Meet “The Old Lady of Threadneedle Street”

BY AWAKE! WRITER IN BRITAIN

MASSIVE, windowless walls encircle her imposing residence. Gatekeepers resplendent in pink tailcoats, red waistcoats, and black top hats guard the entrances. Cameras discreetly monitor her visitors. Who is “The Old Lady of Threadneedle Street,” and why does she need such protection?

The “Old Lady” is one of the major financial institutions in the world—the Bank of England. But how did a bank get such a strange name? Threadneedle Street lies in an area of London where many guilds once flourished, its name likely coming from the three needles in the coat of arms of the Needlemakers’ Company. About a hundred years after the bank’s establishment, politician and playwright Richard Sheridan referred to it in Parliament as “an elderly lady in the city of great credit and long standing.” The cartoonist James Gillray was quick to seize on the idea of a bank being like an old lady, and from that time on, it was popularly known as The Old Lady of Threadneedle Street.

Demand for a National Bank

In the 17th century, goldsmiths ran most of the banking in London. This arrangement worked reasonably well until kings of the Stuart dynasty began borrowing money but not repaying it. Leading goldsmith bankers eventually went bankrupt, and the government came to be in desperate need of finance to support its war with France.

By the time William III and Mary II came to the throne in 1689, there were urgent calls for a national bank to act as the government’s banker and fund-raiser. Out of various schemes submitted, Parliament, despite strong opposition, eventually accepted Scottish merchant William Paterson’s proposal. London’s citizens were asked to lend sums of money that would hopefully total 1,200,000 pounds. In return, the government would pay the subscribers 8 percent interest and incorporate them as the Governor and Company of the Bank of England. Within a fortnight the money arrived, and in 1694 the Bank of England commenced business.

Forty years later, the bank moved to premises on Threadneedle Street. The present structure, dating from the 1930’s, is seven stories high with vast vaults deep beneath the ground. It occupies an entire three-acre [1.2 ha] block.

Ups and Downs

At first, the bank issued handwritten receipts on bank paper to customers depositing their pounds, shillings, and pence for safekeeping. These notes could be converted back into gold or coinage by anyone presenting them for payment. Of course, if all demanded their money at the same time, the bank would risk going out of business. There were a few close calls. For example, by 1797 war with France had again almost bankrupted the country. When investors withdrew their savings in panic, the bank ran out of cash and, as a result, had to issue low-denomination notes instead of gold for the next 24 years. It was during this “restriction period” that the bank gained its nickname The Old Lady of Threadneedle Street. These hastily prepared bank notes were very tempting to counterfeiters, but the penalty was harsh in those days. Over 300 people were hanged for forgery.

The bank also had a narrow escape of a different nature. In 1780, rioters in London tried to storm the building. Thereafter, every night until 1973, a detachment of soldiers patrolled the perimeter to ensure the safety of the nation’s gold.

During the 19th century, the British pound and the Bank of England notes became the soundest currency in the world. However, World War I changed all that. The heavy cost of fighting damaged the country severely. So many investors scrambled to convert their bank notes into gold that gold coins soon disappeared. These were replaced by small-denomination bank notes. Gold coins for everyday use were gone forever. In 1931, Britain left the gold standard entirely, which meant that the value of the pound sterling was no longer linked to a fixed quantity of gold.

Throughout its history, the bank had been a privately owned company. In 1946, however, it was taken over by the government.

The “Old Lady” Keeps Busy

The Bank of England is a central bank. It acts as the government’s banker, advising it on financial policy and keeping the currency as stable as possible by setting appropriate interest rates. Its other customers are commercial banks and central banks of foreign countries. Within its subterranean vaults, it safeguards the country’s gold reserves. Outside London, at another secure site, it oversees the printing of new bank notes.

Located near the center of the world’s time zones, the City of London never sleeps. Inside the city the bank plays a key role. What goes on behind those windowless walls reverberates throughout the rest of the financial world. Yes, “The Old Lady of Threadneedle Street” is as active as ever, keeping a tight hold on the purse strings of the nation.

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Bank’s first charter, 1694

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Handwritten £5 note, 1793

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On Threadneedle Street, 1794

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£1 gold sovereign, 1911

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Part of the first cartoon by James Gillray, 1797

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Ten-shilling note, 1928

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Current building, since 1939