In modern financial  2  Such a circumstance could arise in two ways: The banking reserve – that is, the liquid assets backing deposits at the Bank of England – could fall to a low level as a result of heavy discounting or the issue reserve – that is gold bullion backing Bank of England notes – could run short because of substantial redemptions by note holders.
Indeed, the Bank of England's gold reserves, its ultimate store of liquidity, along with the gold in circulation, were quite small relative to total sterling deposits in the U.K. banking system. This implied, as English historian Sir John Clapham (1945) noted, that there was just a "thin film of gold" (p. 299) tying the pound to the gold standard.