Friday, July 17, 2015

London: Bank of England

This series of posts describes a study abroad course in which students visited several central banks and talked with central bankers about how they responded to—and sometimes failed to respond to—the global financial crisis, and how they are adjusting to their new roles.

by Dong Won (Ellie) Sung

Finally, we are in London, most beautiful city in the world. It’s already our last destination in our central bank tour. The sight of London is totally different from Portugal and Germany. It is really developed and no one would disagree that London is a fabulous place.  Cold weather greeted us and we realized the arrival of another city in our journey. Upon our stay in London, we directly experience with the exchange rate of pound and struggled with the price. Our group had the opportunity to visit Bank of England and the building was so impressive. Inside of the building was also gorgeous, but sadly we were not allow to take a picture. There were lots of mosaic pattern on the floor in a hallway and lion symbols in the building. As we had a strict security check, we could see how serious it is.

Throughout the presentation, we learned about three big topics: macroprudential regulation, microprudential regulation and monetary policy in the bank of England from three speakers: Rhiannon Sowerbutts, Mattew Pegg and Christopher Hackworth. Firstly, macroprudential regulation is running of the financial system in a range of all the banks in UK. UK banks are highly connected each other than I expected and it usually leads cross-sectional risk in action. To overcome the risks, they split instruments into categories. Secondly, the microprudential policy is safety and soundness of individual bank. Regulatory organizations have developed rules to protect the consumer and to manage the crisis. Especially, there were various revisions in banking regulation after the financial crisis. The financial crisis proved the need for a new approach to financial regulation and there was a major change which is the advent of FPC(Financial Policy Committee). The FPC has contributed financial stability by reducing risks and supporting economy policy. Also, I could learn the importance of regulating monetary policy like interest rates that could greatly affect inflation. Eventually, the ultimate object of the bank of England is to promote the good of the people of UK by maintaining monetary and financial stability.

After the presentations, we were able to visit Bank of England Museum that shows the history of Bank of England. Not only they had ancient coins and original artwork for British banknotes that has been issuing over 300 years, the museum offered a rare chance to handle a real 13kg gold bar and it was special experience to me that I never had before. Furthermore, the museum displays historical books, documents, furniture, picture and photographs collection that recorded the Bank’s history. It was most well-displayed museum throughout our tour and I think it was a great chance to see the real historical evidence that shows the development of the Bank of England.

Overall, visiting bank of England was a wonderful experience and I couldn’t believe that it was already the last central bank in our tour and the fact made me sad. Throughout the central bank tour, I learned how differently the central banks operate within the different country and their importance function in their economy. Also, I had an unforgettable experience and left precious memory in London with our group.

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