A History of Financial Institutes in the UK

A History of Financial Institutes in the UK

Financial institutes in the UK, such as the Bank of England, get a lot of attention in crises such as these, but just where do their origins trace back to? As you might expect, the Bank of England dates back hundreds of years, but financial institutes and mechanisms are always changing, and the UK system reflects this.

Let’s take a look at some of the most important steps in UK financial history.

Goldsmiths – the Early Bankers

In the early 1600s, many goldsmiths would work with the crown, storing gold in the royal mint. However, with time, they came to extend their services to the public, accepting gold in return for a receipt and instructions to pay the customer back.

These instructions were like an early banknote, and in 1650, the first provincial bank was opened up in Nottingham by cloth dealer Thomas Smith. The foundations of a banking system were about to fall into place.

Bank of England Founded

Today, the Bank of England is the UK’s central bank, overseeing monetary policy and acting as the lender of last resort. However, when the bank was set up in 1694, it was a private entity to act as the bank for the government.

With funds needed to help fight a long-running war against France, the Bank of England took on an important role from the start, and the foundations were set for an institution that would last until today.

A Run on the Bank

An unlikely event gave country-wide banking a push forward in 1797 when France declared war on the UK. This led to people rushing to the bank to turn their banknotes into gold, depleting vital gold stocks.

To maintain its gold reserves, the government barred the Bank of England from paying out notes in gold, and it became clear that the public needed a more diverse banking system.

Shocks to the System

The 1800s saw a rapid expansion of the banking system, both in scale and services offered. In the early 1800s, National Provincial was commonly accepted as the first truly national bank, with 20 branches across the country.

However, the second half of the century and the industrial revolution brought two big banking crises that tested consumer confidence. The system was still evolving, and these shocks led to greater record-keeping and improved accounting that would make the system more durable.

The Big Banks and an Opening Up of the System

Over the coming years, four of today’s biggest banks would start to develop, with National Westminster, Lloyds, Barclays, and Midlands, rapidly expanding throughout the country.

In recent years, more banking licenses have been granted, though, and with new lending laws to reflect modern society, the choice has never been greater, with companies such as Cash Lady making an impact on the market.


Banking institutions in the UK have come a long way since their origins in the 1600s, and they’ll surely continue to adapt as we move forward.

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