The stock for which Global Financial Data has the longest history is the Bank of England stock, or as it was originally known, the Governor and Company of the Bank of England.
The origin of the Bank of England lies in naval warfare. In 1694, the French had the strongest navy in the world and following the 1690 Battle of Beachy Head, England needed to rebuild its navy, but King William III lacked the resources and the credit to do so.
This problem was resolved by creating the Bank of England. In exchange for creating a limited liability corporation, which would act as a bank for the government and have the right to issue banknotes, the shareholders would loan the bank £1,200,000 at 8% interest. The Royal Charter was granted on July 27, 1694 and the £1,200,000 was subscribed in only 12 days. Over time, the Bank of England took on the responsibilities of managing the government’s debt, becoming a banker’s bank, controlling interest rates through discounting and establishing a base interest rate, having the exclusive right to issue banknotes within 20 miles of London, and then within the entire country, and the other duties that are now associated with a central bank.
The Bank of England was nationalized on October 29, 1945. Shareholders received £400 in bonds for each £100 in par value of bank stock with bonds paying 3% interest (as opposed to the 12% yield) with bonds redeemable at par on April 5, 1966.
The Bank of England’s stock traded for over 250 years before its nationalization. The stock participated in the South Sea Bubble of 1720, though only doubling in price rather than showing the ten-fold increase South Sea Stock enjoyed before collapsing. The Bank of England stock, along with East Indies Co. stock and South Sea Co. stock were the three companies whose shares were safe enough, because of their government connection, to trade regularly on the London Stock Exchange during the eighteenth century. Until the rise of canals and the liquidity created by the Napoleonic Wars, stock trading remained almost non-existent between 1720 and 1800.
Only British government bonds were safer than Bank of England stock; however, Bank of England stock had the potential for dividend increases that the government stock did not. Although the dividend fluctuated in its first dozen years, the dividend settled down to infrequent changes after the 1720 South Sea Bubble.
