IS DOCUMENT I S THE PROPERTY OP HIS BRITANNIC MAJESTY'S GOVERNMENT).
S E C R E T
C P . (45)
COPY NO
167
.hrt
1QTH SEPTEMBER. 1 9 ^ 5 .
CABINET
BANK OP ENGLAND BILL
Memorandum, by t h e C h a n c e l l o r
of t h e
Exchequer
I a t t a c h a d r a f t o f a B i l l t o "bring t h e Bank, o f E n g l a n d
under- p u b l i c o w n e r s h i p .
N o r m a l l y t h i s B i l l w o u l d h a v e "been
e x a m i n e d "by t h e L o r d P r e s i d e n t s C o m m i t t e e b e f o r e s u b m i s s i o n t o
t h e C a b i n e t , h u t , i n v i e w o f t h e n e e d f o r an e a r l y d e c i s i o n ,
h a v i n g r e g a r d t o t h e P a r l i a m e n t a r y t i m e - t a b l e and t h e h y b r i d
n a t u r e o f t h e B i l l , I h a v e c o n s u l t e d t h e L o r d P r e s i d e n t , who
has a g r e e d t h a t t h i s memorandum s h o u l d come d i r e c t t o t h e
Cabinet.
r
2.
Clause 1 p r o v i d e s t h a t the e x i s t i n g c a p i t a l s t o c k of t h e
B a n k , a m o u n t i n g t o £1 L \ , 5 5 3 * 0 0 0 , s h a l l be a c q u i r e d "by t h e T r e a s u r y
f r o m t h e s t o c k h o l d e r s i n r e t u r n for' 39b Government S t o c k o f s u c h
amount t h a t " t h e sum p a y a b l e a n n u a l l y "by way o f i n t e r e s t t h e r e o n
i s e q u a l t o the a v e r a g e annual g r o s s d i v i d e n d d e c l a r e d during
the p e r i o d of twenty y e a r s immediately p r e c e d i n g t h e
3 1 s t , March, 1 9 ^ 5 . "
S u b - c l a u s e (L) g i v e s t h e T r e a s u r y t h e r i g h t t o r e d e e m t h e
s t o c k a t any t i m e a f t e r 3 1 s t March, 1 9 6 6 :
subject to that, the
s t o c k w i l l be p e r p e t u a l .
T h u s , t h e s t o c k h o l d e r s w i l l , a t any
r a t e f o r 20 y e a r s , r e c e i v e t h e same i n c o m e , n e i t h e r more n o r
l e s s , t h a n t h e y h a v e r e c e i v e d i n r e c o n t y e a r s . As r e g a r d s ' c a p i t a l
v a l u e s , i t i s t h o u g h t t h a t t h e market v a l u e of t h e Government Stock
t o h e i s s u e d t o o w n e r s o f e x i s t i n g Bank S t o c k w i l l h e r o u g h l y
t h e same a s t h e p r e s e n t p r i c e o f Bank S t o c k .
(The a v e r a g e p r i c e
o f Bank S t o c k o v e r t h e s i x months t o 3 0 t h J u n e l a s t was 3 8 3 ) *
I
;
I
3*
C l a u s e 2 p r o v i d e s t h a t on t h e a p p o i n t e d day t h e p r e s e n t
Court o f D i r e c t o r s , c o n s i s t i n g o f a G o v e r n o r , a D e p u t y G o v e r n o r
and t w e n t y - f o u r D i r e c t o r s , s h a l l g i v e p l a c e t o a new C o u r t o f a
G o v e r n o r , two D e p u t y o v e r n o r s a n d s i x t e e n D i r e c t o r s , a l l
a p p o i n t e d "by H i s M a j e s t y .
D e t a i l e d p r o v i s i o n s ahout terms of
o f f i c e , e t c . are i n the Second Schedule to the B i l l .
G
I
I
3*
C l a u s e k s u h - c l a u s e ( 1 ) c o n f e r s on t h e T r e a s u r y t h e
w i d e s t p o s s i h l e p o w e r s t o g i v e d i r e c t i o n s t o t h e Bank o f
E n g l a n d , i f s u c h d i r e c t i o n s are. n e c e s s a r y . - We may h o p e , and
e x p e c t , t h a t r e s o r t to such formal d i r e c t i o n s w i l l he very
exceptional,,
I t i s i n t e n d e d t h a t t h i s power' s h o u l d h e u s e d
i n r e l a t i o n t o i s s u e s o f p o l i c y a n d t h a t ( a s i s i n d i c a t e d "by
s u b - c l a u s e ( 2 ) ) t h e d a y - t o - d a y management o f t h e Hank b y t h e
Court of D i r e c t o r s w i l l not he i n t e r f e r e d , w i t h .
S u b - c l a u s e ( 3 ) i s d e s i g n e d t o g i v e t h e Bank o f E n g l a n d ,
w i t h t h e s u p p o r t o f t h e T r e a s u r y , power of c o n t r o l o v e r t h e
c o m m e r c i a l hanks...
Here a g a i n i t rnay h e h o p e d t h a t t h e p o w e r s
w i l l not have t o h e f o r m a l l y u s e d , h u t , i f n e c e s s a r y , they
w i l l g i v e c o n t r o l over such m a t t e r s as the c r e d i t p o l i c i e s
o f t h e .hanks..
(intld)
T r e a s u r y Chambers,
10TH SEPTEMBER,
S.W.1.
1945.
H.D.
S E C R E T
A I'T N E X
D R A F T .
OF
A
B I L L
TO
B r i n g t h e Bank of E n g l a n d u n d e r p u b l i c c o n t r o l ,
t o make p r o v i s i o n f o r r e g u l a t i n g b a n k i n g
o p e r a t i o n s : and f o r p u r p o s e s c o n n e c t e d w i t h , t h e
purposes aforesaid.
Be i t
T r a n s f e r of 1 . Bank s t o c k
To T r e a s u r y .
enacted,
(1)
etc.
On t h e a p p o i n t e d , day
-
( a ) t h e w h o l e o f t h e e x i s t i n g c a p i t a l
s t o c k o f t h e Bank o f E n g l a n d ( h e r e ­
i n a f t e r r e f e r r e d t o a s "Bank S t o c k ' )
s h a l l , by v i r t u e o f t h i s s e c t i o n ,
be t r a n s f e r r e d to such person as
t h e T r e a s u r y may n o m i n a t e , a n d
s h a l l bo h e l d b y t h a t p e r s o n on
b e h a l f o f t h e T r e a s u r y f r e e of a l l
t r u s t s , l i a b i l i t i e s and incurobrances;
1
( b ) t h e T r e a s u r y - s h a l l i s s t i e , t o e v e r y
p e r s o n who i m m e d i a t e l y b e f o r e t h e
a p p o i n t e d day i s r e g i s t e r e d i n the
b o o k s o f t h e s a i d Bank a s t h e h o l d e r
o f a n y Bank s t o c k , t h e e q u i v a l e n t
amount o f s t o c k c r e a t e d b y them f o r
the purpose ( h e r e i n a f t e r r e f e r r e d to
as the "government s t o c k " ) .
( 2 ) The g o v e r n m e n t s t o c k s h a l l b e a r i n t e r e s t
a t t h e r a t e o f t h r e e p e r c e n t p e r annum;
and t h e
e q u i v a l e n t amount o f t h e g o v e r n m e n t s t o c k s h a l l , i n
r e l a t i o n t o a n y p e r s o n , be t a k e n t o be s u c h t h a t
t h e sum p a y a b l e a n n u a l l y 037- way o f i n t e r e s t t h e r e o n
i s equal t o the average annual g r o s s d i v i d e n d
d e c l a r e d during the p e r i o d of twenty years
i m m e d i a t e l y p r e c e d i n g t h e t h i r t y - f i r s t day of March,
n i n e t e e n h u n d r e d and f o r t y - f i v e u p o n t h e amount o f
Bank s t o c k o f w h i c h t h a t p e r s o n was t h e r e g i s t e r e d
h o l d e r i m m e d i a t e l y b e f o r e the a p p o i n t e d day.
(3)
The i n t e r e s t upon t h e g o v e r n m e n t
s h a l l b e c h a r g e d on a n d i s s u e d o u t o f t h e
C o n s o l i d a t e d F u n d o f t h e U n i t e d Kingdom or
growing produce t h e r e o f .
stock
the
(4)
The g o v e r n m e n t s t o c k may h e r e d e e m e d a t
p a r b y t h e T r e a s u r y a t any t i m e a f t e r t h e t h i r t y ­
f i r s t day o f M a r c h , n i n e t e e n h u n d r e d and s i x t y - s i x
a f t e r g i v i n g n o t l e s s t h a n t h r e e months'' n o t i c e i n
t h e London G a z e t t e o f t h e i r i n t e n t i o n t o do s o .
(5)
- h e T r e a s u r y may, f o r t h e p u r p o s e o f
p r o v i d i n g a n y sums r e q u i r e d b y t h e m i n o r d e r t o
r e d e e m t h e g o v e r n m e n t s t o c k , r a i s e money i n a n y
manner i n w h i c h t h e y a r e a u t h o r i s e d t o r a i s e
money u n d e r t h e N a t i o n a l L o a n s A c t , 1 9 3 9 , a n d a n y
s e c u r i t i e s c r e a t e d and i s s u e d t o r a i s e m o n e y u n d e r
thif. s u b s e c t i o n s h a l l h e d e e m e d t o have b e e n c r e a t e d and i s s u e d u n d e r t h i s A c t . (6)
No d i v i d e n d s s h a l l h e p a i d on t h e Bank
s t o c k i n r e s p e c t of any p e r i o d a f t e r i t has b e e n
t r a n s f e r r e d under s u b s e c t i o n ( 1 ) of t h i s s e c t i o n :
b u t i n l i e u o f any s u c h d i v i d e n d s t h e Bank s h a l l
pay to the Treasury, i n r e s p e c t of the year
b e g i n n i n g w i t h the' a p p o i n t e d d a y a n d e a c h s u b ­
s e q u e n t y e a r , t h e sum o f £ 1 , 7 4 6 , 3 6 0
or s u c h l e s s o r g r e a t e r stun a s may from ­
t i m e t o t i m e be a g r e e d u p o n b e t w e e n t h e T r e a s u r y a n d t h e Bank, Any sum p a i d t o t h e T r e a s u r y u n d e r t h i s s u b s e c t i o n s h a l l be p a i d i n t o t h e E x c h e c u e r . (7)
The i n c i d e n t a l and s u p p l e m e n t a l
p r o v i s i o n s s e t out i n t h e F i r s t Schedule to
Act s h a l l have e f f e c t w i t h r e s p e c t to the
government s t o c k .
Oourt o f
directors
of Bank o f
England.
this
2 . - . i - V I ) On t h e a p p o i n t e d d a y , a l l p e r s o n s who a r e ,
i m m e d i a t e l y b e f o r e t h a t d a y , members o f t h e c o u r t
o f d i r e c t o r s o f t h e Bank o f E n g l a n d s h a l l v a c a t e
t h e i r o f f i c e , and on. a n d a f t e r t h a t d a y t h e c o u r t
s h a l l c o n s i s t o f a G o v e r n o r , two D e p u t y G o v e r n o r s
and s i x t e e n d i r e c t o r s .
( 2 ) The G o v e r n o r , D e p u t y G o v e r n o r s a n d
d i r e c t o r s s h a l l be appointed by His Majesty.
(3)
A quorum o f t h e c o u r t s h a l l c o n s i s t
of not l e s s than e i g h t d i r e c t o r s , t o g e t h e r w i t h
t h e Govei-nor o r o n e D e p u t y G o v e r n o r , and when a
quorum i s p r e s e n t t h e c o u r t may a c t n o t w i t h s t a n d i n g
t h a t a v a c a n c y e x i s t s among t h e members o f t h e
court.
( a ) The p r o v i s i o n s o f t h e S e c o n d S c h e d u l e t o
t h i s Act s h a l l have e f f e c t as r e s p e c t s the t e n u r e
o f o f f i c e and q u a l i f i c a t i o n s o f members o f t h e
court of d i r e c t o r s . ­
( 5 ) h o t aore
n f o u r o f t h e d i r e c t o r s may b e
employed, t o i v c one i r e x c l u s i v e s e r v i c e s t o t h e
C o n a e q u e n t i a1
provisions
as to c o n s t i ­
t u t i o n of
Bank o f
England.
3..,--(1 ) On t h e a p p o i n t e d day t h e c h a r t e r s
of t h e Bank o f E n g l a n d ' and any b y e l a w s i n
f o r c e t h e r e u n d e r s h a l l , Toy v i r t u e o f t h i s s u p ­
s e c t i o n , be r e v o k e d , b u t t h e r e v o c a t i o n t h e r e ­
of s h a l l n o t a f f e c t t h e e x i s t e n c e o f t h e
G o v e r n o r and Company o f t h e Bank o f E n g l a n d
as a c o r p o r a t i o n i n c o r p o r a t e d by Royal Charter,
and t h e members o f t h e c o r p o r a t i o n s h a l l be t h e
members o f t h e c o u r t of d i r e c t o r s f o r t h e t i m e "being t o g e t h e r w i t h , t h e p e r s o n who h o l d s t h e c a p i t a l s t o c k o f t h e Bank on b e h a l f o f t h e Treasury. ( 2 ) S u b j e c t t o t h e p r o v i s i o n s of t h i s A c t , t h e Bank o f E n g l a n d s h a l l be c o n s t i t u t e d and r e g u l a t e d i n a c c o r d a n c e w i t h s u c h c h a r t e r s as" may f r o m t i m e t o t i m e b e g r a n t e d b y H i s M a j e s t y arid a c c e p t e d on b e h a l f o f t h e Bank b y t h e c o u r t of d i r e c t o r s . Treasury
directions
t o Bank o f
England and
r e l a t i o n s of
Bank o f
England
with other
Banks.
l i . - . - ( 1 ) The T r e a s u r y may f r o m t i m e t o t i m e
g i v e such, d i r e c t i o n s t o t h e Bank o f E n g l a n d a s ,
a f t e r c o n s u l t a t i o n w i t h the Governor of the
Bank, t h e y t h i n k n e c e s s a r y i n t h e p u b l i c
interest.
( 2 ) S u b j e c t t o any s u c h d i r e c t i o n s , t h e
a f f a i r s o f t h e Bank s h a l l be m a n a g e d b y t h e c o u r t of. d i r e c t o r s i n a c c o r d a n c e w i t h s u c h rule
i f any. a s ma? be l a i d down b y the c h a r t e r o f t h e Bank and any b y e l a w s made thereunder. ( 3 ) The Bank o f E n g l a n d m a y , e i t h e r in­
f u r t h e r a n e e of s u c h d i r e c t i o n s o r o t h e r w i s e ,
r e q u e s t i n f o r m a t i o n f r o m , and make
r e c o m m e n d a t i o n s t o , b a n k s i n r e g a r d t o banking­
o p e r a t i o n s , and t h e T r e a s u r y may, i f t h e y
t h i n k i t e x p e d i e n t i n the p u b l i c i n t e r e s t ,
make s u c h r e g u l a t i o n s a n d g i v e s u c h d i r e c t i o n s
think, n e c e s s a r y for t h e purpose of
a s they
s e c u r i n g t h a t any s u c h r e q u e s t or r e c o m m e n d a t i o n
i s carried out.
(h)
I n t h i s s e c t i o n t h e e x p r e s s i o n "bank"
means a n y p e r s o n c a r r y i n g on an u n d e r t a k i n g
w h i c h t h e T r e a s u r y by o r d e r d e c l a r e t o be a
banking u n d e r t a k i n g f o r the p u r p o s e s of t h i s
section.
Appointed
day.
;e o f t h i s A c t t h e a o o o i n t e d
F o r t h e puz
day s h a l l b e such d a y a s t h e T r e a s u r y may b y
order determine, n o t being l a t e r than / three
Act/
months from the day o f
pa s s i rig o f t h i s
^/ t h e t h i r t y - f i r s t
iarch, n i n e t e e n
h u n d r e d and f o r t y - s i s
Short
title.
6,
Act,
5.
This
1945.
Act
DC
t h e Bank o f
Englant
FIRST SCHEDULE
/ " " A n c i l l a r y p r o v i s i o n s a s t o r e g i s t r a t i o n , trgjisfen?
etc^
o f Government s e c u r 1 t i c s . J"^
SEOOHD SCHEDULE
S u p p l e m e n t a r y P^rovisiqns a s t o Court of
Directors
1.
The t e r m - o f o f f i c e o f t h e G o v e r n o r s h a l l b e f i v e y e a r s , a n d t h e terra o f o f f i c e o f t h e D e p u t y Governors s h a l l be four y e a r s . 2.
The t e r m o f o f f i c e o f t h e d i r e c t o r s s h a l l b e f o u r y e a r s , and. f o u r o f them s h a l l , r e t i r e e a c h y e a r on t h e a n n i v e r s a r y o f t h e a p p o i n t e d , d a y : Provided, t h a t , of t h e d i r e c t o r s a p p o i n t e d t o take
o f f i c e . o n the a p p o i n t e d day, four s h a l l be a p p o i n t e d t o h o l d o f f i c e u n t i l , t h e f i r s t a n n i v e r s a r y o f t h a t day
a n d s h a l l t h e n r e t i r e , f o u r s h a l l be a p p o i n t e d t o h o l d
o f f i c e u n t i l t h e s e c o n d , a n n i v e r s a r y o f t h a t d a y and s h a l l t h e n r e t i r e , and f o u r s h a l l be a p p o i n t e d t o h o l d
o f f i c e u n t i l t h e t h i r d a n n i v e r s a r y o f t h a t d a y and s h a l l then r e t i r e , 3*
A p e r s o n who h a s h e l d o f f i c e a s G o v e r n o r , D e p u t y
Governor or cVirector s h a l l b e e l i g i b l e f o r r e - a p p o i n t m e n t .
I+.
office
A p e r s o n s h a l l be d i s q u a l i f i e d f o r h o l d i n g
o f G o v e r n o r , D e p u t y G o v e r n o r or d i r e c t o r i f
the ­
( a ) he i s a Member o f t h e Commons House o f
P a r l i a m e n t or a p e r s o n h o l d i n g a n o f f i c e
o f p r o f i t u n d e r t h e Crown;
or
( b ) he i s s u b j e c t t o a n y d i s q u a l i f i c a t i o n
w h i c h may b e i m p o s e d b y t h e c h a r t e r o f
t h e Bank,
and a p e r s o n s h a l l v a c a t e a n y s u c h o f f i c e i f ho
becomes s u b j e c t to any such d i s q u a l i f i c a t i o n .
5.
Where t h e o f f i c e o f a d i r e c t o r i s v a c a t e d u n d e r t h e f o r e g o i n g p a r a g r a p h , or b y d e a t h or r e s i g n a t i o n , a p e r s o n a p p o i n t e d t o f i l l the vacancy s h a l l hold, o f f i c e u n t i l t h e t i m e when t h e p e r s o n i n w h o s e p l a c e h e was a p p o i n t e d would, r e g u l a r l y h a v e r e t i r e d , a n d s h a l l t h e n retire.