Bank, and are regarded by them as part of their cash reserves. Since the joint-stock banks regulate their lending policy by reference to the size of their cash reserves, the Bank of England can control the supply of money by manipulating these bankers' deposits, and changes in this item therefore provide an indication of changes in monetary policy. 'Other accounts' are the balance of accounts of ordinary customers (a few private individuals and companies, plus other governments and foreign and Commonwealth banks); this item remains fairly constant and has no monetary significance.
On the assets side, the main item again is 'Government securities', consisting of Treasury bills and other securities. The size and composition of this item may be changed at any time on the initiative of the Bank by purchases and sales in the discount market and stock exchange ('open market operations').
'Discounts and advances' may be of three kinds bills discounted for the Bank's customers, advances made by the Bank to its customers and advances made to discount houses in its capacity as 'lender of last resort'.
'Other securities' consist of non-Government securities bought by the Bank on its own initiative.
'Notes' represent merely a cross-entry from the Issue Department, 'coin' represents silver coin held for issue to joint-stock banks as required.
These accounts reveal most of the Bank's main domestic functions. It acts not only as banker to the Government but also manages the National Debt. As a bankers' bank it provides a source of notes (which it issues itself), coin (which it buys from the Royal Mint) and credit (which it provides either directly as lender of last resort to the money market or indirectly by 'open market' dealings in bills and bonds. In these ways it can influence the level and the structure of interest rates and the supply of money in the economy.
The Bank also conducts transactions between Britain and the rest of the world. It manages the Exchange Equalization Account, administers Foreign Exchange Control, maintains relations with foreign and sterling area central banks and monetary authorities, and participates in the work of international financial institutions the International Monetary Fund, Bank for International Settlements and others.
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