A History of Central Banking: From Ancient Egypt and Rome to the Bank of England and the U.S. Federal Reserve

This chapter discusses history of central banking. The Bank of England eventually became a central reserve bank where other banks deposited their major reserves, except for a small working reserve for daily use. The Bank of England also became the holder of most of other banks gold reserves such that the primary reserve of the English banking system and later a significant part of the reserve of foreign banking systems as well was kept with the Bank of England. It is found that when a liquidity-shortage crisis threatened, the Bank of England was expected to tap into this central reserve by making loans to other banks and corporations. It did this through the mechanism of the discount rate, the rate it charged for short-term loans.