England, Bank of
of England was incorporated by act of Parliament in 1694 with the
immediate purpose of raising funds to allow the English government to
wage war against France in the Low Countries (see). A royal allowed
the bank to operate as a joint-stock bank with limited
liability. No other joint-stock banks were permitted in
England and Wales until 1826. This special status and its position as
the government's banker gave the bank considerable competitive
was located first in Mercers' Hall and then in Grocers' Hall, but it
was moved to its permanent location on Threadneedle Street in the
1730s. By that time it had become the largest and most prestigious
financial institution in England, and its bank notes were
widely circulated. As a result, it became banker to other banks,
which, by maintaining balances with the Bank of England, could
settle debts among themselves. The bank was threatened by the
economic instability that accompanied the, but its standing was also
considerably enhanced by its actions in raising funds for Britain's
involvement in those conflicts.
19th century the bank gradually assumed the responsibilities
of a central bank. In 1833 it began to print legal tender, and
it undertook the roles of lender of last resort and guardian of the
nation's gold reserves in the following few decades.
was privately owned until 1946, when it was nationalized. It funds
public borrowing, issues bank notes, and manages the country's
gold and foreign exchange reserves. It is an important adviser to the
government on monetary policy and is largely responsible for
implementing the chosen policy by its dealings in the money, bond,
and foreign exchange markets. The bank's freedom of action in
this regard was considerably enhanced when it was given the power to
determine short-term interest rates in 1997
Colonial Office in the Bank of England,
unsigned watercolour by one of Sir John Soane's draftsmen, c. 1818;
in Sir John Soane's Museum, London.
By courtesy of the trustees
of Sir John Soane's Museum, London; photograph, R.B. Fleming
Bank of Russia.
The tasks and functions of the Bank of Russia are set by the
Constitution of the Russian Federation and Federal Law on the Central
Bank of the Russian Federation (Bank of Russia). The Bank of Russia’s
main objective is to protect the rouble and ensure its stability. The
Bank of Russia is also the sole issuing centre and the body of
banking regulation and supervision. Its main functions are formulated
in Article 4 of the Federal Law on the Central Bank:
collaboration with the government of the Russian Federation, it
elaborates and implements a uniform national monetary policy designed
to protect the rouble and ensure its stability;
- it is the only
issuer of cash and the organiser of its circulation;
- it is the
creditor of last resort for credit organisations and organises the
- it sets the settlement rules of the Russian
- it sets the rules of conducting banking operations
and accounting and the reporting rules for the banking system;
it conducts state registration of credit organisations and issues and
revokes the licences of credit organisations and the organisations
that audit them;
- it supervises the activities of credit
- it registers the issue of securities by credit
organisations in accordance with federal laws;
- it conducts, on
its own behalf or on behalf of the government of the Russian
Federation, all kinds of banking operations necessary for the Central
Bank’s implementation of its main duties;
- it conducts
foreign exchange regulation, including operations to buy and sell
foreign exchange, and establishes the procedure for effecting
settlements with foreign countries;
- it organises and exercises
foreign exchange control on its own and through authorised banks in
accordance with the laws of the Russian Federation;
participates in making Russian Federation balance of payments
forecasts and organises the drafting of the Russian Federation’s
balance of payments;
- it analyses and forecasts the state of the
Russian Federation’s economy as a whole and by region,
concerning specifically monetary, credit, foreign exchange, financial
and price relations, publishes the corresponding materials and
statistical data and performs other functions in accordance with
Bank of Russia co-ordinates and regulates settlement relations in
Russia and establishes the rules, forms, deadlines and standards for
non-cash settlements obligatory for all legal entities and natural
persons. The forms of non-cash settlements are determined by the
Civil Code of the Russian Federation.
principal forms of non-cash settlements today are payment orders and,
to a lesser extent, payment requests (for collection). Letters of
credit and cheques are used on a small scale.
A part of
settlements is effected by legal entities and private individuals
using payment cards, which are gaining ever wider acceptance.
of Russia is making efforts to ensure the effective and uninterrupted
functioning of the settlements system and enhance its reliability.
settlements are effectuated through correspondent accounts opened
with the Bank of Russia, correspondent accounts opened by credit
institutions with one another, correspondent accounts opened with
non-bank settlement credit institutions and through the system
ofintrabank settlements, using inter-branch settlement accounts.
legislation accords the Bank of Russia a special place in the
country's payments system. The Bank of Russia not only ensures
general guidance of the payments system and provides the methodology
and organisation of settlements, but also directly participates in
this system, effecting interbank settlements through its divisions.
payments made through the Bank of Russia settlement network account
for a large part of the payments turnover.
participant in the settlements effected through the Bank of Russia
settlement network is awarded an identification code. The Bank of
Russia keeps the Russian Federation Bank Identification Code
Directory (BIC Directory), which contains the following data: the
name of each credit institution participating in settlements and its
bank identification code, correspondent account with the Bank of
Russia and domicile.
Directory is regularly reviewed and updated.
institutions located in the Russian Federation (resident credit
institutions) and having the banking licence of the Central Bank of
the Russian Federation open only one correspondent account with one
of the Bank of Russia institutions (a cash settlement centre or
operations department), which services them. The branches of credit
institutions may have correspondent subaccounts to implement
settlements and may not have such accounts. If they don't, they
effect settlements through the correspondent account of their parent
organisation or the subaccount of another branch.
the Russian payments system comprises about 1,400 resident credit
institutions, more than 4,000 branches of credit institutions and
nearly 1,200 subdivisions of the settlement system and it is the
principal means of implementing the official monetary policy by the
Bank of Russia.
settlements of clients of credit institutions and their branches are
effected from the bank accounts opened with these institutions. In
special cases, stipulated by the law, legal entities may have
accounts opened with Bank of Russia institutions.
institutions and their branches with correspondent accounts and
subaccounts with the Bank of Russia effect settlements for their
clients for commodities, works and services and make tax and other
compulsory payments and their own income payments to the budget and
payments to the accounts of state extrabudgetary funds through the
various divisions of the Bank of Russia settlement network.
As for the
settlements between clients of one credit institution (branch), they
are effected by writing off or entering funds to the clients'
corresponding accounts, bypassing the correspondent account of the
credit institution (or its branch's subaccount) opened with a Bank of
between the cash settlement centres of the regional divisions of the
Bank of Russia, serviced by a single computer centre, on transactions
of credit institutions (or their branches) and on their own
transactions are effected through the accounts opened specially for
correctness of settlements effected by the cash settlement centres is
confirmed by the concurrence of the initial and reply turnovers in
the process of confirmation, that is by comparing each reply entry
with the initial one.
are effected if there are funds in the correspondent accounts of
credit institutions or subaccounts of their branches and within the
amount of these funds. If a credit institution (or its branch) has
not enough funds to meet all claims made on it, funds are written
down from its correspondent account or from the subaccount of its
branch to effect payments for its clients and its own payments in the
order established by the Civil Code of the Russian Federation. In
this case, documents are put into the file of unpaid settlement
documents, attached to the correspondent account of the credit
institution or the subaccount of its branch.
effected through the Bank of Russia settlement network are based not
only on paper, but also electronic payment documents. These are the
so-called intra- and interregional electronic settlements. The latter
are regulated by the Provisions on Inter-Regional Electronic
Settlements Effected through the Bank of Russia Settlement Network.
The exchange of electronic documents through the Bank of Russia
settlement network is regulated by the Provision on the Rules of
Exchange of Electronic Documents between the Bank of Russia, Credit
Institutions (Branches) and Other Clients of the Bank of Russia in
Effecting Settlements through the Bank of Russia Settlement Network,
adopted in March 1998.
divisions of the Bank of Russia settlement network participate in
electronic settlements as the bodies registering and supervising
institutions, their branches and other clients of the Bank of Russia
that have correspondent or other accounts with the divisions of the
Bank of Russia settlement network may use electronic settlements.
This helps accelerate money turnover and reduce the amount of funds
"electronic payment document" (EPD) is used in effecting
electronic settlements in the Bank of Russia settlement network. The
EPD is a document that serves as a legal basis for conducting
operations with the accounts of credit institutions (branches) and
other clients of the Bank of Russia, opened with a Bank of Russia
institution, bearing an electronic digital signature and having equal
legal force, stipulated in an agreement with the Bank of Russia, with
paper based payment documents signed by the authorised persons with
their own hand and stamped.
the electronic payment documents presented for execution to a Bank of
Russia institution must contain the requisites in accordance with
which operations with accounts are conducted. Two kinds of EPD may be
EPD containing all requisites of a payment document, including
EPD containing the requisites necessary for conducting operations
with accounts in a Bank of Russia institution.
transfer of funds using fall-format EPD does not require accompanying
payment documents on paper, while the transfer of funds using
abndged-format EPD must be accompanied by an exchange of paper based
payment documents, filled out in accordance with the established
1999 the Bank of Russia plans to phase in a paperless technology in
its settlement system, using full-format electronic payment documents
only in the exchange of electronic documents between Bank of Russia
institutions and between the Bank of Russia and credit institutions.
January 1,1998, the Bank of Russia charges a fee for its settlement
services. Some kinds of settlement operations are conducted by the
Bank of Russia free of charge.
settlements effected through correspondent accounts opened by credit
institutions with one another play a part in the general payment
of settlement operations with correspondent accounts of credit
institutions opened with other credit institutions are formulated in
the Bank of Russia Provisions on Effecting Non-Cash Settlements by
Credit Institutions in the Russian Federation, which came into effect
operations conducted with correspondent accounts of correspondent
banks are divided into two types: operations to service clients and
own interbank operations.
development of correspondent relations depends on various factors,
such as mutual payment flows, price and demand in the credit market,
the possibility of participating in trading in the regional
government securities markets and on currency exchanges and the risk
settlements in correspondent relations are effected with credit
institutions in CIS and other countries.
through clearing institutions are one of the means of interbank
development of clearing settlements depends on the financial
condition of credit institutions and the state of the money markets.
Eight settlement credit institutions have been granted permanent
licence as clearing houses.
operations are based on a clearing model requiring the participating
banks to make preliminary deposits in their accounts with the
2,000 credit institutions and their branches and other corporate
clients effect settlements through non-bank clearing institutions.
of Russia has a decisive role to play in elaborating the principles
of organising clearing operations and monitoring compliance with
settlements are gaining acceptance. They include settlements between
a head office of a credit institution and its branches and between
branches of a credit institution. The procedure for conducting
settlement operations with inter-branch settlement accounts in Russia
is established by the Bank of Russia Provisions on Conducting
Non-Cash Settlements by Credit Institutions in the Russian
strategy for the development of Russia's payments system was
elaborated in 1996. It sets forth as the main objectives of the
reform of the system further modernising settlements, upgrading
banking technologies, introducing new instruments of payment, raising
the standard of services provided to credit institutions and other
organisations and creating conditions for liquidity management.
the banking technology of implementing settlements onto a
qualitatively new level, new methods are being developed, new rules
and regulations are being enforced, new technologies are being
introduced and new organisational principles are being established.
Efforts are also being made to accelerate the introduction of
electronic documents and build an advanced automated real-time system
end, steps are being taken to determine the status and functions of
individual subsystems for the implementation of settlements, enable
credit institutions to manage their liquidity more accurately,
develop and introduce formats of electronic documents and settlement
documents on paper, stimulate the functioning of clearing
institutions, improve conditions for the introduction of bank payment
cards in order to reduce the amount of cash in circulation, and
elaborate regulatory rules in these areas.
of Russia division responsible for ensuring methodologically and
organisationally the efficient and uninterrupted functioning of the
national payments system is the Methodology and Organisation of
accordance with its Statute, the Department ensures the
implementation of the main tasks involved in developing and upgrading
the methods of non-cash payments in the Russian Federation,
elaborating a concept of development of the Bank of Russia payments
system and organising supervision of the Bank of Russia settlement
divisions and other settlement systems.
States, Bank of the
central bank chartered in 1791 by the U.S. Congress at the urging of
and over the objections of Thomas Jefferson. Extended debate over its
constitutionality contributed significantly to the evolution of pro-
and anti-bank factions into the first American political
parties--respectively, the Federalists and the
Democratic-Republicans. Antagonism over the bank issue grew so heated
that its charter could not be renewed in 1811. Reconstituted in 1816,
the Bank of the United States continued to stir controversy and
partisanship, with Henry Clay and the Whigs ardently supporting it
and and the Democrats ardently opposing it.
The first Bank of the United States was a cornerstone of Hamilton's
fiscal policy; it was a means to fund the public debt left from the
Revolution, to facilitate the issuance of a stable national currency,
and to provide a convenient means of exchange for all the people of
the United States. It was capitalized at $10,000,000 and fully
subscribed almost instantly, with the federal government
holding the largest block of ownership, 20 percent. A substantial
interest in the bank was also purchased by Europeans.
The bank accomplished all Hamilton had hoped for and also succeeded
in an unforeseen role: the regulation of private banks chartered by
the several states. At this time the issuance of notes was a more
conspicuous feature of banking than were deposits. Bank notes entered
circulation as the money banks lent to their borrowers, and these
notes comprised most of the total currency in circulation.
The rapid growth of the young country generated powerful demand for
loans and tended to stimulate the overextension of credit. It was in
the general interest to restrain such overexpansion, and the bank
imposed that restraint automatically. As the depository of the
government, with offices in the chief seaports and commercial
centres, it constantly received from collectors of revenue the notes
of private banks by which monies due the government were paid. As
fast as it received such notes it called for their redemption in gold
and silver by the banks of issue, thus automatically restricting the
overextension of credit and protecting the economy from inflation.
Conversely, in periods of panic and deflation, the bank could ease
the pressure. It was engaged precisely in what came later to be
called central banking.
Despite its successes, the bank met political opposition that
gathered force with partisan changes taking place in the country. In
good part, this opposition was based on the very restraints the bank
imposed on private, state-chartered banks; this was also seen as an
affront to states' rights, and the bank's federal charter was
called unconstitutional. In 1811, when the 20-year charter expired,
renewal was politically impossible. Its officers acknowledged reality
and successfully sought a state charter in New York.
Within a few years, however, economic developments, chaotic
conditions among the state banks, and changes in the composition of
Congress combined to enable the chartering of a new Bank of the
United States with wider powers than before and with closer links to
the government. There was some early mismanagement, but in 1823 of
Philadelphia became its president and the bank began to flourish.
Under Biddle, the central banking responsibilities were recognized
and developed as consciously as those of the Bank of England at the
same time--perhaps more so. But since these responsibilities usually
had to be exercised as restraints, private banks resented them and
complained of oppression.
The rapid development of American industry and transportation was
enhancing the richness of the country's resources, and the idea of
democracy was beginning to connote to entrepreneurs the idea of free
enterprise and laissez-faire. Hence, the very conditions that made
credit restraint advisable also made it objectionable. Meanwhile, a
developing agrarian populism, especially in the South and West, and
among the poor everywhere, was seeing in democracy opposition to
privilege and aristocracy and wealth. The bank became known as "the
monster," and the enemy of the common people. These incongruous
strains against the bank united under the leadership of Andrew
Jackson, who became president in 1829. His attacks on it were
sustained and colourful and rallied wide support. Attacks on the
bank's constitutionality continued, although a decade earlier the
Supreme Court, in McCulloch v. Maryland, had found the
charter constitutional under the doctrine of implied powers, leader
of the Whigs in the Senate from 1831, championed the bank against the
Jacksonian Democrats and in 1832 deliberately injected the bank
question into the presidential campaign by bringing about the
renewal, four years early, of the bank's charter, adopted by Congress
on July 3. Jackson promptly vetoed the bank renewal act as
unconstitutional, disdaining the Supreme Court decision and asserting
that officeholders were bound by their oaths to uphold the
constitution as they, not others, understood it. In a demagogic veto
message he depicted the bank as the "prostration of our
Government to the advancement of the few at the expense of the many."
The bank issue dominated the campaign of 1832, in which Jackson
decisively defeated Clay. The veto stood, but the bank's charter
still had four years to run, so Jackson determined to scuttle it
ahead of time by withdrawing government funds from it. He shuffled
his cabinet twice before finding in Roger B. Taney--who as attorney
general had declared the move legal--a treasury secretary willing to
withdraw U.S. deposits from the Bank of the United States and place
them in various state-chartered private institutions, which quickly
became known as "pet banks."
The Bank carried on as best it could until the expiry of its charter
in 1836, when it sought and won a state charter as the Bank of the
United States of Pennsylvania. The long and rancorous affair became
known as the, and Jackson's victory in it precluded for almost 80
years--until the creation in 1913 of the FederalReserveSystem--any effective regulation of private banks in the
banking authority of the United States. It acts as a fiscal agent for
the U.S. government, is custodian of the reserve accounts of
commercial banks, makes loans to commercial banks, and
is authorized to issue Federal Reserve notes that constitute the
entire supply of paper currency of the country. Created by the of
1913, the system consists of the Board of Governors of the Federal
Reserve System, the 12 Federal Reserve banks, the, the Federal
Advisory Council, and, since 1976, a Consumer Advisory Council; there
are several thousand member banks.
of Governors of the Federal Reserve System determines the reserve
requirements of the member banks within statutory limits,
reviews and determines the discount rates established by the 12
Federal Reserve banks, and reviews the budgets of the reserve
banks. A Federal Reserve bank is a privately owned
corporation established pursuant to the Federal Reserve Act to serve
the public interest; it is governed by a board of nine directors, six
of whom are elected by the member banks and three of whom are
appointed by the Board of Governors of the Federal Reserve System.
The Federal Reserve banks are located in Boston, New York,
Philadelphia, Chicago, and San Francisco, and also in Cleveland,
Ohio; Richmond, Va.; Atlanta, Ga.; St. Louis, Mo.; Minneapolis,
Minn.; Kansas City, Mo.; and Dallas, Texas. The Federal Open Market
Committee, consisting of the seven members of the Board of Governors
and five members elected by the Federal Reserve banks, is
responsible for the determination of Federal Reserve bank
policy in the purchase and sale of securities on the open market. The
Federal Advisory Council, whose role is purely advisory, consists of
12 members, one of whom is elected by the board of directors of each
of the Federal Reserve districts. All national banks are
required to be members of the Federal Reserve System, and state banks
may become members if they meet membership qualifications.
Federal Reserve System exercises its regulatory powers in several
ways, the most important of which may be classified as instruments of
direct or indirect control. One form of direct control can be
exercised by adjusting the legal reserve ratio--i.e., the
proportion of its deposits that a member bank must hold in its
reserve account--thus increasing or reducing the amount of new loans
that the commercial banks can make. Because loans give rise to
new deposits, the potential is, in this way, expanded or reduced.
This policy tool has not been used very frequently in recent years.
supply may also be influenced through manipulation of the (also
called rediscount) rate, which is the rate of interest charged by
Federal Reserve banks on short-term secured loans to member
banks. Since these loans are typically sought to maintain
reserves at their required level, an increase in the cost of such
loans has an effect similar to that of increasing the reserve
classic method of indirect control is through, first widely used in
the 1920s and now employed daily to make small adjustments in the
market. Federal Reserve bank sales or purchases of securities
on the open market tend to reduce or increase the size of
commercial-bank reserves; e.g., when the Federal
Reserve sells securities, the purchasers pay for them with checks
drawn on their deposits, thereby reducing the reserves of the banks
on which the checks are drawn.
instruments of control described here have been conceded to be more
effective in preventing inflation in times of high economic activity
than in bringing about revival from a period of depression. A
supplemental control occasionally used by the Federal Reserve Board
is that of changing the margin requirements involved in the purchase