Bank Charter Act 1844

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Bank Charter Act 1844[1]
Act of Parliament
Long titleAn Act to regulate the Issue of Bank Notes, and for giving to the Bank of England certain Privileges for a limited Period.
Citation7 & 8 Vict. c. 32
Territorial extent United Kingdom of Great Britain and Ireland
Royal assent19 July 1844
Other legislation
Repealed by
Status: Current legislation
Text of statute as originally enacted
Revised text of statute as amended
Bank Act of 1844

The Bank Charter Act 1844 (7 & 8 Vict. c. 32), sometimes referred to as the Peel Banking Act of 1844, was an Act of the Parliament of the United Kingdom, passed under the government of Robert Peel, which restricted the powers of British banks and gave exclusive note-issuing powers to the central Bank of England.[2] It is one of the Bank of England Acts 1694 to 1892.[3]


Until the mid-nineteenth century, commercial banks in Britain and Ireland were able to issue their own banknotes, and notes issued by provincial banking companies were commonly in circulation.[4]

Under the 1844 Act, bullionism was institutionalized in Britain,[5] creating a ratio between the gold reserves held by the Bank of England and the notes that the Bank could issue,[6] and limited the issuance by English and Welsh banks of non-gold-backed Bank of England notes to up to £14 million.[7] The Act also placed strict curbs on the issuance of notes by the country banks,[6] barring any new "banks of issue" in any part of the United Kingdom and thus beginning the process of centralizing banknote issuance.[8][9]

The Act was a victory for the British Currency School, who argued that the issue of new banknotes was a major cause of price inflation.

Although the Act required new notes to be backed fully by gold or government debt, the government retained the power to suspend the Act in case of financial crisis, and this in fact happened several times: in 1847[10] and 1857, and during the 1866 Overend Gurney crisis.

Also, while the act restricted the supply of new notes, it did not restrict the creation of new bank deposits, and these would continue to increase in size over the course of the 19th century.

Bank deposits are sums of money that a bank, backed by considerable collateral, may choose to deposit in the holder’s account as a loan which requires repayment with interest. The money comes into existence when the bank creates the deposit,[11] and when the loan is paid off, the money disappears from the bank’s balance sheet.[12] While a loan is effectively a cash advance provided by the bank to the customer, in the long term the effect of unrestricted creation of bank deposits (money) can lead to inflation in the markets into which that money is channelled, such as the property market through banks' mortgage lending.

As a result of the Act, as provincial banking companies merged to form larger banks, they lost their right to issue notes. The English private banknote eventually disappeared, leaving the Bank of England with a monopoly of note issue in England and Wales. The last private bank to issue its own banknotes in England and Wales was Fox, Fowler and Company in 1921.[13][14]

The Bank Notes (Scotland) Act 1845 adopted a year later was more lenient, allowing banks in Scotland to issue more than their 1845 circulation amount, as long as the additional circulation was backed pound-for-pound with gold reserves at head office. Merging banks were also allowed to combine their issues.[15]

Today three commercial banks in Scotland and three in Northern Ireland continue to issue their own sterling banknotes, regulated by the Bank of England.[16]

Banking Act 2009[edit]

The Banking Act 2009 abolished the "weekly return" of the number of banknotes issued by the Bank of England: "Section 6 of the Bank Charter Act 1844 (Bank to produce weekly account) shall cease to have effect".[17]


The Cambridge economic historian Charles Read has argued that this legislation reduced Britain's fiscal capacity to pay for humanitarian relief during the Great Famine in Ireland (1845–1852),[18] and that it also made the financial crises of 1847, 1857 and 1866 worse than they would otherwise have been.[19][20] (More traditional explanations for the UK Government's decisions to withhold relief and intervention are given in the article about the famine.)

See also[edit]


  1. ^ The citation of this Act by this short title was authorised by the Short Titles Act 1896, section 1 and the first schedule. Due to the repeal of those provisions it is now authorised by section 19(2) of the Interpretation Act 1978.
  2. ^ "Bank Charter Act 1844" (PDF). Bank of England. Archived (PDF) from the original on 3 December 2010. Retrieved 27 October 2010.
  3. ^ The Short Titles Act 1896, section 2(1) and Schedule 2
  4. ^ "£2 note issued by Evans, Jones, Davies & Co". British Museum. Archived from the original on 18 January 2012. Retrieved 31 October 2011.
  5. ^ Anna Gambles, Protection and Politics: Conservative Economic Discourse, 1815-1852 (Royal Historical Society/Boydell Press, 1999), pp. 117-18.
  6. ^ a b Poovey, Mary (2008). Genres of the Credit Economy: Mediating Value in Eighteenth- and Nineteenth-Century Britain. University of Chicago Press. p. 49.
  7. ^ Dewey, Peter (2014) [1994]. War and Progress: Britain 1914-1945. Routledge. p. 74.
  8. ^ "Bank Charter Act 1844: No banker not issuing notes on 6th May 1844, to issue notes hereafter". The National Archives. 19 July 1844. (7 and 8 Vict) c.32 (s. 10). No person other than a banker who on the sixth day of May one thousand eight hundred and forty-four was lawfully issuing his own bank notes shall make or issue bank notes in any part of the United Kingdom.
  9. ^ Tonilo, Gianni; White, Eugene N. (2016). "The Evolution of the Financial Stability Mandate: From Its Origin to the Present Day". Central Banks at a Crossroads. Cambridge University Press. p. 431.
  10. ^ Campbell, Gareth (2014), "Government Policy during the British Railway Mania and the 1847 Commercial Crisis", British Financial Crises since 1825, Oxford University Press, pp. 58–75, doi:10.1093/acprof:oso/9780199688661.003.0004, ISBN 978-0-19-968866-1
  11. ^ "Money creation in the modern economy". Bank of England. Retrieved 6 February 2014.
  12. ^ "Most of the money in the economy is created by banks when they provide loans". Bank of England. 1 October 2019. Most of the money in the economy is created, not by printing presses at the central bank, but by banks when they provide loans. [...] This also means as you pay off the loan, the electronic money your bank created is 'deleted' – it no longer exists. So essentially, banks create money, not wealth.
  13. ^ "A brief history of banknotes". Bank of England. Archived from the original on 4 February 2012. Retrieved 31 October 2011.
  14. ^ "Fox, Fowler & Co. £5 note". British Museum. Archived from the original on 2 October 2011. Retrieved 31 October 2011.
  15. ^ "RBS History in 100 objects: Banknotes bill, 1844". RBS Heritage Hub. Royal Bank of Scotland. Retrieved 26 March 2018.
  16. ^ "The Bank of England's Role in Regulating the Issue of Scottish and Northern Ireland Banknotes". Bank of England. Archived from the original on 4 February 2012. Retrieved 31 October 2011.
  17. ^ "Banking Act 2009" (PDF). p. 135. Retrieved 6 January 2017.
  18. ^ Read, Charles (2022). The Great Famine in Ireland and Britain's Financial Crisis. The Boydell Press. ISBN 9781800106284.
  19. ^ Read, Charles (2023). Calming the storms: The Carry Trade, the Banking School and British financial crises since 1825. Palgrave Studies in Economic History. Palgrave Macmillan. ISBN 9783031119149.
  20. ^ Boot, H. M. (1984). The commercial crisis of 1847. Hull, England: Hull University Press. ISBN 0-85958-442-9. OCLC 11325541.

External links[edit]