Central Banking – The Bank of England – section (iv) (b) Ownership & Control

This video is a follow on from the previous video dealing with some background information with regard to the Bank of England. If you haven’t seen that video, I would recommend you doing so before watching this one.

Here’s where we need to focus on ownership and control.

Ownership and control
The situation for the Bank of England seems, at first, fairly clearcut. The Bank of England website states that the bank is “wholly owned by the public sector.”

However, we must appreciate that there’s a quite a difference between ownership and control.

The website itself actually discusses the issue of ownership and control in an article under the title “Ownership of the Central Banks”.

This next little bit comprises of some quotes taken directly from the article as well as the occasional comment made by me along the way and then after that, I will give you my opinion on the matter.

So … to quote.

“Ownership is a complex concept, a bundle of rights and responsibilities. In ordinary language, if I say I own a bike, then this implies I possess the bike and can use it as I please. Ownership implies control.”
However, the article admits that control is something separate from ownership with regard to corporations.
The article then acknowledges that being a shareholder means having a financial interest in the business, but not having a say in the day-to-day running of the business.
The owners of central banks, mostly governments, are ordinarily responsible for making executive appointments, and receive a share of central banks’ profits. Day-to-day control of the central bank is delegated to the central bank’s senior management and policy committees.
The owners, or shareholders are then “abstracted from their day-to-day operations.”
The article goes on to talk about how Central Banks are different from ordinary corporations.
While both modern central banks and modern corporations are often characterised by a separation between ownership and control, there are key differences in their organisational objectives. The purpose of most private sector corporations is the pursuit of profits for shareholders. By contrast, central banks typically have statutory mandates based on economy-wide goals – e.g. price stability, financial stability and market functioning. This is irrespective of whether central banks are wholly owned by government, or, as in a handful of cases detailed below, their residual claimants are private sector entities.
Consequently, the issue of central bank ownership is considered by most scholars of marginal importance.
This would be a remarkable statement to make if it weren’t for the next part … so to continue …
Some people argue central banks should be fully privatised, with the largest private sector banks playing the role of lenders of last resort. Conversely, some argue central banks should be fully nationalised.
However, central bank ownership on its own may not matter.
Instead, the crucial factors may be other aspects of their govern