The Origins of Central Banking

Looks to be a historical account ...

The Bank of England

Basically, a cash-strapped England needed more money in the late 17th century and gave a license to a private group to form a bank that would buy government bonds and issue banknotes against the repayment of those bonds by the government. Additional legal maneuvers to protect it from competition by other banks, or to be required to buy its notes with gold. In effect, it became the sole source of currency in England

Free Banking in Scotland

Meanwhile in the north, Scotland was practicing free banking - no central bank, nor any political regulation. Each bank issued notes that were not legal tender, but were used in trade nonetheless. Scottish notes were honored (even preferred) in England, but not vice-versa.

The Peelite Crackdown, 1844-1845

Peel Act of 1844 attempted to reform English banking - however, they imposed a monopoly, which eliminated the checks and balances that free banking requires to keep banks honest. Worse, they attempted to impose a uniform currency on the entire UK by prohibiting Scottish banks from issuing their own currency (forcing them to act as commercial banks beholden to the central bank of England), thereby destroying Scottish banking as well.