On 27 July 1694, William III and Mary II granted a Royal Charter to the Governor and Company of the Bank of England. The institution had been created mainly to provide the government with money for war against France.

The Nine Years’ War placed heavy demands on government finances. England needed a larger and more dependable system of borrowing than the Crown had previously used.

Lending directly to a monarch carried risks. Charles II had damaged confidence in 1672 when the Crown suspended payments owed to goldsmith-bankers. Investors needed stronger assurance that government loans would be repaid.

The plan behind the Bank joined private investment to parliamentary taxation. Subscribers provided £1.2 million, which was lent to the government. Parliament assigned tax income to meet the interest payments.

This made the loan more secure. Repayment depended on revenue authorised by Parliament rather than the monarch’s personal promise. William and Mary were among more than 1,200 original stockholders.

The Bank was a private company. Its shareholders appointed a governor, deputy governor and directors. Sir John Houblon became its first governor.

In return for the loan, the Bank received privileges allowing it to carry on banking business. It acted as banker to the government, accepted deposits and issued notes. Its close relationship with the state distinguished it from other private banks. However, it did not yet perform all the functions of a modern central bank.

The Bank opened for business on 1 August 1694 at Mercers’ Hall in Cheapside. It employed seventeen clerks and two gatekeepers.

Its role expanded over the following centuries. It managed more government borrowing, became increasingly important to the banking system and gained a dominant position in issuing banknotes. These functions developed through later laws and practice rather than appearing in full under the original charter.

The Bank remained privately owned until it was nationalised in 1946. In 1997, it received operational responsibility for setting interest rates.

The institution, established on 27 July 1694, began as a way of financing war. Its later position grew from the relationship created between private lenders, Parliament and the government.