This chapter covers the Bank’s introduction of its receipt (quasi-repo) facility in 1683 and its simultaneous transition to a fiat-money standard. Data extracted from the Bank’s ledgers (which survive from 1666) show that before the introduction of receipts, the Bank routinely executed large purchases of silver in order to maintain the size of its balance sheet and to ensure an adequate stock of metallic assets. These data also show that the Bank’s open market purchases were curtailed after the introduction of the receipt system, which created greater incentives for Bank customers to deposit trade coins into the Bank. With the introduction of receipts, Bank ledger balances unaccompanied by a receipt lost their rights to redemption in coin—Bank money became fiat money. The archival data suggest that the transition to fiat money was chiefly motivated by a desire to improve Bank accounting, via a reduction in the set of feasible transactions involving precious metal. The chapter shows how the transition to fiat money also stabilized the market value of Bank money. An appendix to this chapter presents a methodology for classifying Bank transactions from entries in its ledgers.

This final chapter discusses the role of the Bank within a selective history of central banking. “Exchange bank” institutions such as the Bank became obsolete by the end of the eighteenth century. The new model for central banks was the Bank of England, which incorporated features such as private equity capital, large holdings of sovereign debt, a discount window, and the issue of circulating banknotes. It is argued that the Bank of England nonetheless gravitated to a two-bank structure following the 1844 passage of Peel’s Act, with many similarities to the eighteenth-century Bank of Amsterdam. Peel’s Act split the Bank of England into two banks, a passive bank (“Issue Department”) that issued notes against gold deposits and paid out gold coins, and an active bank (“Banking Department”) used its ledger money to commercial paper and engage in various types of open market operations. A concluding section argues that the active—passive dichotomy bears some relevance for modern financial markets, with active liquidity arising from traditional central bank open market operations, and passive liquidity arising from arrangements such as repo transactions. It is argued that recent crisis events have revealed the interconnectedness of these two forms of liquidity.