The Bank of England's profits across 300 years: wars, financial crises and distribution

sIsInterest in central bank finances was not particularly high until sparked by the global financial crisis of 2008–9. Scrutiny then focused mainly on the balance sheet, and capital and reserves in relation to crises or independence: the profits of central banks have received less attention either in times of crisis or other events (Cukierman 2011; Darbyshire 2011; Stella 2011; Archer and Moser-Boehm 2013; Martin-Acena et al. 2019). However, profits did feature, and to offer some perspective in this article we provide for the first time a series for the profits of the Bank of England (hereinafter the Bank) over the period from its foundation to the present time. Of course, a profits series of this length is rare for any business, let alone a central bank, but the Bank is unusual in both its longevity and its gradual evolution from a private bank with concern for its shareholders into a central bank that accepted its public responsibilities, and later became the state's bank. While there are no similar series currently available for comparison, the importance of our series lies in setting profits against the changing nature of the Bank's role and its relationships with its shareholders, the state and the wider financial sector.sWe first outline how central banks are financed, and describe the general pattern of the Bank's profits (Section II). That is followed by a discussion of the sources of profits and how these varied, for example in times of war or periodic financial crisis, and whether profits were actively or passively acquired (Sections III and IV); Section V examines the accumulation and use of reserves. Finally, we look at how the profits may or may not have been contested in terms of charter renewal, tax and distribution to shareholders, including the state (Section VI).sIIsCentral banks can be financed in four main ways: from taxation; from seignorage; from a levy on financial institutions; or out of their own banking business...