Bank Of England

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BANK OF ENGLAND

Financial Construction Management, Bank of England



Financial Construction Management, Bank of England

Introduction

Bank base rate (BBR) or prime rate is defined by each commercial bank based on the average cost of its resources. It should be noted that the major banks are aligned at the same rate because of competition. Theoretically, it is the rate that commercial banks apply to their best customers, so this is the minimum price offered to best customers. It provides a benchmark for the calculation of credits granted to SMEs and to a lesser extent, some consumer loans.

The money market rate at which they should add a margin representing their management costs. Thus, the European Central Bank, the Federal Reserve Board or the Bank of England, provides loans to banks using interest rates.

Central Bank of the United Kingdom, which was nationalized in 1946, has a monopoly on the issue of the British currency, sterling, in England and Wales. The Bank of England is second in charge of conducting monetary policy of the United Kingdom through its "Bank's Monetary Policy Committee" which has been entrusted since 1997, the sole responsibility of fixing the interest rate director from whom the discount rate or refinancing in which the Bank of England lends cash to commercial banks (Buckle 2004, 2004 pp. 2).

In the area of monetary policy, the official mission of the Bank of England, like that of the ECB (European Central Bank), is to ensure and maintain price stability, but also to support the British government's economic policy.

Thus the Bank of England, she is in concert with the UK Treasury ("HM Treasury") and with the FSA ("Financial Services Authority") since 1998 in charge of regulating the interbank market and supervision of banks in the United Kingdom (this responsibility rests solely with the Bank of England before that date).

Building on the effectiveness of reduced its key interest rate to revive an economy experiencing a real recession in the UK in 2008-2009; the Bank of England has implemented this decline dramatically since October 2008 (reduction 375 basis points between October 2008 and January 2009). In February 2009, the interest rate the Bank of England reached the unprecedented level of 1%.

Discussion

Ever since the late 1600's, the UK financial system has been supported and controlled by what is referred to as base rate. The base rate is a figure which defines the lending rate the Bank of England uses for overnight lending to other UK banks. The base rate has great influence over the economy of the UK due to its function. Not only does it provide the structure to the economy, but also is the main component used to control inflation. The base rate figure is determined and maintained by a group within the Bank of England known as the MPC, or Monetary Policy Committee. When obtaining an original mortgage or a re-mortgage loan product from a lender, the interest rate associated with the loan is directly affected by the base ...
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