Biography of a banknote  Share

We are all very familiar with banknotes because we handle them every day. whether sitting in our pockets, tucked away in wallets or just an entry in our bank accounts, they are part of day-to-day life. But, at the end of the day, we really know very little about them. Who makes them, for instance? Who decides when and where they go into circulation? How long do they last? What happens to a banknote at the end of its life? To mark the tenth anniversary of the arrival of euro banknotes, the new “in the Spotlight” takes a look at the life of this all-too- familiar means of payment.

Since 1851, the National Bank has been printing banknotes, previously denominated in Belgian francs, and today in euros. Production of euro banknotes is shared. Since 2002, each central bank of the euro area supplies part of the overall annual production of some of the banknote denominations. It is the European Central Bank that decides each year on the share-out of the denominations between the different banks. The central bank concerned bears the costs of production equivalent to the share that it has been allocated. In 2012, Belgium is still printing €50 notes (a denomination that it has been producing since 2002) as well as € 5 notes.

The Printing Works of the NBB

The Printing Works of the NBB

The Eurosystem, made up of the national central banks of the 17 euro area countries, is empowered to issue money. The NCBs put euro notes and coins into circulation, mainly via the banking system. So it is the National Bank that is responsiable for issuing this currency on Belgian territory. This is done on the basis of demand from the banks, which pass on both withdrawals and deposits by members of the public, in line with their needs and of course within their own means too, as well as requests for loans. Therefore, it is not the National Bank itself that decides on the volume of notes and coins to issue. The quantity put into circulation depends on the economic situation, the public appetite for certain means of payment, or even seasonal fluctuations in household spending. In the olden days, banknotes were convertible into gold, which meant that it was absolutely essential for the issuing country to hold gold reserves. Nowadays, it is only the demand side of the equation that determines the quantity of money issued.

The letter Z indicates that it is the Belgian central bank (NBB) that was in charge of production of this banknote

The letter Z indicates that it is the Belgian central bank (NBB) that was in charge of production of this banknote

It is possible to find out which central bank was in charge of production of a euro banknote (it is not necessarily the central bank of the country where the banknote was printed) thanks to the serial number indicated on the back of the note. This central bank (for which the banknote has been made) can be identified by the first letter of this number. For Belgium, it is the Z. The letters were attributed, starting with the euro area when there were only twelve countries, by listing them in alphabetical order in the official language of the Member State. The country that falls first in alphabetical order (Belgium) was then given the last letter of the alphabet, which is why Belgium has the Z. In the case of the five countries that adopted the euro later on, the allocation has been dictated by the order of their arrival; so Estonia (the last country to have joined the euro area) has the highest letter in the alphabet, the D. The identification of the printers is found in a code on the front of the banknote and it is also the first letter of this code that refers to the printing works that have produced the banknote (for the NBB’s printing works, it is a T).

Banknote recycling

To carry out their task of issuing notes and coins, the central banks also have to ensure that the banknotes in circulation preserve their quality and integrity in order to guarantee users’ confidence. Notes must be easily accepted by both the general public and retailers. They do of course get passed around, from hand to hand and from pocket to pocket and are thus inevitably subject to wear and tear. Banknote recycling means that they are put back into circulation once they have been checked very closely to make sure they are authentic and in good condition. Credit institutions like banks and other businesses have to check notes very carefully before redistributing them to their customers so as to prevent any counterfeit and/or unfit notes from getting back into the economic circuit.

On average, each banknote comes back to the National Bank’s counters once, twice or three times a year. They are systematically checked under a fully automated procedure. Soiled or worn banknotes are destroyed and replaced by new ones. As a rough indication, in 2011, the national central banks deemed 5.9 billion banknotes unfit for circulation and replaced them with new ones. For the public at large, the National Bank exchanges damaged notes if more than half of the surface is still intact and if the damage proves to be unintentional.

A banknote lasts for just over two years on average. However, this lifespan varies considerably according to the denomination and the use made of it. Those that wear out the most are the €5 and €10 notes, as they are used most frequently, while the €500s can last for a very long time. So, what happens to your banknotes once they have served their purpose? Not a lot actually! But you may be interested to know that the green backs of the benches found in Room 4 of the Museum are made out of recycled banknotes. Ladies and gentlemen, now is your chance to sit on some money!

As for fake banknotes…

Once spotted, counterfeit banknotes are analysed, classified and handed over to the police. Some 21,918 fake banknotes were taken out of circulation in 2011 in Belgium, compared with 43,675 counterfeits in 2010. The number of fake banknotes is only a very small proportion of the authentic notes in circulation in Belgium, broadly estimated at around 470 million. The denominations that are counterfeited the most are the €50 and €20 notes.

Back of bench made out of recycled banknotes

Back of bench made out of recycled banknotes

It is assumed that anyone coming into possession of a fake banknote should immediately hand it in to the competent police authorities who will investigate where the fake came from. Naturally, you cannot get it replaced with a real note. It is your responsibility to be aware of the banknote security features and to remain vigilant. And if you are not sure, then check out Room 6 of our Museum!

LAURIE DE MARÉ
Museum Guide

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