The City's traditional money men to go

An old City tradition will disappear early next year, when the Bank of England abolishes the last formal privileges of a seven-strong band of discount houses, in the biggest reform of the money markets for more than a century, writes Peter Rodgers.

The discount houses are banking intermediaries used by the Bank of England since at least the late-19th century to control interest rates set by the big clearing banks. They operate a specialist market at the heart of the City.

The discount house brokers kept up the tradition of visiting the Bank of England in silk top hats until as recently as1992, when business was switched entirely to the telephone and the top hats were shelved.

Under reforms announced yesterday, the Bank of England will open up the short-term sterling money markets to dozens of banks, building societies and securities firms, of UK and continental ownership. The discount houses will have to fight to survive against the new competition.

The Bank said the new system would bring the setting of sterling interest rates into line with techniques expected to be adopted for the euro after monetary union.

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