Bank act. The name given to the special act under which the Bank of England exists. The earlier
charters of the bank were for terminable periods; the present charter, conferred by the Bank act,
so-called, in 1844, continues for an indefinite period.

The Bank act limits the circulation (notes) that may be issued by the Bank of England against (or
be backed by) securities alone. In times of crisis when the scarcitv of circulating medium causes
panic the bank is allowed by Parliament to increase the amount of the notes that it may issue
against securities. This is done by suspension of the Bank act. The suspension is permitted by a
"Letter of license" from the government of the day, which promises that the government will
propose a bill of indemnity if the legal limit is exceeded. The Bank act was last suspended in 1866.