Bank Restriction Act 1797
The Bank Restriction Act 1797 was an act of the Parliament of Great Britain 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
Before restriction suspended the currency's gold standard, an increasing number of people were trading their banknotes for gold. This, combined with the overprinting of banknotes, meant the Bank of England's gold reserves were shrinking quickly. The timing of the act, which had been under consideration for a few months owing to runs on banks in Newcastle-upon-Tyne, Sunderland, and Durham that had in turn requested monetary support from the Bank of England, was the invasion of Britain on 22–24 February 1797 by French forces in Fishguard. When news of this event, now known as the Battle of Fishguard, became known in London, a much greater run on the Bank of England itself was feared, had a large number of holders of banknotes attempted to convert them into gold when bullion reserves already were heavily reduced. However, because the total face value of the notes in circulation was almost twice the gold reserves held, this would have bankrupted the Bank, and Parliament decided to suspend specie payments with immediate effect; this suspension was renewed annually until 1821.Reasons for overprinting
British banknotes were overprinted by the government of William Pitt the Younger after Britain declared war on revolutionary France in 1793. 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, this situation was reversed, and with £2,295,360 of notes in circulation being backed by £11,233,390 of bullion, the British government resumed "convertibility" on 1 May 1821.In popular culture
After the passing of the act, Richard Brinsley Sheridan publicly bemoaned the way in which the Bank of England had fallen under the influence of William Pitt the Younger by describing the institution as "An elderly lady in the City, of great credit and long standing who had unfortunately fallen into bad company." This in turn led to James Gillray’s famous cartoon entitled Political Ravishment; or the Old Lady of Threadneedle Street in Danger, which depicts Pitt seducing the Bank of England, personified as an old lady attired in £1 and £2 notes, for her fortune. The cartoon's title is the origin of the Bank's nickname of "The Old Lady of Threadneedle Street," still in use today.Subsequent developments
The act was amended and continued until the end of one month after the start of the next session of parliament by the '.The act was further amended and continued until one month after the conclusion of the present war by definitive treaty by the '.
The act was further continued, as amended, until 1 March 1803 by section 1 of the Continuance of Laws Act 1800.
The act was further continued until 1 March 1803, as amended, by section 1 of the '.
The act was further amended and continued until 6 weeks after the start of the next session of parliament by the '.
The act was further amended and continued until 6 months after the ratification of a definitive treaty of peace by the '.
The act was further continued, as amended, until 25 March 1815 by the '.
The act was further continued, as amended, until 5 July 1816 by the '.
The act was further continued, as amended, until 5 July 1818 by the '.
The act was further continued, as amended, until 5 July 1819 by the '.
The act was further continued, as amended, until the end of the present session of parliament by the '.
The whole act was repealed by section 1 of, and the schedule to, the Statute Law Revision Act 1871.