Like any bank, the Bank of England offers a range of services to its customers. These customers are, however, rather different from those of other banks. The Bank’s services are correspondingly specialised and some of them unique. The Bank now does little commercial banking business. Most of its 8,000 private account holders are staff and pensioners of the Bank itself. There are three other important groups of customers.

The commercial banks

All the clearing banks keep accounts at the Bank of England. When the banks settle daily differences between themselves in the clearing system - that is, in the exchange of cheques written by each other’s customers, or of credits moving from one bank to another - they do it using their accounts at the Bank of England. The banks are obliged to keep operational balances large enough to cover these needs and are expected not to overdraw. (Separately, all banks and building societies operating in the UK keep a small proportion - currently 0.15% of their sterling deposits - on non interest-bearing deposit with the Bank of England. These cash ratio deposits provide the main source of income for the Bank to enable it to carry out its functions.)

Other central banks

Other central banks keep accounts and gold at the Bank of England and may conduct foreign exchange and bullion business in London through the Bank.

The Government

The Government keeps its main banking accounts at the Bank of England, so that payments of taxes to the Government and payments by the Government for social security, defence and so on are ultimately made to and from accounts at the Bank. The Government accounts are managed in such a way that any surplus funds are invested in the money markets or used to reduce the Government’s short-term debt. As banker to the Government, the Bank also manages the UK’s reserves of gold and foreign exchange. From 1 April 1998, however, the responsibility for the issuance and management of the Government’s gilt-edged debt, formerly a bank function, was transferred to the Debt Management Office. Eventually, the Debt Management Office will also become responsible for the Government’s day-to-day cash management.

Reproduced by kind permission of the Bank of England