Bank of England raised funds by granting lenders a banking monopoly

By 1694, the English Crown urgently needed to raise £1.2 million to fund its war against France, but the government's history of defaulting on royal debt gave prospective lenders every rational reason to refuse — no interest rate improvement alone could fully compensate for a borrower whose past behavior suggested repayment was uncertain. Simply offering a higher rate would have signaled desperation without solving the underlying trust problem.

Rather than continue negotiating purely on loan terms, the government structured something categorically different: subscribers who advanced the money wouldn't just be creditors waiting on repayment, they would be incorporated into an entirely new institution with a valuable standing privilege independent of whether the underlying government loan was ever fully repaid on schedule.

Under the 1694 Tonnage Act, subscribers who advanced the £1.2 million loan were incorporated as the Governor and Company of the Bank of England, granted 8% annual interest on the loan itself, and — critically — given the exclusive right to issue banknotes in England, an entirely separate and durable banking monopoly whose value didn't depend on the Crown ever fully honoring the original loan.

Attached a separate, durable banking monopoly to the loan, so lenders gained value independent of repayment, decoupling appeal from the Crown's credit.

The banking monopoly's value didn't depend on the Crown repaying, so lenders' downside was hedged.

The exclusive right to issue notes was a durable asset, making the deal attractive regardless of the loan's risk.

Subscribers became shareholders in a new institution, aligning their interests with the Bank's success, not just the loan's repayment.

The offer was so compelling that it filled in 12 days, proving the privilege outweighed the credit risk.

When trust is the bottleneck, bundle a valuable independent privilege with the risky deal to shift focus from credibility to opportunity.

The subscription opened in June 1694 and was fully filled within just 12 days, drawing 1,520 separate subscribers contributing amounts from £25 up to £10,000, with King William and Queen Mary themselves among the largest contributors — a dramatically faster and more successful raise than the government's troubled credit history alone would have predicted, because the attached banking monopoly made the deal valuable independent of the loan's own risk.