Bank Charter Act 1844 receives royal assent

Background. Prior to the mid-nineteenth century, commercial banks in Britain and Ireland issued their own banknotes, with provincial company notes commonly circulating. The Act aimed to curb this practice by barring new banks of issue, thereby centralizing note issuance. It was viewed as a victory for the British Currency School, which argued that new banknote issuance caused price inflation.

Mechanism. The Act created a separate Issue Department at the Bank of England. It initially set aside £14 million in securities, gold coin, and bullion as backing for notes. Silver bullion was restricted to no more than one-quarter of the department's gold coin and bullion holdings. This structure formalized the exclusive note-issuing powers granted to the central bank.

Political Context. The legislation was passed under the government of Robert Peel, a Conservative statesman who served as Prime Minister from 1841 to 1846. Peel's administration enacted several major laws in 1844, including the Factories Act and Railway Regulation Act. The Bank Charter Act was part of his broader legislative agenda during this period.