IT was 330 years ago this week that the Bank of England was established by royal charter sealed by the joint sovereigns, William and Mary, based upon the plan first promulgated by Scottish banker and trader William Paterson.

I do not usually write about English institutions but on realising the anniversary was coming up I checked the Bank of England website and in its history section I discovered this note about its foundation in 1694 before which the monarchy and government had to borrow money at extortionate rates of interest from private individuals, usually goldsmiths.

The website states: “The Bank of England began as a private bank that would act as a banker to the Government. It was primarily founded to fund the war effort against France. The King and Queen of the time, William and Mary, were two of the original stockholders.

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“The original Royal Charter of 1694, granted by King William and Queen Mary, explained that the Bank was founded to ‘promote the public Good and Benefit of our People’.

“In essence, this is still used today in our current mission statement: ‘Promoting the good of the people of the United Kingdom by maintaining monetary and financial stability.’ “The Bank of England opened for business on August 1, 1694, in temporary accommodation in the Mercers' Hall in Cheapside. It had a staff of just 17 clerks and two gatekeepers.”

Notice the absence of any reference to the man who is rightly seen as the founder of the Bank of England, William Paterson – after all, its creation was his idea.

You have to look deeper into the website to find its sole reference to Paterson in a blog by bank museum officer Alice Beagley. She wrItes: “William III was desperately trying to raise funds for wars against France… “The King discussed a number of ideas from the government, wealthy merchants and noblemen. But one of these came out on top.

“William Paterson, a Scottish merchant, suggested that members of the public could lend £1.2 million to the government (around £200, today if you take inflation into account).

“People who signed up to this scheme effectively became shareholders in a new joint-stock company. That means it was owned by the public and the government.

“The company was called ‘The Governor and the Company of the Bank of England’. People invested in it by purchasing ‘bank stock’ and the government paid them 8% interest. It was a good deal for the Government as goldsmiths charged lending rates of more than twice that amount!

“And if that wasn't enough to tempt people to invest, the other selling point of this new ‘National Bank’ was that investors could be reassured that any money stored within our walls was safe from royal hands – what's not to like?!

“The £1.2m target was raised in just 11 days by 1268 members of the public from all walks of life. And we were formally established by Royal Charter on July 27, 1694.”

With respect that reads as though Paterson had an idea – a very good one as central banks globally followed his suggestions ever afterwards – and that was that, but there was much, much more to William Paterson than just one idea.

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Regular Back In The Day readers will know all about Paterson as he was the man behind the disastrous Darien Scheme, as well as advocating for the Union of 1707, but I think it only right that he should get more credit for his work to found one of the world’s greatest financial institutions.

Paterson was born to a farmer at Tinwald in what is now Dumfries and Galloway in April 1658. He was educated at the local parish school until he had to leave his home village at the age of 17 for reasons which are still not completely clear but which may have been disagreements over religion.

He moved to Bristol and thence to the Netherlands before he started a business trading with the West Indies where he lived for some time and made the acquaintance of “buccaneers” – pirates by another name – such as William Dampier who was probably the man who explained to Paterson the possibilities of the Isthmus of Darien.

Paterson returned to Europe and tried to interest various governments in a nascent Darien Scheme, but they all rejected it, including King James VII and II, and so Paterson returned to being a merchant, and was soon heavily involved in the lucrative slave trade. By the mid-1680s, he was established as a very wealthy member of the Merchant Taylors Company in London, and he was respected for his success and innovative methods.

With William and Mary on the joint thrones, Paterson could see a huge problem for them and the solution to it. For numerous reasons, such as still being owed fortunes from the reign of King Charles II, the various lenders were not prepared to fund the military expansion that King William wanted in particular. In 1691, Paterson committed his thoughts to print – effectively, he proposed there should be a new bank lending money to the Government with the right to issue banknotes.

He described his idea in a pamphlet of 1694 entitled “A Brief Account of the Intended Bank of England”: “It was proposed some years ago that a publick transferrable Fund of Interest should be established by Parliament, and made convenient for the Receipts and Payments in and about the Cities of London and Westminster; and to constitute a Society of Money'd Men for the government thereof, who should be induced by their Interest to exchange for Money the Assignments upon the Fund, at every demand."

William and Mary themselves paid £10,000 each – the maximum permissible – for stock in the institution at its successful launch in the last days of July 1694.

Paterson was named as one of the founding directors of the new Bank of England, but a year later he fell out with his fellow directors over a change of policy and resigned, then took himself north to Scotland to instigate the Darien Scheme which ruined his reputation for ever.