Kavan Choksi Discusses the Important Responsibilities of the Bank of England (BoE)

Kavan Choksi

The Bank of England (BoE) is the central bank of the United Kingdom, and is responsible for overseeing the monetary policy of the country. Kavan Choksi mentions that the BoE also issues the currency of the United Kingdom, as well as regulates banks, financial institutions, and payment systems.  It basically is the UK equivalent of the Federal Reserve in the US. Much like the central banks of other nations, the BoE also tends to act as a lender of last resort in a financial crisis.

Kavan Choksi marks the important responsibilities of the Bank of England (BoE)

The Bank of England (BoE) was established in 1694 and is one of the oldest central banks in the world. The BoE has been responsible for setting the UK’s benchmark interest rate since the year of 1997, as the government transferred its authority over U.K. monetary policy to the bank. This change was formalized the next year by the Bank of England Act. The Bank of England has a wide range of responsibilities, which include:

  • Maintaining monetary and financial stability: Maintaining monetary and financial stability is the primary responsibility of the BoE. This would involve keeping inflation stable and low, while making sure that its financial system is sound and resilient. A variety of tools and methods are used by the BoE to achieve these objectives, starting from setting interest rates and conducting open market operations, to supervising financial institutions. The Bank of England’s Monetary Policy Committee (MPC) sets the base interest rate in the UK. This is the rate at which the BoE lends funds to commercial banks. MPC sets interest rates with the goal of achieving the Bank of England’s inflation target of 2%.  This central bank also carries out open market operations by purchasing and selling government bonds. They do so to influence the supply of money in the economy as well as the level of interest rates. The BoE also supervises insurers, banks and discerning other financial institutions. It may assess the risks to such institutions and take action to make sure that they are well-planned and can withstand shocks.
  • Promoting sustainable economic growth: The Bank of England plays a vital role in promoting sustainable economic growth. It supports the growth of the economy while trying to make sure that inflation does not rise too high. This is done by working with the government and other stakeholders in order to develop and implement a robust economic policy. This includes measures for boosting productivity, investment, and exports.  The BoE also plays a key role in supporting the development of the financial system, which is quite vital for economic growth.
  • Issuing banknotes and providing banking services: The BoE is the sole issuer of banknotes in the United Kingdom, and it also provides banking services to the government and other financial institutions. The services offered by BoE include managing the government’s debt, processing payments and providing loans.

As per Kavan Choksi, the BoE is committed to promoting financial inclusion. This basically involves making sure that everyone in the country has access to affordable and appropriate financial services. BoE works with several stakeholders to develop and implement policies that support the promotion of financial inclusion.

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