Bank Restriction Act 1797

Edit links
Source: Wikipedia, the free encyclopedia.

Act of Parliament
37 Geo. 3. c. 45
Dates
Royal assent3 May 1797
Expired2 December 1797
Other legislation
Repealed byStatute Law Revision Act 1871
Status: Repealed
Act of Parliament
38 Geo. 3. c. 1
Dates
Royal assent30 November 1797
Text of statute as originally enacted

The Bank Restriction Act 1797 was an

37 Geo. 3. c. 45) which removed the requirement for the Bank of England
to convert banknotes into gold. The period lasted until 1821, when convertibility was restored. The period between these two dates is known as the Restriction period.

Reasons for restricting

An increasing number of people were trading their

banknotes attempted to convert them into gold when bullion reserves were heavily reduced. However, because the total face value of the notes in circulation was almost exactly twice the actual gold reserves held (£10,865,050 of notes, compared to £5,322,010 in bullion),[3] this would have bankrupted the Bank, and Parliament decided to suspend these "specie payments" with immediate effect; this suspension was renewed annually until 1821.[4]

Reasons for overprinting

British banknotes were overprinted by the government of William Pitt the Younger after Britain declared war on revolutionary France in 1793.[5] The Bank Restriction Act released the government from the fear of mass redemption of such convertible banknotes, and by the end of the war in 1814 the banknotes in circulation had a face value of £28.4 million, yet were backed by only £2.2 million of gold. However, by 1821, and with radical economic policies instigated by Sir Robert Peel (the future Prime Minister, acting as Chairman of the Bullion Committee), this situation was reversed, and with £2,295,360 of notes in circulation being backed by £11,233,390 of bullion,[3] the British government resumed "convertibility" on 1 May 1821 (two years ahead of schedule).

In popular culture

"The Old Lady of Threadneedle St"

After the passing of the act,

The Old Lady of Threadneedle Street
", still in use today.

See also

Further reading

References

  1. ^ "Bank Restriction Act of 1797". Investopedia. Retrieved 10 March 2007.
  2. ^ "Mark Crosby, "The Bank Restriction Act (1797) and Banknote Forgery" | BRANCH". Retrieved 14 October 2022.
  3. ^
    ISSN 0362-4331
    . Retrieved 14 October 2022.
  4. JSTOR 25108102
    .
  5. ^ "England". University of Pennsylvania. Archived from the original on 11 February 2007. Retrieved 10 March 2007.
  6. ^ "Mark Crosby, "The Bank Restriction Act (1797) and Banknote Forgery" | BRANCH". Retrieved 14 October 2022.
Retrieved from "https://en.wikipedia.org/w/index.php?title=Bank_Restriction_Act_1797&oldid=1203310836"