INTERNATIONAL REVIEW ON CASH MANAGEMENT

YEAR V ISSUE 10 DECEMBER 2011 The euro banknote

On 1 January 2012 it will be ten years since euro banknotes and coins were first put into cir - culation. To mark this anniversary, BILLETARIA is publishing a special issue devoted exclu - sively to the euro, to which leading figures and experts from within the Eurosystem have con - e tributed. I would therefore like to express the Banco de España’s gratitude to the representatives of the European Central Bank and Eurosystem national central banks who have contributed to this issue, which aims to add to the dissemination and understanding of the common European currency, particularly among experts and specialists from countries u outside the euro area.

The launch of euro banknotes and coins was a logistic operation on a huge scale, putting to

s the test the technical capabilities of the central banks’ teams and their level of cooperation and coordination. Alongside this teamwork by the central banks, it required the active involve - ment and cooperation of all the industry players dealing with banknotes and coins in the twelve countries in which the single currency was being gestated. This included everyone s from manufacturers and distributors, through to credit institutions and retailers. The exercise was on an unprecedented scale, but was completed brilliantly, and the success of the oper - ation was accompanied by the currency’s enthusiastic reception by the citizens of the coun - i tries concerned.

From the outset the euro banknotes have been well received, the quality of circulating bank -

notes is high, and counterfeiting rates are low. What is more, during their ten years in circula - tion, euro banknotes have proven themselves to be a useful tool in the European public’s every -

l day life, helping make commerce and travel easier for citizens. The euro’s acceptance as an international currency has also been on an upward path, and euro banknotes have circulated inside and outside Europe with extraordinary ease. It could be said that the euro banknote has been a calling card for the European project and a symbol of identity for the European Union. a For banknote industry professionals, euro banknotes are an inter - esting topic of discussion and subject of knowledge, and, as can be i seen from the articles published in this issue of BILLETARIA, there is no doubt of their contribution in a world undergoing continual change and innovation. However, it is also important to remember that euro banknotes have gone beyond being a matter of special - c ist interest to seamlessly forming a part of our everyday lives.

Miguel Fernández Ordóñez. Governor of the Banco de España e

p 10 years S Opinion Editorial Editorial

J. Darío Negueruela Banco de España

On 1 January 2002, following long months of work and preparation, the euro banknote was born. In many ways, given both the expect - ations the project had aroused among European citizens and the symbolism behind it, an historic milestone had been reached. After many years of pursuing a common economic policy, of building a powerful and, at times, intricate legal Community body, of following Untitled / JDN a path of continuous enlargement and of trying to instil the project of a single Europe in citizens’ minds, European leaders were finally in This special issue of BILLETARIA is presented by Miguel Fernán - a position to present European public opinion with a concrete sym - dez Ordóñez, Governor of the Banco de España and the BIL - bol of the much-maligned and oft-misunderstood Union. The single LETARIA’s customary interview focuses on Gonzalo Gil, Deputy European currency came into being as the tangible symbol of the Governor of the Banco de España at the time of the euro Union in the form of a banknote to be used by all European citizens, changeover but now retired from public office. His long profession - a testament to individual relinquishment (of national currencies) for al career and the wide acclaim given to his excellent work mod - a collective gain, and the expression of our firm resolve to overcome ernising a central bank at a time of change are more than sufficient our differences by seeking out elements that allow us to live togeth - arguments for his inclusion in BILLETARIA. Our thanks to both for er, making us stronger and creating a better future. their invaluable support and the generosity with which they gave us their time. A fortunate coincidence sees the simultaneous publication of issue no. 10 of BILLETARIA and the tenth anniversary of the euro, so it A large body of experts at the European Central Bank under José would be impossible – if not inexcusable – to miss the opportunity to Manuel González-Páramo, together with leading figures from dedicate a special issue in celebration of this long-awaited birthday. Eurosystem central banks help us create a mosaic of contributions rich in variety and high in quality. To them and to the experts who Our goal developed into a project with three fundamental object - contributed towards the technical section on banknote design and ives. First, to create a forum for leading practitioners and experts to production, and to those who worked to present a simple but thor - come together to discuss what the world of the euro is like on the ough view of the information about the euro, our most sincere inside and how citizens, with no links to the professional world of thanks. BILLETARIA is a case where the generosity and quality of banknotes, perceive the new single currency landscape. Second, its contributors can be easily appreciated. specific contributions will help provide for a better understanding of the euro if there are references to practical aspects of its design and In this issue, our section on banknote security features is dedicated printing. And lastly, this issue of BILLETARIA aspires to serve all our exclusively to features present in euro banknotes. Similarly, our cus - readers outside the euro area as a vade mecum for the world of the tomary map covers the area of Europe, as a tribute to the euro, with euro, providing information on statistics, legal provisions, commu - a reproduction of the finest quality generously provided by the ECB. nications policy, bibliography, historical references, etc. Given the considerable work by the European Central Bank in the area of com - The length of this issue of BILLETARIA, which is spread over 52 munication, a wealth of sources of information is at hand for those pages, is due to its exceptional nature, and we expect to return to who require specific information on euro banknotes. BILLETARIA our usual editorial format with the following issue. In the meantime, has drawn on this store of knowledge and, in a single publication, our thanks again to the outstanding range of contributors and our provides a brief summary of some of the most frequently searched- growing readership who make it possible for us to continue. And, for topics, with a view to becoming a useful reference tool. finally, here’s to a happy birthday to the euro!

CONTRIBUTORS

Miguel Fernández Ordóñez Governor. Banco de España / J. Darío Negueruela Director of the Cash and Issue Department. Banco de España / Gonzalo Gil Former Deputy Governor. Banco de España / María luisa leyva Head of the International Currency Division. Banco de España / José Manuel González-Páramo Member of the Executive Board of the European Central Bank / ton Roos Director Banknotes. European Central Bank / Antti Heinonen Chair of the CBCDG Executive Committee, European Central Bank / Helmut Rittgen Head of the Cash Department. Deutsche Bundesbank / Stefan Augustin Director of the Cashier´s Division and Branch Offices. Oesterreichische Nationalbank / Vicente Ventura Expert in the Currency Development Division. European Central Bank

2 BIllEtARIA no. 10 December 2011 10

SUMMARY

Opinion 1 Introduction Miguel Fernández Ordóñez 2 Editorial 4 Interview with Gonzalo Gil 8 the first ten years of the euro banknotes José Manuel González-Páramo 10 the integrity of euro banknotes Ton Roos 12 the singularity of the euro banknotes Antti Heinonen and J. Darío Negueruela 14 the ongoing harmonisation of the Eurosystem's cash policy Helmut Rittgen 16 the circulation of euro banknotes outside the euro area Stefan Augustin 18 the euro (banknotes and coins) as seen by European citizens Vicente Ventura 20 the Banco de España’s survey on cash

Design and Production 21 New clothes for the euro Reinhold Gerstetter 22 the design of the first series of euro banknotes Robert Kalina 24 Euro banknote production Nunzio Minichiello

Background references 26 Euro cash statistics J. Darío Negueruela and María Luisa Leyva 31 the euro issuing countries Víctor Andrés 34 legal framework of the euro Roberto Ugena, África Pinillos and María José Fernández 40 Information campaigns for euro cash changeover Olivier Radelet 43 Spain’s cash-communication activities María Eulalia Andonegui 44 Basic bibliography on euro banknotes and coins 48 list of contacts of the European System of Central Banks 50 Security features of the euro banknotes and coins Jean Michel Grimal and Fernando León

CONTRIBUTORS

Reinhold Gerstetter Banknote designer / Robert Kalina Former designer at Oesterreichische Nationalbank / Nunzio Minichiello Head of Banknote Printing Department. Banca d´Italia / Víctor Andrés Eurosystem Currency Unit Manager. Banco de España / Roberto Ugena Director of the Legal Department. Banco de España / África Pinillos Legal Counsel of the Legal Department. Banco de España / María José Fernández Head of the Resources Division. Banco de España / Olivier Radelet Principal Project Manager for Euro Banknotes and Coins Communication. European Central Bank / María Eulalia Andonegui Eurosystem Currency Unit. Banco de España / Jean Michel Grimal Head of the Currency Development Division. European Central Bank / Fernando león International Currency Unit Manager. Banco de España / José Moreno Eurosystem Currency Unit. Banco de España / Yolanda Barrera Photographer.

BIllEtARIA no. 10 December 2011 3 Opinion Interview with Gonzalo Gil

Interview with Gonzalo Gil

J. Darío Negueruela and María luisa leyva Banco de España

Gonzalo Gil joined Q. What do you recall in particular from 1 January 2002? the Banco de Es- A. During the last few days of 2001 I felt somewhat nervous, like man - paña in Septem- agers at other central banks involved in the introduction of the euro. ber 1968 after Although we had been working on the project for several years, we were finishing his hon - concerned that some sort of contingency might arise at this critical ours degree in moment that could derail it. At that point we were asking ourselves ques - tions such as: Would it ultimately be possible for all credit institutions, Economics at the ATMs and merchants in 12 countries to have sufficient quantities of the University of Ma- new currency available to exchange national banknotes and coins? Would drid, having just the euro banknotes and coins be available for the exchange in towns in the furthest flung corners of Europe? Would citizens accept the euro with - turned 24. His first out difficulty? Would counterfeits appear that the public would be unable post was in the to identify as such? But right from the start of D-Day the good news in the Studies Depart- media reassured me. Moreover, on the morning of that famous Tuesday, ment. Over the course of his career he has held the conference call held by the central banks involved highlighted the suc - cess of the undertaking. The way the euro was accepted was impressive: various positions of responsibility at the Bank in a people went out to withdraw new banknotes from ATMs as soon as pos - variety of different areas: after starting as an econ - sible. Although it was a public holiday, the Banco de España was open to omist in the Studies Department, he was later change pesetas for euros, and so many people came that a queue formed responsible for operations management functions, that stretched right around the building. and the design of infrastructure systems. He was Q. Do you have any anecdotes from that day? Deputy Director of the International Department until, for almost a decade, he held the position of A. Yes, I remember one particularly special telephone call. As an intro - duction, I should say that the new banknotes were prepared for the Director General for Operations, Markets and changeover at all the country’s credit institutions, but they could not be Payments Systems, where he managed application issued before 1 January 2002. Well, in the early hours of the morning of of monetary policy in Spain, inter-bank and clearing the first day I received a call from a Spanish minister, somewhat irate, markets, electronic payment systems and cash. because he had seen members of the public with euro banknotes on tel - evision, while he did not yet have any. To tell the truth I was pleased that he was showing so much interest in the new notes, and I told him that In mid-2000 he was appointed Deputy Governor unfortunately I did not have any banknotes at home to offer him, as when of the Banco de España, a post he held until his I left the Bank the day before, euros had not yet been placed in circula - legal term expired. His management while Deputy tion. I advised him that he could obtain new banknotes straight away at any ATM or from the Banco de España from 9 a.m. onwards. On 1 Governor of the Banco de España (2000-2006) January 2002 80% of ATMs in the 12 countries of European Monetary has been recognised as one of the most fruitful Union were dispensing euro banknotes. Uptake was so rapid that within and innovative of recent years. Since leaving the a week of the euro’s issue, 50% of national banknotes in circulation had institution he has maintained close ties with been exchanged. banking and financial markets. Q. How did the birth of the euro banknote come about? Was there are real awareness that developing a single currency was a real pos - On 1 January 2002 Gonzalo Gil was the Deputy Governor of the Banco sibility or was it talked about as a hypothetical pipe dream? de España, and his responsibilities included all aspects of the manage - ment, preparation, launch and implementation of the euro in Spain. His in- A. The truth is that although the creation of a European monetary area depth knowledge of the ins and outs of managing the common European had been gestating for a long time, up until 1998 there was no certainty that it was going to become a reality. That was when the Council of the currency, his demonstrated management ability, international contacts, European Union conducted a convergence test on the Member States solid grounding in economics, and his global perspective as a financial and decided which countries would form part of European Monetary expert make him the ideal source of an expert opinion and assessment of Union, with the euro as their single currency. The objective was so com - the months before and after the launch of the euro. plicated and involved so many political, economic and financial difficul - ties, that the likelihood of its not reaching completion successfully was Our thanks, then to Gonzalo Gil, who received us cordially two afternoons fairly high. Moreover, all previous attempts to create a monetary area had in the summer of 2011 to talk about those events of tens years ago. With failed. We had witnessed the dismantling of the fixed-exchange rates set his usual generosity, he shared with us his knowledge, experience and by the Bretton Woods system, the failure of the European currency snake good manners. that was created in 1972, and the continual modifications of the

4 BIllEtARIA no. 10 December 2011 Opinion Interview with Gonzalo Gil

exchange rate in the European Monetary System in the 1990s, etc. But Q. Were there any insuperable technical difficulties for the design or following the Delors Report, which was approved at the Madrid summit management of a single European currency? How did the technical in June 1989, it seemed Europeans really believed in our project and will - features of the banknote, printing, storage, transport and security, ing to fight for it without becoming discouraged by any setbacks. As of look from the point of view of a deputy governor? 1994, when the European Monetary Institute was born, central banks started to work on the production and issue of a common banknote for A. No. We never felt that there were insurmountable technical issues. The Europe. Contrary to pessimistic views, all the difficulties were overcome, launch of the euro was obviously a far-reaching political operation and its and economic and financial convergence were achieved, with independ - success depended essentially on the level of commitment of the partici - ence of the central banks from their respective governments, an agree - pants, of which there was no doubt. From this perspective, our role was ment on the exchange rate of each currency against the euro, the com - obviously to implement appropriate planning and preparation. mitment to locate the headquarters of the European Central Bank in Frankfurt am Main, etc. This all made it possible for a long await child to However, policymakers and central bank managers sometimes find cer - be born: the euro. tain technical aspects of banknotes somewhat remote, and sometimes we are surprised at the degree of detail and sophistication of the technol - Q. It has sometimes been said that the creation of the euro resulted ogy that goes into something which some people think is merely a piece in tensions between European countries, given the serious tempta - of paper, but as people who work in the sector say: «a banknote is not tion some countries might feel to take advantage of the situation and just a piece of paper». In the Eurosystem we were also aware that we had devaluate their currencies. How were the exchange rates between a sizeable team of top-notch specialists and professionals in banknote the various national currencies and the euro set? design, printing and management. It therefore seemed impossible that our teams would be unable to find reasonable solutions to any problem that A. Although it might be hard to believe, the way the exchange rates they came up against. between the euro and the national currencies were set did not cause any conflicts, as the European authorities were always in agreement on the The point was to be able to be assured that our specialists, with such a need to introduce the euro in the least distorting way possible for the vari - wide range of backgrounds and experience, would be willing to agree ous different economies. Against this backdrop, although the plan for the and reach a consensus within the set timescales, which were fairly introduction of the euro stipulated that the exchange rates between the short. The logistical aspects of the operation represented a challenge of national currencies and the ECU would be set on 1 January 1999, the the first order in view of the scale of the operation and the absence of Council of the European Union decided to agree the exchange rates existing references. However, the will to succeed was so huge and the before the stipulated date, and thus calm the foreign exchange market generosity of spirit so clear that nobody doubted the final outcome at and avoid speculative attacks against some of the currencies. The any time. exchange rates against the euro were announced in June 1998 based on the spot prices for the various currencies in the foreign exchange market at that time. That is to say, the exchange rates were not forced in any way, nor was the occasion taken to allow any country a competitive devaluation vis-à-vis the rest of the European Union. This is why no conflicts arose over the euro exchange rates.

Q. Why and how was it decided that banknotes and coins would be put into circulation a few years after the introduction of the scriptural euro?

A. As BILLETARIA’s readers are no doubt aware, producing and distrib - uting a new series of banknotes takes time. It is not a task that can be completed immediately. This is true in any country, so you can imagine the preparatory work required by a project involving the 12 countries in the European Monetary Union to ensure supplies of new banknotes and coins for over 300 million citizens. There was no wish to delay the estab - lishment of monetary union, but at the same time it was not possible to obtain such large volumes of cash quickly, given the need to produce the new banknotes and coins. An ingenious formula was arrived at in order to achieve these two objectives: the euro was defined as Europe’s offi - cial currency, with irrevocable exchange rates set against the various par - ticipant currencies, serving as legal tender for everything except cash payments. This strategy enabled us to gain the two years needed to pro - duce banknotes while between 1999 and 2002 the euro area’s economies recorded their accounts and settled their transactions in euros.

During this period, the twelve founding members of Monetary Union were working flat out to produce the 15 billion banknotes and 52 billion coins needed for the changeover. The banknotes and coins that were put into circulation in 2002 were manufactured by each of the countries to meet the projected needs. Today things are different. Countries no longer pro - duce all the banknotes they need individually, as the Eurosystem allo - cates production of the different denominations between the different central banks to exploit economies of scale and obtain supplies of euros efficiently. Jaime Caruana, Governor, and Gonzalo Gil, Deputy Governor (2000-2006) / Banco de España

BIllEtARIA no. 10 December 2011 5 Opinion Interview with Gonzalo Gil

Q. How was the design of the banknotes and coins arrived at? Are there any Spanish fea - tures in the banknotes? A human face had been almost de rigueur in previous bank - notes: were there discussions about putting a portrait on the banknotes, or was this a topic that was not given much importance?

A. How did we arrive at the final design of the euro banknote? As I said: talking, negotiating, and giving way on a lot of issues. When people ask me about the euro banknotes, the first thing I usually say is that it is a banknote that is impos - sible to understand unless you take into account that it was the result of a consensus. Why is there a five-euro banknote and why is there a five-hun - dred-euro banknote? Because for historical, sociological, cultural and economic reasons, some countries felt that having a five-euro bank - note was of the utmost importance, while for oth - ers it was essential to have a five-hundred-euro banknote. And the same is true of the sizes of the banknotes, the thickness of the paper, the type of ink, the technical features and the design ele - ments. The willingness to compromise on tech - nical issues helped us reach an agreement giving the image of union we were aiming for and make the banknote a common symbol.

Of course, the experts have always been in favour of including a human portrait on bank - notes, based on the results of psychological studies into how banknotes are perceived which support its inclusion. But this was a real - ly difficult case, as it seemed almost impossible to avoid at least part of the population identify - ing the face of the famous person with a par - ticular country or nationality. The decision not to include a portrait put a stop to what seemed like an interminable debate and so made it possible to make progress on details and elements of the banknote that responded to the general philosophy. In the end, the powerfully symbolic Uyuni salt lake (Bolivia) / Y. Barrera images of bridges, windows and doors made it possible to reach agreements that at times had seemed unattainable. given the tensions relating to sovereign debt (quite severe at the time of this interview), and the complicated situation of economic crisis, there is Q. the single currency eliminated currency risk within the euro area no doubt that the community institutions will be able to restore stability. and gave European citizens a powerful tool with which to compare Ultimately, the tensions will stimulate the Monetary Union towards recov - prices easily. How did this affect competitiveness and commercial ering the energy and responsiveness it has begun to lose in recent exchanges between the countries involved? years.

A. First of all, we should not forget that even before the euro, the Q. In this same context, do you not think that a country in which a lot European Union enjoyed free movement of goods, services and capital, of counterfeit banknotes are circulating will tend to lose credibility, which was already consolidating commercial and financial competitive - both internally and externally, and that this will have a negative effect ness. The big change that came with the introduction of the single cur - on investment rates and its ability to attract resources. And, that, by rency was that the authorities in the countries involved lost two basic contrast, a country’s having an effective anti-counterfeiting policy instruments of economic policy: interest rates and exchange rates. This could have a positive influence on creating a favourable economic meant that less competitive and inflationary countries could no longer climate? tackle their trade imbalances by devaluing their currency or cutting inter - est rates, therefore the imbalances inevitably ended up translating into a A. That is a very interesting question and not one that I had ever thought decline in economic activity. to ask myself. I need a moment to think about it. So, to answer I will take an extreme case: Can a country flooded with counterfeit banknotes sus - Nevertheless, I should also point out that European Monetary Union tain a high rate of economic growth? I doubt it. Even on the assumption itself, and the credibility of its institutions, in particular the Eurosystem, that the volume of electronic payments was significant. A country in which has brought about a step change in the growth potential of member the authorities fail to take steps to ensure the authenticity of currency is countries. Although it might seem a bit of a paradox at the moment, not one that inspires confidence, so investment and financing will tend to

6 BIllEtARIA no. 10 December 2011 Opinion Interview with Gonzalo Gil

A. I think it is always possible to reach a com - promise. The key is to be aware of the role assigned to us and the relative importance of the functions or tasks we have to perform. It is true that to a large extent the emergence of central banks is related to the advent of the issue monopoly in the modern age and that bank note issue has always been an impor - tant function of central banks. And profes - sional cash handlers make sure they remind us of this from time to time.

But, things have to be put in their proper con - text, and we should not forget that we are now in the second decade of the 21st centu - ry. Today, a central bank’s responsibilities reach far beyond cash, as the current financial crisis is reminding us every day. They are cur - rently almost entirely focused on tasks such as controlling inflation, financial stability, pru - dential supervision and advising governments and institutions at national and supranational level. Of course, the stability and smooth operation of the markets and payments sys - tems, in the broadest sense, are functions that the maximum authorities at central banks must attend to. Gonzalo Gil (left) and J. Darío Negueruela (right) / Banco de España My personal feeling is that on many occa - be held back. On this logic, one could argue that fighting counterfeiting will sions cash managers have felt themselves to be ignored by the upper have a positive effect on the nation’s economic climate. echelons of their respective central banks, perhaps unreasonably. Central banks are broad institutions and have shown themselves capa - Q. to an outside observer it may be surprising to see the huge dif - ble of taking on a variety of complex functions at the same time. Cash ferences that exist between central banks in terms of the role they is, and will remain, one of them, although I would ask for broadminded - give to cash-related tasks and the importance they attach to them. ness and perspective. Cash no longer plays the role in society that it did How do you interpret this difference? Should we not expect central a century ago. We have to adapt to new times and reinvent our mission banks to be more homogeneous in this regard? every day. It is not a question of whether a central bank pay more or less attention to cash, but whether society understand that the issues are A. It is true that although central banks have a monopoly of banknote addressed efficiently and reasonably. issuance, for both economic and historical reasons there are big differ - ences between the functions each performs. Alongside those that con - Q. Cash management at central banks has undergone huge —some duct activities involved in the cash cycle directly, from banknote production would say “revolutionary”— changes in recent years. Is this percep - and distribution through to the withdrawal and destruction of unfit coins, tible from the outside? there are also those whose model is based on minimal involvement of the central bank. Nevertheless, I think there is a common function that they A. It is true, cash management has been undergoing considerable all perform and that, moreover, we are witnessing the spread of a new changes and this process has been stepped up in recent years. But trend. The function that all central banks around the world perform is that again, I would like to underline the need to put things in their proper con - of fighting counterfeiting. This encompasses everything from issuing bank - text and remember that many other central bank areas and activities have notes that are difficult to reproduce and copy, to public information cam - also progressed by leaps and bounds. In any event, we should congratu - paigns on the security features of the banknotes in circulation. The gen - late those people who have risen to today’s challenges and applied new eral trend I am referring to is that of outsourcing cash activities. Central models of cash management: something that for many years had repeat - banks have focused on the primary goal of controlling inflation and imple - ed guidelines and values inherited from the past. menting monetary policy, and have tended to shrink budgets available for other activities. On this subject I would like to say that cost reduction should Q. And finally, we would like to ask whether you consider communi - be an objective as long as it does not jeopardise the issuing authority’s cation to be one of the issues central banks have yet to fully confront. ability to perform its basic role in meeting the country’s demand for bank - notes and coins and guaranteeing the authenticity and quality of the cash A. It is true that communication, and the new ways of managing informa - in circulation. tion, risk analysis, cost control, the application of new models to product technology and the automation of processes and security are some of the Q. People sometimes think that cash, which is in such widespread other fields where it is necessary to modify the approach and attitude. use by the general public, is one of a central bank’s basic tasks Nowadays, central bank employees are increasingly viewed as public ser - and that the institution ought to be close to citizens. Others main - vants responsible for the management of scarce public resources. tain that the role of a central bank should be focused more on its Professionalism, efficiency and rigour are essential features of their day- relations with public institutions and the banking sector. Is it pos - to-day work. And to tell the truth, it gives me satisfaction to see how this sible to find a reasonable balance between these two points of is also being implemented in this modern cash management area we have view, or do we always have to opt for one or other of these alter - been talking about. natives?

BIllEtARIA no. 10 December 2011 7 Opinion the first ten years of the euro banknotes The first ten years of the euro banknotes José Manuel González-Páramo Member of the Executive Board of the European Central Bank

I am very pleased to have the opportunity to con - rency. Although the relative share of cash as a means of payment has tribute to this special issue of BIllEtARIA, which diminished in favour of new means of payment, the use of cash as a store of value has increased. is dedicated to the tenth anniversary of the euro banknotes. Over the last ten years I have been in Since the cash changeover in particular, the Eurosystem has focused on the interesting position of being able to witness the need to continuously improve the production and issuance of euro banknotes in order to reap the full benefits of the common currency. The euro cash developments from the perspective of first step in this direction had already been taken in 2001, when there was both a national central bank (NCB) and, in par - a move from a system whereby each NCB procured all seven denomin - ticular, the European Central Bank (ECB). When ations of banknote, to one which pools the production of euro banknotes. the euro banknotes and coins were introduced on Now, each NCB does not normally procure more than two denomin - ations, which enables the Eurosystem to benefit from economies of scale 1 January 2002, I was a Member of the Executive and helps to ensure a degree of uniformity in the banknotes by reducing Commission of the Banco de España. In June the number of production sites for each denomination. Furthermore, 2004 I then became a Member of the Executive owing to the migration of banknotes from country to country as a result of Board of the ECB and was assigned responsibili - tourism or other activities, it was decided to assign responsibility for bank - note production to the NCBs on the basis of their paid-up share in the ty for three business areas, including the ECB’s capital, rather than on the basis of their own needs. Directorate Banknotes. In this article, I would like to discuss the challenges that the euro bank- The overall efficiency of euro banknote production will be further enhanced through the introduction of the Single Eurosystem Tender notes confronted us with during the first decade Procedure (SETP), which will ensure the equal treatment of all printing of their existence, as well as some of the lessons works participating in public tenders for euro banknotes and maintain a that we have learnt along the way.

The euro was adopted as a unit of exchange in 1999, but it wasn’t until three years later, with the introduction of euro cash, that the citizens of Europe had a tangible symbol of European integration. In order for the euro banknotes to be readily accepted, a smooth changeover was fun - damental, not only within but also outside the euro area, as many bank - notes of the legacy currencies were also used outside the euro area.

From the Eurosystem’s perspective, ensuring a smooth cash changeover involved three major challenges: i) the industrial challenge of producing more than 15 billion euro banknotes and 51 billion euro coins: ii) the logistical challenge of first planning and then implementing the cash changeover, together with banks, cash-in-transit companies, retail - ers and banknote equipment manufacturers in a short period of time; and iii) the communication challenge of familiarising euro area residents and professional cash handlers with their new cash and the changeover modalities.

The changeover went very smoothly, with the euro banknotes being well received from the outset. Since 2002 a further five Member States of the European Union (EU) have adopted the euro and have benefited from the lessons learnt during that changeover. In their case, the euro was brought into circulation under a “big bang” scenario, with a significantly shorter dual circulation period.

Over the first decade of their existence, demand for euro banknotes has been much stronger than had been anticipated on the basis of the past growth in demand for the legacy currency banknotes, as low inflation expectations have encouraged the public to adjust their cash holdings.

Demand has also been considerable among non-euro area residents, who are estimated to hold more than 20% of the euro banknotes in cir - culation. During the financial turmoil in 2008, there was a strong increase in demand for euro banknotes that originated largely from outside the euro area and thus demonstrated the confidence in the euro as a parallel cur - European Central Bank

8 BIllEtARIA no. 10 December 2011 Opinion the first ten years of the euro banknotes

European Central Bank resilient supply chain. NCBs with their own printing works or access to jointly procuring banknotes to meet their requirements through a competi - public-sector printing works have the right to opt out of the tender proce - tive tender procedure. dure and continue producing their share of euro banknotes at their own printing works. I believe that these developments, the aim of which is to boost efficiency by improving the division of labour within the Eurosystem, are very impor - A common stock management system for euro banknotes has also been tant. Many activities have huge fixed costs, and accepting that each NCB set up, with a view to coordinating the logistical stocks of the NCBs at the does not necessarily have to provide the entire range of services would Eurosystem level and creating a Eurosystem Strategic Stock. The strategic avoid any duplication of costs and increase efficiency. stock is to be available for use when the Eurosystem has insufficient logis - tical stocks to cover an unexpected increase in demand for euro banknotes Besides pooling their services, some NCBs specialise in testing cash or when there is a sudden interruption in the supply of euro banknotes. handling machines, as well as in assessing the quality of euro banknotes based on samples from across the euro area, while others have been So far, the main decisions on how to enhance the efficiency of the pro - entrusted with the task of developing and maintaining certain information duction and issuance of euro banknotes have been taken in a top-down systems for the benefit of the Eurosystem. manner by the Governing Council of the ECB. Notwithstanding the good progress that has been made, it is evident that, owing to different tradi - The further development of these initiatives is one of the future challenges tions, banking structures, payment behaviour, etc., there is not a one- faced by the Eurosystem. Likewise, the integrity of the euro banknotes size-fits-all solution for every aspect of euro cash management. Therefore, themselves should be preserved, as this is key to their wide acceptance. the NCBs have also followed a bottom-up approach, voluntarily joining The euro banknotes need to be upgraded regularly with innovative and forces and pooling some of their services. This is very much in line with user-friendly security features, so as to always remain a few steps ahead the Eurosystem’s mission statement, according to which “we are com - of the advances in reproduction technology. mitted to good governance and to performing our tasks effectively and efficiently, in a spirit of cooperation and teamwork”, and Organisational Owing to the overriding objective of having a smooth cash changeover, Principles, which state that “potential synergies and economies of scale several parameters were fixed in the specifications of the current series shall be identified and exploited to the extent feasible”. of euro banknotes. They had to be produced by 15 printing works and processed by the 12 NCBs that were to introduce the euro banknotes One example of this voluntary pooling of NCB services are joint informa - in 2002. Therefore, although they were state-of-the-art in the mid- tion systems for central bank cash management. Two systems, the Cash 1990s, their specifications had certain limitations. In this regard, a differ - Single Shared Platform (Cash SSP) and the Cash Electronic Data ent approach has been taken for the development of the second series Interchange (Cash EDI) have already been developed in order to improve of euro banknotes, which will be discussed by Ton Roos in this same the efficiency and security of cash flows, both within the NCB and issue of BILLETARIA. between the NCB and its customers, financial institutions and cash-in- transit companies. Currently, seven NCBs have joined the Cash SSP and In conclusion, during the first ten years of the euro banknotes, good two have joined the Cash EDI, and more will follow. progress has been made in several areas, and the ongoing high level of demand for the banknotes highlights the confidence in them. However, Another example, which is encouraging in view of our commitment to effi - maintaining their integrity and preserving the resilience and efficiency of ciency and competition, is that eight NCBs have joined forces and are the euro cash cycle will continue to be a challenge in the future.

BIllEtARIA no. 10 December 2011 9 Opinion the integrity of euro banknotes The integrity of euro banknotes

ton Roos European Central Bank

In line with its exclusive right to authorise the issue of euro banknotes 1 the European Central Bank (ECB) is mandated to ensure a smooth and efficient supply of euro cash, as well as to preserve the integrity of the currency. the integrity of the euro banknotes is ensured through research and development (R&D) in security systems, counterfeit deterrence and monitor - ing, and the application of a set of common quality and authentication standards to all stakeholders involved in the production and processing of banknotes. By extension, the objective is to preserve public confi - dence in the currency and this is achieved also with consistent communication.

In this article, it is described what the Eurosystem does to preserve the integrity of the euro banknotes.

BILLETARIA

Research and development

Like all central banks, the ECB has a duty to safeguard the integrity of its Counterfeit analysis, monitoring and international cooperation banknotes. Therefore, the euro banknotes must incorporate effective security features that can be easily recognised by the general public. Fur - As mentioned above, there is a strong correlation between R&D activities thermore, the Eurosystem must remain technologically ahead of counter - and the fight against counterfeiting. The Eurosystem closely monitors feiters by continuously improving these features for use in both the current advances in printing and reproduction technology that could be available and any future series of euro banknotes. Accordingly, the Eurosystem man - to counterfeiters, as well as the number of counterfeit banknotes seized. ages, coordinates and funds a wide variety of research projects in both the The counterfeits are analysed by the National Analysis Centres (NACs) in public and private sector. every country and the Counterfeit Analysis Centre (CAC) at the ECB, which coordinates technical and statistical information. The information stored in Originally, even before the launch of the euro banknotes in 2002, the main the CAC’s database is shared with national police forces and other bod - objective of the Eurosystem’s R&D activities was to develop an emergency ies involved in combating counterfeiting. The ECB works closely with response that could be used in the event that the integrity of the euro bank - Europol (the European Police Office), as well as with Interpol (the Inter - notes came under threat, i.e. an “emergency banknote” that could be print - national Criminal Police Organization) and the European Commission. ed and issued within a very short time frame. Cooperation on counterfeit deterrence also goes beyond the European However, the R&D strategy for protecting the integrity of the euro bank - level. The Eurosystem participates actively in the work of the Central Bank notes has evolved over the years and now focuses on a continuous devel - Counterfeit Deterrence Group (CBCDG) 2, which develops technologies that opment of security features, including their industrialisation and incorpora - prevent personal computers and digital imaging software from capturing tion into a fully originated banknote. This strategy is applied irrespective of or reproducing images of banknotes. The ECB hosts the International Coun - a new series being introduced, and aims at providing a selection of fea - terfeit Deterrence Centre (ICDC), which acts as the technical centre for the tures that fully comply with the Eurosystem’s requirements and that can CBCDG. The ICDC maintains a public website 3, which provides informa - be incorporated into an emergency response banknote or a future series tion and guidance on the reproduction of banknote images, as well as links of banknotes at any given point in time. to country-specific websites.

Another not so well-known factor in ensuring the integrity of the euro bank - Quality control in production notes is the protection of the intellectual property rights. Given the number of euro banknotes that are printed on an annual basis, the ECB may be an Today, euro banknotes (and coins) are legal tender in 17 EU Member States attractive target for patent trolls (entities that try to enforce their patents in and are also accepted in many other countries. Within the EU, there are 15 an aggressive way), even if only a fraction of the banknote cost is claimed printing works which are accredited to produce euro banknotes, nine paper in the litigation process. It is therefore essential that all intellectual property mills that are accredited to produce banknote paper according to a com - aspects are carefully evaluated throughout the development cycle. This has mon technical specification, and many other suppliers of inks, foils and been particularly important in the development of the new security features security threads. for the second series of banknotes.

1. See Article 128(1) of the Treaty on the Functioning of the European Union (TFEU) and Article 2. A group of 32 central banks and banknote printing authorities from around the world. 16 of the Statute of the European System of Central Banks (ESCB). 3. See http://www.rulesforuse.org

10 BIllEtARIA no. 10 December 2011 Opinion the integrity of euro banknotes

European Central Bank

In view of the wide variety of stakeholders involved, the Eurosystem has put Annual quality survey in place the necessary measures to ensure that the banknotes issued have the same visual appearance, are of the same quality in terms of the materials The Eurosystem conducts annual surveys on the quality of the euro bank - they are made from and are accepted not only by the public, but also by notes in circulation at the euro area level, which complement other measures vending and sorting machines throughout the euro area. Banknote produc - taken by the national central banks (NCBs) to assess and steer the quality at tion is monitored rigorously according to the quality management and controls the national level. The results obtained can be used to analyse developments defined by the Eurosystem. The acceptance or rejection of euro banknotes in the quality of banknotes from one year to the next and, if necessary, as a either at printing works or subsequently by cash departments is based on basis for addressing sorting policy issues and identifying specific measures Eurosystem criteria, and on this basis, the ECB has implemented a Eurosys - to be taken by the NCBs in order to maintain a high level of quality. tem quality management framework that covers the entire supply chain.

Security accreditation Quality of the euro banknotes in circulation In order to ensure that the general public continue to have confidence in In 2010 the overall quality of the euro banknotes in circulation was euro banknotes as a means of payment, it is necessary to establish a set of deemed to be “good” for the €20, €50 and €100 banknotes and minimum security rules. To this end, the Eurosystem has introduced an increased slightly to “satisfactory” for the €5 and €10 banknotes. accreditation procedure to confirm the compliance of the security arrange - ments at manufacturing sites where “euro secure items” 4 are produced, The results of the public opinion poll show that public satisfaction processed and stored. All entities involved in such activities are obliged to with the condition of the euro banknotes is stable. In 2010 76% of comply with the security rules defined by the Eurosystem and obtain the euro area citizens were either “satisfied” or “very satisfied” with the necessary security accreditation. 5 overall condition of the euro banknotes in circulation. Nevertheless, only 37% were satisfied with the condition of the €5 banknote, while Other relevant aspects of the integrity of euro banknotes 75% were satisfied with the condition of the €50 banknote.

Recirculation of banknotes

All euro banknotes recirculated via ATMs or over the counter at branches Environmental and health and safety accreditation procedures of credit institutions are checked for authenticity and fitness, which is an important means of reassuring the public of the banknotes’ integrity. Cash The Eurosystem has also recently defined environmental and health and handlers are required to follow a set of procedures 6 to ensure that the euro safety accreditation procedures for the production of euro banknotes. 7 A banknotes they have received, and which they intend to put back into cir - manufacturer may only carry out a euro banknote production activity if it culation, are checked for authenticity. In this way, banknotes are declared has been granted health and safety and/or environmental accreditation for fit for use and any counterfeits are detected. that activity.

Conclusions

4. “Euro secure items” means the first series of euro banknotes and their components and other The integrity concept applied to euro banknotes is about building and main - related materials or information requiring security protection, the loss, theft or publication of taining TRUST in the currency. A currency that is trusted and stable is a which could damage the integrity of euro banknotes or assist in the production of counterfeit precious public good. For the public to have confidence in the currency, euro banknotes or their components. they must also be able to trust that euro banknotes are readily exchange - 5. See Decision ECB/2008/3 of the ECB of 15 May 2008 on security accreditation procedures for manufacturers of euro secure items for euro banknotes. able, that the number of counterfeits is minimal and that the supply and 6. As specified in Decision ECB/2010/14 of the ECB of 16 September 2010 on the authenticity physical integrity of the banknotes will meet the public demand at all times. and fitness checking and recirculation of euro banknotes. To conclude, the Eurosystem will continue to ensure that the euro bank - 7. See Decision ECB/2011/8 of the ECB of 21 June 2011 on the environmental and health and notes remain a reliable, valuable and valued means of payment in the euro safety accreditation procedures for the production of euro banknotes. After a three-year tran - sitional phase starting in 2013, the Decision will be implemented in 2016. area and beyond.

BIllEtARIA no. 10 December 2011 11 Opinion the singularity of the euro banknotes The singularity of the euro banknotes

Antti Heinonen CBCDG, European Central Bank J. Darío Negueruela Banco de España

the issuance of the euro banknotes ten years ago was a major logistical, production and communi - cations challenge that necessitated new solutions for various aspects of traditional banknote launch scenarios. Similarly, after the launch of the euro banknotes, new solutions were required in order to reap the full benefits of the common currency. In the meantime, some of the solutions and best practices implemented by the Eurosystem have now become widely accepted and used in the cen - tral bank community. In this article, we will briefly elaborate on the impacts that the euro banknotes have had on central bank cash management and the banknote industry in general.

Preparations for the production and issuance of the euro banknotes start - ed back in 1992. Over the almost 20 years since then, the technological environment in which banknotes are produced and issued has changed significantly. Therefore, we cannot claim that the impacts presented below have resulted solely from the introduction of the euro banknotes. Evident - ly, central banks outside the euro area have also made use of the new opportunities available and have independently come to similar conclusions.

Impacts on the banknote industry European Central Bank Traditionally, central banks in general have met their banknote requirements either through commercial tenders or through their public printing works. This part of their core business and have either outsourced (United Kingdom, was also the case the EU national central banks (NCBs). Some used com - Finland and Sweden) or closed (Norway) their printing works. It remains to mercial printing works, while others had in-house or NCB/publicly-owned be seen how things will develop in this regard in the future, but there has printing works. A total of 15 printing works, 9 paper mills and 20 or so sup - clearly been a change in the collaboration between banknote printers and pliers of other raw materials and security features were therefore involved in the central bank community, with new approaches having been developed the production of the euro banknotes. In order to ensure that euro banknotes for analysing competitive aspects, relative costs, and tendering and work - of the same denomination were identical in spite of the different production ing procedures. equipment, techniques and processes used, stringent technical specifica - tions and a common quality management system were needed. Further - Involving stakeholders in launch preparations more, quality and security accreditation procedures were established for manufacturers of the banknotes. More recently, environmental and health In the past, decisions regarding the launch of new series of banknotes tend - and safety accreditation procedures have also been introduced. There has ed to be taken independently by the NCBs. Larger countries normally issued been a lot of interest in these procedures within the banknote community one or two denominations at a time, while smaller countries often launched and, to some extent, they have become a reference point for other central the whole series simultaneously. Prior to the launch, the NCBs informed banks in establishing their production requirements and in their communi - banks of the distribution schedule for the new notes and provided bank - cation with banknote manufacturers. In addition, the accreditation proce - note equipment manufacturers with the opportunity to test the banknotes dures have been used by the banknote industry in their marketing activities. for anything ranging from a few weeks to a couple of months.

Over the last two decades, the NCBs have been continually assessing Of course, this approach was not going to be suitable for launching a new which elements should belong to their core business. In terms of banknote currency in 12 countries at the same time, with a short period of dual cir - printing, the trend was to have an in-house or NCB/publicly-owned printing culation. Therefore, all stakeholders, including banks, retailers, cash-in-tran - works. However, for the production of euro banknotes, a decentralised sit companies, the vending industry and consumer organisations, were to 1 pooling system was introduced. Given that this system has been fully sat - be involved in the preparations from the early stages. The first meeting with isfactory, some NCBs have concluded that banknote printing is no longer stakeholders at the European level was held in 1997, more than four years before the launch. Meetings at the national level also took place around the 1. Decentralised pooling means that each NCB procures only a limited number of denominations same time. During these meetings, several ideas for the launch were put to meet the need for those particular denominations throughout the euro area. forward.

12 BIllEtARIA no. 10 December 2011 Opinion the singularity of the euro banknotes

For the changeover to be smooth, the euro banknotes needed to be imme - to outsource various tasks to third parties, and several non-euro area cen - diately and widely accessible to the general public on 1 January 2002, or E- tral banks have already made great progress in this respect. day. The requests of banks and ATM manufacturers were therefore con - sidered openly and the relevant technical specifications of the euro With regard to the management of the cash cycle, the Eurosystem has banknotes were even released to the device manufacturers in 1999. Fur - implemented new policies aimed at ensuring a smooth supply of euro bank - thermore, euro banknotes produced in the various printing works were notes and at maintaining the integrity of the banknotes, i.e. ensuring that available for centralised testing 20 months before the changeover in spring only genuine and good quality banknotes are in circulation. 2000, and again in autumn 2000. From the beginning of 2001, manu - facturers could test their devices at the NCB test centres and after the In order to enhance the fight against counterfeiting, a multinational system “frontloading” step of the banknote distribution process, they could test was set up for managing technical and statistical data on counterfeits, them on their own premises. Since the launch of the euro cash, the including information provided by national police forces. Despite the com - Eurosystem has also organised regular plenary and bilateral meetings with plexity of the system, it has been a major success and has opened up new banknote equipment manufacturers. opportunities for other central banks.

The involvement of stakeholders in the development of the launch scenario Much the same can be said of the concerted policy of checking the “fit - has now become state-of-the-art, with testing by the vending industry and ness” of the euro banknotes. Although the initial costs of implementing this ATM manufacturers also being seen as a crucial factor for the successful policy were high, owing to the need for large number of banknotes for introduction of a new series of banknotes. replacement, it has been extremely worthwhile, as it is now possible to carry out the technical fine-tuning that is necessary for reducing costs, without Another important stakeholder in the launch of the euro banknotes was the detriment to the banknotes’ fitness level. European Blind Union (EBU) and the respective national associations. The EBU had a say on the differences in size between the various denomin - Owing to the range of traditions among the NCBs there is no “one-size- ations, and one year before the changeover, it was provided with sets of fits-all” cash management solution in the euro area. However, in order for sample banknotes for training blind and partially-sighted people. It was also third parties to be able to reap the benefits of the common currency and given funding for the provision of special measurement devices. Similarly, for there to be a level playing field between banks in the euro area, the representatives of vulnerable groups have been involved in the develop - Eurosystem Cash Recycling Framework was set up. The possibility of recy - ment and testing of new features for the second series of euro banknotes. cling euro banknotes has enabled banks and other cash handlers to sup - ply the currency more effectively and more cost efficiently. However, the A prerequisite for the smooth euro cash changeover was that the money authenticity and fitness of the recycled banknotes should be properly had to be available where necessary on E-day. The solution was to dis - checked in order to ensure their integrity. tribute the euro banknotes and coins in two steps known as “frontloading” and “sub-frontloading”, with banks receiving the new cash four months To this end, the Eurosystem has developed a test procedure to allow prior to E-day, which in turn could distribute it to retailers one month before - manufacturers of counterfeit detection devices to test them on a wide hand. In volume terms, the majority of the banknotes and almost all the range of counterfeit euro banknotes. Information on the devices tested is coins were frontloaded. Although the frontloading of cash is not normally published on the website of the European Central Bank in order to help necessary when introducing a new series, the launch of the euro banknotes banknote users choose the one that best suits their needs. This informa - and coins showed that this kind of exceptional operation can be carried tion is not only of use to banks and third parties within the euro area, but out smoothly. also to parties around the world who are considering recycling their own banknotes. Today, there is no doubt about the importance of prior collaboration with all stakeholders when launching a new currency. It is no longer seen as a mat - In conclusion ter solely for central banks; instead it is considered to be a notable social change that affects a multitude of sectors and has to be carefully planned. It is an intangible element that is difficult to measure, but the euro has It is not just the importance of the new banknotes being accepted by the undoubtedly changed the behaviour of the chief cashiers within the euro area, general public that is recognised, but also that, with adequate planning and which, given their relationship and collaboration with colleagues outside the the commitment of all stakeholders, the most complex launch scenario can euro area, has in turn influenced the international central bank community. be successful. Within the euro area, the ongoing sharing and reporting of information forces Communications on banknotes the chief cashiers to be part of a community in which they are all at some point in a situation of asking for or receiving help. This has given rise to a Several important aspects of the Euro 2002 Information Campaign and the new type of collaboration whereby reasons are provided even for any excep - campaigns for subsequent cash changeovers have had an impact on the tional measures to be taken, owing to the policy of transparency of infor - communication of information on banknotes in general. Given that this issue mation. The concept of confidentiality has also had to be revised, as several of BILLETARIA also includes an article devoted to the Eurosystem’s com - topics can, and sometimes have to, involve a number of colleagues, which, munication policy, only two aspects will be mentioned here: i) the campaign at the same time, has brought about improvements in terms of efficient slogan “the EURO, OUR money”; and ii) the catchphrase “FEEL–LOOK– management, cost savings and quality. Without doubt, this new approach TILT”, which is used to remind people how to check the security features of has been transmitted to and is being followed on a larger scale in the inter - the banknotes. These expressions have been so successful that, with some national context. minor adjustment, they have even been put to good use in several bank - note information campaigns outside the euro area. This is not to mention one of the main paradigms that was eliminated through the introduction of the euro, namely the cast-iron link between Management of the cash cycle banknotes and state or nation. The reality of having created a system for sharing seigniorage, reached agreement on the international redistribution The NCBs play different roles in the cash cycle, depending on the respec - of banknotes and established strategic stocks for use in exceptional cir - tive country’s history, economy, geography, banking structure, payment cumstances have shown that a different way of operating is possible. The habits, etc. Accordingly, they all have a different set-up, ranging from just a empirical demonstration that some dreams can be realised has opened the head office to an extensive branch network. Over the years, developments door to experiments that previously would never have been contemplated in banknote processing technology have made it easier for central banks in other regions of the world.

BIllEtARIA no. 10 December 2011 13 Opinion the ongoing harmonisation of the Eurosystem’s cash policy The ongoing harmonisation of the Eurosystem’s cash policy

Helmut Rittgen Deutsche Bundesbank

the guiding political principle in Europe is charac - al framework conditions, such as the structure of the banking industry, the terised by a strong desire for decentralisation, as (cash) infrastructure or the specific payment habits of consumers. reflected by the reiteration of the principle of sub - Harmonisation from the point of view of the banking industry sidiarity in the treaty on European Union. For example, its preamble states that “decisions are The stance of the banking industry is very heterogeneous. Regardless of [to be] taken as closely as possible to the citizen the divergence in national cash cycles and in the related tasks that used to be carried out by the respective NCBs, it was not long after the introduction in accordance with the principle of subsidiarity”. of the euro cash that calls were made for a “Single European Cash Area” therefore, the Union shall act only “if and in so far (SECA). For the banking industry, this means all euro-area central banks as the objectives of the proposed action cannot be should provide a basically harmonised range of services. In 2006, the Euro - pean Payments Council (EPC) presented the Eurosystem with a “wish list”, sufficiently achieved by the Member States, either which was mainly characterised by the diverse nature of the demands being at central level or at regional and local level...” (Arti - made by the banking associations within the euro area. In 2007, based on cle 5.3 of the treaty on European Union). the “wish list” the so-called “Roadmap for more convergence of NCB cash services” was developed, which aimed at further harmonisation in cash payment services within the Eurosystem. From the start, the Eurosystem has followed this guiding principle. Even back when the euro cash was introduced in 2002, the Eurosystem’s “com - These calls for harmonisation have already borne fruit. For example, the mon fee policy” harmonised the basic cash services that are provided by Eurosystem has agreed to harmonise by means of minimum requirements all national central banks (NCBs) free of charge. In addition, NCBs may pro - the packaging units for standard services, in which banknotes are paid in vide other fee-based services in order to meet the needs of market partic - and out. Furthermore, all NCBs have undertaken to accept coin deposits in ipants or offer a range of services that complies with the traditional role of at least one of their branches (as of 2008) and to grant all euro-area credit the central bank in the cash cycle. institutions access to their cash services (as of June 2007). Since the begin - ning of 2011, banknote deposits and withdrawals in different orientations Tasks relating to the standard “European” basic services, as well as special have been offered by all NCBs as a standard service. This harmonisation operational tasks to be carried out at the national level, are allocated with - process is following a development path initiated by certain NCBs some in the Eurosystem in accordance with the stipulated principle of subsidiar - years ago. The Eurosystem as a whole, and thus market participants too, ity. Consequently, the NCBs are in a position to accommodate the nation - therefore benefit from the innovative efforts of individual NCBs. In the near future, the electronic transmission of deposit and withdrawal data, which has been possible in Bel - gium and Germany for several years, will be intro - duced for all credit institutions within the Eurosys - tem. Nevertheless, there still remain differences at the national level that require a customized range of services from the respective NCB and should not be harmonised.

In the meantime, the banking industry appears to have adopted a new stance, particularly in Ger - many. Differences in the national cash cycles are being taken into account, i.e. the “one-size-fits-all” strategy is no longer being pursued. Instead, the new idea that Eurosystem NCBs could compete with each other is gaining ground. For example, the 2009 national Cash Plan of the German Banking Industry ( Die Deutsche Kreditwirtschaft ) states: “Standardisation does not mean indiscriminate uni - formity. In our view, it means finding a balance of services and processes which represents a clear improvement for the recipient while leaving room for individuality to take account of national speci - ficities.” This notion of promoting competition is fur - ther underlined by the statement: “Only healthy competition will motivate national central banks to European Central Bank improve their services.”

14 BIllEtARIA no. 10 December 2011 Opinion the ongoing harmonisation of the Eurosystem’s cash policy

Recycling of banknotes

The perhaps most significant development for market participants concerns cash processing itself. In many Eurosystem countries, credit institutions used to be able to reissue banknotes via ATMs without involving the NCB beforehand checking them for fitness and authenticity. Owing to the rise in the use of newly developed bank - note processing systems with efficient banknote-accept - ing sensors (e.g. cash recycling machines), it became necessary to set common minimum standards for pri - vate banknote recycling. As a result, the Governing Council of the European Central Bank (ECB) adopted the “Framework for the detection of counterfeits and fit - ness sorting of euro banknotes by credit institutions and professional cash handlers” at the end of 2004.

The implementation of this framework varied considerably across the euro- countries and was not always legally binding. Consequently, the harmonisation process was temporarily put on hold and only resumed when Council Regulation (EC) 1338/2001 was amended by the Euro - pean Commission at the end of 2008. The changes to Boats / JDN this Regulation included extending the group of addressees and supplementing the legal obligation to retain counterfeits Standardisation of banknote packaging by an obligation to check the authenticity of the banknotes. With regard to banknote checking, the amended Regulation refers to the ECB’s frame - In order for cross-border cash transports to be cost-efficient, there is a lot work. On this basis, the ECB adopted a decision on 16 September 2010 to be said in favour of harmonising the packaging methods. Owing to the which placed the Framework on a legally binding basis throughout the large number of different packaging methods for standard services of vary - Eurosystem. ing volume within the Eurosystem, market participants wishing to carry out cross-border transports are unnecessarily obliged to hold and store empty Cross-border cash transports containers for such transports. Although it would therefore make sense to harmonise the packaging methods, the question arises as to whether Mur - cia and Neubrandenburg, for example, actually need to use the same meth - Against the background of greater market integration and the opening up ods, as it may safely be assumed that there will never be any direct trans - of NCBs to foreign credit institutions, a growing number of market partici - ports made between these two places. pants also wanted to take advantage of these possibilities. Nevertheless, border barriers are still in place; not for individuals, but for cash-in-transit The Eurosystem has agreed on four packaging methods for cross-border companies (CIT) if they are transporting cash across borders escorted by cash transports, namely cardboard boxes (though only for withdrawals), safe armed guards. Firearms law, as well as many security requirements relat - bags, sealed bags and reusable plastic boxes. The NCBs are now required to ing to such transports, are subject to national legislation and still vary great - offer one of these standardised packaging methods to their foreign customers, ly from country to country. but may continue to use other packaging methods in transactions with nation - al market participants. However, owing to the non-discrimination rule against The European Commission therefore prepared a “Regulation on the pro - foreign market participants, the NCBs are obliged to accept, upon request, the fessional cross-border transportation of euro cash by road between euro- packaging methods offered to national market participants. Consequently, area member states”. The aim of the Regulation is to facilitate intra-Euro - the practical impact of the standardisation has been rather limited. pean cross-border transportations of cash by road. The Regulation proposes time-limited licences – including vehicle monitoring – for CITs Harmonisation versus innovation operating on a cross-border basis. Such a licence would refer primarily to the security of the transports rather than companies’ solvency position. Only things that have already been developed and tested in the market can Therefore, the licence would be subject to a number of conditions (includ - be harmonised. It follows that a harmonisation process needs to be pre - ing armoured vehicles, firearms, protection and training of security staff) ceded by an innovation process. In order to minimise the risk to the sys - that go beyond the current national regulations. tem as a whole, it makes sense to only introduce innovations locally or for certain purposes. Given its diversity and range of market structures, the According to a study carried out by the European Commission, there are Eurosystem is particularly well suited to this approach, as experience has only a few regions in Europe, e.g. the border areas between France, Ger - shown. For example, multi-denomination processing was tested in only a many and the Benelux countries, between Spain and France or Portugal, few countries before being launched on the market. The same approach between Austria and Germany and between Austria and Slovakia or Italy, was taken with electronic access and certain packaging methods. Such a where cross-border cash transports already take place and could gain in decentralised innovation process should be encouraged in the future. economic importance in the future. Cross-border cash transports are esti - mated to constitute around 1-2% of the transports carried out within the The harmonisation process in Europe, which, according to the preamble respective countries. It is highly questionable whether the standardisation of the Treaty on European Union, is aimed at “creating an ever closer union of cash transport regulations will lead to a rise in cross-border transports, among the peoples of Europe”, is well under way. The same Treaty, how - as the provisions of the Regulation are extremely bureaucratic and almost ever, also refers to the principles of “citizen-friendliness”, “subsidiarity” and universally more stringent than the current national regulations for cash “proportionality”, which sometimes appear to fade into the background. transports. Furthermore, other constraints will continue to remain, such Any harmonisation process that ignores Europe’s diversity runs the risk of as language, trading practices and working conditions. overshooting the mark.

BIllEtARIA no. 10 December 2011 15 Opinion the circulation of euro banknotes outside the euro area The circulation of euro banknotes outside the euro area Stefan Augustin Oesterreichische Nationalbank

Since the launch of the euro, the total value of and it rose even further in the last quarter of 2008 when the financial crisis banknotes in circulation has practically quadru - erupted. The maximum value of the banknotes circulating outside the euro area can be assumed to be equal to the difference between the estimated pled, rising from 221 billion euros in January 2002 and real value of the banknotes in circulation, i.e. the amount of banknotes to 847 billion euros at the end of June 2011. this that cannot be explained otherwise. Moreover, it is thought that national impressive increase reflects the unbroken rise in banknotes for a value of approximately 50 billion euros (mostly German marks 2) are still in circulation abroad. Therefore, banknotes with a value of up demand, not only from the more than 300 million to 330 billion euros may be circulating outside the euro area. citizens of the euro area, but also from citizens of neighbouring countries and regions who use Estimating the minimum value of euro banknotes in circulation the euro as the currency in which to make pay - outside the euro area ments or keep their savings. last but not least, An alternative approach to determining the value of the euro banknotes in cir - euro banknotes are in demand from tourists from culation is to base the estimate on the net shipments of euro banknotes by all around the world. monetary financial institutions (MFIs) to destinations outside the euro zone.

Although precise statistics on the Chart 1 : Estimated and observed growth in cash in circulation between 1991 and mid-2011 (seasonally adjusted figures) 1 value of euro banknotes in circula - tion outside the euro area are unob - EUR billion tainable, it is possible to offer approximate figures. According to the estimates that will be outlined below, the total value of euro bank - notes in circulation outside the euro area is probably somewhere between 113 billion and 330 billion euros. The true figure is likely to be at the upper end of this scale, as the estimated shares of the Deutsche Bundesbank and Oester - reichische Nationalbank alone in the circulation of euro banknotes out - side the euro area come to approx - imately 200 billion euros. Chart 2 : Net shipments of euro banknotes to destinations outside the euro area in the period Dec. 2001-Jun. 2011 Estimating the maximum value of the euro banknotes in cir - culation outside the euro area

Estimates have been made based on the premise that the difference between the estimated progression of the total value of national bank - notes in circulation and the value of euro banknotes in circulation can be explained by the outflows towards countries outside the euro area (See Chart 1).

At the end of 2003 the value of banknotes in circulation had exceeded the estimated level based on an extrapolation from demand for national banknotes. Since then demand for euros has been strong,

16 BIllEtARIA no. 10 December 2011 Opinion the circulation of euro banknotes outside the euro area

The value of net shipments stood at 113 billion euros at the end of June Assets denominated in foreign currency in South-East Europe 2011, according to data provided voluntarily by the MFIs in the euro area to their respective central banks. This figure only includes shipments by The use of foreign currency, particularly the euro, is a very widespread MFIs and does not include outflows relating to tourism or remittances by phenomenon in South-East Europe and as such a factor of major rele - migrant workers to countries outside the euro area. These flows probably vance in a number of policy areas. This is why, between October and exceed those by MFIs, so this figure sets the minimum value, which cor - November 2007 the OeNB began to run semi-annual surveys on foreign responds to 13% of the value of banknotes in circulation at the end of currency holdings in five European Union Member States (Bulgaria, the June 2011. Czech Republic, Hungary, Poland and Romania, plus Slovakia until 2009) and in five potential candidate countries for EU membership (Albania, The European Central Bank (ECB) estimates that, overall, the value of the Bosnia and Herzegovina, Croatia, the Former-Yugoslav Republic of Mace - banknotes in circulation outside the euro area represents between 20% donia and Serbia). and 25% of the total value of euro banknotes in circulation 3. This would put the value of euro banknotes circulating outside the euro area at between Chart 4 shows extrapolations of the value of euro banknotes in circulation 170 and 212 billion. Here too the upper figure seems to be the more real - in these countries. One effect of the recent financial crisis was the massive istic, given that the Deutsche Bundesbank estimates that its share is around withdrawal of cash deposited in credit institutions due to fear of a collapse 160 billion euros (approximately 45% of the net 4 issuance of euro bank - of the banking system. On average, only one in four customers paid all or notes allotted to the German central bank). part of the money they had withdrawn back into their bank. Customers used most of the savings they had withdrawn to finance consumption or Within the Eurosystem, Germany, Austria and France are the main suppli - to maintain their standards of living. During the process, the volume of euro ers of euro banknotes to countries outside the euro area, and the main banknotes in circulation contracted from 13 billion euros, in the spring of recipients of inflows. Whereas in the case of Deutsche Bundesbank the 2008, to 6.7 billion euros, in the spring of 2011. outflows towards other countries exceed inflows, the case of Austria is the opposite. Given Austrian banks’ strong focus on the countries of central, Chart 4: Estimated value of the cash in euros in circulation in central, eastern and south - eastern and southeast Europe, a considerable volume of banknotes return - east Europe (lower limit) ing to the euro area is channelled through the Oesterreichische National - bank (OeNB).

Net euro banknote issuance in Austria

Austria is one of the most cash-intensive countries of the euro area. At the same time, the net accumulated issuance of euro banknotes by the OeNB has declined continuously, with the exception of the period of the financial crisis. In cumulative terms, net issuance was negative at the end of June 2011, with a value of -6.8 billion euros. However, offsetting lodg - ments and payments by non-residents in the euro area turned this nega - tive figure into a net issuance of 27 billion euros (see Chart 3). In these first nine and a half years since the launch of the euro, outward flows of euro banknotes from Austria to countries not belonging to the monetary union reached at least 50 billion euros. Over the same period, inflows of euro banknotes from countries outside the euro area towards Austria, processed and recycled by the OeNB, came to a total of 83 billion euros. These figures suggest that the OeNB has behaved like a cash hub link - ing the Eurosystem and the economies of central, eastern and southeast Europe. Source: OeNB Euro Survey. Note: Projections per capita refer to the population older than 14 years. Due to underreporting depicted values represent the lower bound of actual euro cash holdings of households in the Chart 3: Observed and estimated variation in net euro banknote issuance in Austria . region.

Given the nature of banknotes as an anonymous means of payment and store of value, it is difficult to determine precisely where they have ended up. Nevertheless, based on the information drawn from various sources, it can plausibly be maintained that the total value of euro banknotes kept out - side the euro area is around 20-25% of the total value of banknotes in cir - culation.

1. The estimate from the fourth quarter of 2000 onwards uses the model presented in Fischer, B., Köhler, P., Seitz, F. (2004), The Demand for euro area currencies : Past, present and future , European Central Bank, Working Paper No. 330. 2. The outflow of banknotes other than those denominated in German marks from countries of the euro area could be between 5 and 15 billion euros. 3. European Central Bank (2011) July; The international role of the euro , page 36. 4. Accumulated differences between monthly lodgements and withdrawals of euro banknotes.

BIllEtARIA no. 10 December 2011 17 Opinion the euro (banknotes and coins) as seen by European citizens The euro (banknotes and coins) as seen by European citizens Vicente Ventura European Central Bank

Banknotes and coins are one of the most important identity markers in people’s daily lives. On the euro banknotes, the images of European Central Bank

maps, bridges and windows portray the spirit the same currency goes beyond economics. The notion of sharing is fun - of openness and cooperation in Europe. At the damental, as it can be traced back to the earliest efforts to rebuild Europe same time, the national side of the euro coins, in the aftermath of the Second World War. It is also present in Jean Monnet’s proposal that the States of Europe should form a “European which is different and specific to each country, entity”. Sharing is at the heart of the creation of an “ever closer union”, as is an example of European citizens being “unit - articulated in the Treaty of Rome in 1957, just as it is foundational to the ed in diversity”. Certainly, the relationship creation of “an area without internal frontiers”, as proposed in the Single European Act in 1987. between the euro and national identities is a two-way thing. The concept of sharing was then realised on 1 January 2002, when 12 nations abandoned their national currencies in favour of a shared European currency, the euro. It’s European, trusted, practical and shared… …but it’s not there yet as an identity marker The euro banknotes and coins, which are the face of the common cur - rency, were introduced on 1 January 2002. This was one of the most European citizens agreed to give up their national currencies in 2002, but important events in the history of European integration, as the euro is now some still feared the loss of a basic element of their national identity. The not only the most tangible expression of the common monetary policy, but information campaign relating to the cash changeover therefore highlight - also an icon of European identity. Citizens value the euro banknotes and ed the euro as a symbol of European identity, one which could transcend, coins as a reliable means of payment and as a stable store of value, both but not diminish the importance of, the national dimension. To demon - in the euro area and beyond. In terms of value, euro banknotes have the strate that the introduction of a common currency would not affect local largest circulation at the global level and up to one-quarter of their circu - cultures, the two were depicted as coexisting, for example, on the nation - lation value (€850 billion) is in circulation outside the euro area, in particu - al side and the (common) European side of the euro coins. lar in its neighbouring regions. Traditionally, the images on banknotes and coins have been chosen as Surveys have established that citizens trust the euro banknotes and coins. such because they are reminiscent of the historical and local traditions of Trust is also a key factor in information provision. The national central the nation state in question. This was not the case for the euro banknotes, banks have always been regarded as the most trustworthy source of however, as the aim was to draw attention away from national identities. information on the euro and issues related to the cash changeover in EU The information campaign therefore made no specific reference to any Member States adopting the euro. As soon as citizens start to use the particular European nation state. The images on the euro banknotes and cash, they rarely think beyond the notion that the euro banknotes and coins show that the European identity is in the making and they will pre - coins symbolise value and are a medium of exchange. For example, they sumably continue to mirror its ongoing development. do not make a habit of checking the authenticity of the banknotes, i.e. they do not usually pay much attention to the banknotes’ security fea - Frequently asked questions by the general public tures. This confidence may be attributable to the very low counterfeit fig - ures and the trust that citizens have in the issuing institutions. The European Central Bank (ECB) receives questions and feedback from the general public on issues related to the euro banknotes and coins via Recent research has also shown that European citizens believe the euro its contact e-mail address: info@ecb.europa.eu . The issues raised gener - banknotes and coins are a practical means of making low-value pay - ally fall into two categories. First, approximately two-thirds of all the ques - ments, for which cash settlement is the quickest and most economic tions received are requests for authorisation to use images of the bank - method. They facilitate the immediate and final settlement of debts. notes and coins for professional purposes, e.g. for producing advertising Sharing the euro across countries makes travelling and price comparisons or didactic/educational materials. Second, there are questions on general much easier. Banknotes and coins are also not subject to the problem of aspects of the euro banknotes and coins, such as: identity fraud and are always an accepted payment method that is made possible through the large network of ATMs. Last but not least, the euro — what they are made of, their durability or life span, how they can be banknotes are appreciated worldwide as a store of value, as highlighted tracked, the lettering in serial numbers and the purpose of serial numbers; by the fact that, during the financial turmoil of 2008, citizens converted — what to do with damaged or mutilated banknotes; their bank account holdings into the trusted central bank money. — circulation figures for the banknotes and coins; — potential improvements to the features of the banknotes; The euro banknotes and coins are not only valued for their practicality, — why high-denomination banknotes (e.g. €200 and €500) are not however. The fact that cash payments are made in the same currency by accepted by certain retailers and, to a lesser extent, why we do not all 331 million citizens of the euro area and that all prices are expressed in have smaller denominations (e.g. €1 and €2 banknotes).

18 BIllEtARIA no. 10 December 2011 Opinion the euro (banknotes and coins) as seen by European citizens

Households and firms

Surveys carried out by the ECB among households and companies show that, in the euro area in 2008, the value of cash transactions was still between 1.5 and 2 times the value of all electronic payments. Cash seems to be the most preferred means of payment for transactions below €100, with a considerable number of citizens (20% of respondents in the coun - tries surveyed) even paying in cash for transactions up to €1,000. In Austria, Italy and Spain, people use cash more often and pay in cash for larger pur - chases, while in France and the Netherlands cash is used the least.

Cash is used most widely in the hotel and restaurant sector, followed by the retail and wholesale sector. It is in these sectors that companies pay most of their expenditure in cash. Overall, however, it can be concluded that cash payments only constitute a small share of companies’ expenditure. Untitled / J. Moreno

Quality of the euro banknotes ■ The more cash handlers are informed about the security features of the banknotes, the more they perceive them as secure. Euro area citizens are generally satisfied with the quality of the euro bank - ■ The four security features that are checked most often by cash handlers notes in circulation. Banknotes becoming worn, soiled or creased quickly are: the feel of the paper and the raised print (74%), the security thread are the main reasons for any dissatisfaction with the quality. In general, the (46%), the watermark (44%), and the hologram (37%). €50 banknotes are considered to be in better condition than the €5 bank - ■ Almost 50% of cash handlers use some sort of device to check the notes. The latter tend to wear out more quickly since they are often authenticity of the banknotes. passed from hand to hand in the form of change. From a socio-demo - graphic point of view, people’s satisfaction with the condition of the euro Three-quarters of cash handlers would like to receive additional informa - banknotes varies according to how much difficulty they have keeping their tion on the euro banknotes and their security features, with leaflets being household finances in order. For example, people who belong to a house - the most widely preferred vehicle for receiving such information. Online hold that has few problems meeting its expenses are more likely to be sat - training also appears to have some appeal. Training and publications are isfied with the condition of the euro banknotes than those who find it more highly appreciated by cash handlers, but the main sources of information difficult. on how to check the banknotes are employers or work colleagues, the media and credit institutions. Working with employers to promote training Views from people in non–euro area countries and the distribution of printed material appears to be crucial.

Recent surveys have shown that there is still a wide need for information Conclusions on the euro in many non-euro area countries. The most preferred infor - mation channel in these countries is television, followed by newspapers Both within and outside the euro area, euro banknotes and coins are and magazines containing information from commercial institutions. The widely accepted as a reliable means of payment and a stable store of main issues on which more information is desired include the value of one value. However, there is still some way to go before they are perceived by euro in the local currency, how the euro will be introduced in that country citizens as identity markers. Traditionally, banknotes and coins have been and the practical implications of the euro in terms of salaries and bank instrumental in shaping identity. Therefore, images which link the euro to accounts. Those who are older, less educated or living in a rural area are Europe and are easily recognised by Europeans should be promoted on interested in information on the value of the euro, while those who are the euro banknotes and coins as a way of fostering a common identity. younger, more educated or living in a metropolitan area are more con - cerned about its socio-economic implications. Although the surveys among households and companies were conduct - ed in 2008 and 2009, there are no indications that the use of cash has A common piece of feedback from citizens in the EU Member States that changed substantially since then. The share of electronic payments in have recently adopted the euro is that, although they perceive the euro to total transactions has probably increased slightly, owing to a rise in the be a stable currency, most feared that the changeover to the euro was number of payment terminals, improvements in the infrastructure and likely to push up prices in their country. campaigns promoting electronic payments. Looking ahead, cash is expected to remain an important means of payment in the medium term, Outcome of cash handlers’ surveys with new means of payment having only a moderate impact.

A number of surveys were commissioned by the ECB to determine how The distribution of information on the euro banknotes and coins to the much cash handlers (e.g. financial services, supermarket cashiers, store general public is desirable in order to maintain the high level of positive managers, waiters/waitresses, etc.) know about the security features of feedback from citizens in terms of their trust in the euro banknotes and the euro banknotes and how they apply that knowledge when checking coins, as well as in terms of the quality and practicality of the euro cash. the banknotes. Furthermore, the aim of the surveys was to explore the potential for communication measures specifically targeting professional Furthermore, training and specialised information on the security features cash handlers. A summary of the key findings is outlined below, together of the euro banknotes and coins should be available to professional cash with some conclusions: handlers as the “first line of defence” against counterfeiting. The role of employers in this is key and they should be encouraged to promote train - ■ The surveys revealed a need for simple communication tools and termin - ing and to ensure the availability of such specialised information for cash ology. handlers. ■ Checks are more likely to be carried out on suspicious or high-denomin - ation banknotes. The higher the denomination, the lower the level of Finally, the demand for information from EU Member States that have acceptance, possibly owing to the relatively high financial loss incurred if either recently adopted the euro or are on their way to doing so should a counterfeit is accepted. also be monitored and met.

BIllEtARIA no. 10 December 2011 19 Opinion the Banco de España’s survey on cash

The Banco de España’s survey on cash Cash and Issue Department Banco de España

the Banco de España is one of the mem - Security features

bers of the Eurosystem that periodically The majority of respondents rated the banknotes’ security fea - runs surveys to obtain information about tures very highly, reporting that they encountered no difficulty the use of cash, the public’s degree of checking them. The best-known security elements, and those that are most-frequently checked, are the paper, relief printing familiarity and acceptance of the security and the security thread. Retailers check banknote authenticity measures, and their opinion about the more frequently than do the general public, and small authenti - euro. Rigorous representative surveys cov - cation devices are in widespread use. Retailers mainly check the banknotes they receive in change and when customers pay for ering the whole country have been con - goods, whereas the public usually check the banknotes they ducted annually since 2005. receive over the counter at banks or from ATMs more closely than those they are given as change. Approach Counterfeit banknotes received by the public The selected sample allows studies by age, sex, geographic area and income level, and targeted on the general public, small retailers The number of counterfeits reaching the public in Spain has been and the hospitality sector. Professional experts collect the informa - on a downward trend in recent years (see Chart 2). Most retailers tion using a 20-minute questionnaire during visits to homes and com - check banknote authenticity using special-purpose devices, which pany premises. The questions asked cover various topics: use of does not usually bother customers. cash, how users rate the banknotes and coins in circulation, security elements, counterfeit banknotes, and the cash services provided by Chart 2. Number of members of the public who have received credit institutions. a counterfeit Uses of cash

The convenience, ease of use, rapidity and security cash means it 12 remains the most frequently used universal means of payment, and is used for the vast majority of small value payments. The largest 10 average payment made in cash is 114 euros. Retailers do not like the highest denomination banknotes, given the potential losses they 8 face in the event of robbery or accepting counterfeits. Most people 7 7 surveyed were against the use of 1 and 2 cent coins. 5 How users rate the banknotes and coins in circulation

Euro banknotes and coins are well received by the public and the public’s opinion of their quality and usage condition has been on an upward trend, as Chart 1 shows. Small retailers tend to reject poor- condition banknotes more the public do.

Chart 1. How the public and retailers rate the quality of euro banknotes and coins Source: Banco de España.

Cash-related services provided by credit institutions

Both retailers and the public are satisfied with the cash-related ser - vices they receive from credit institutions. In 2010, the public tend - ed to mainly obtain their banknotes from ATMs, which on average they visit once a week to take out an average of 145 euros. Small retailers tended to use bank counters more than they previous year, and said they preferred to receive coins in cartridges. The vast majority said they were able to obtain the denominations of notes they required from banks.

Source: Banco de España / Note: 10 (Very good), 0 (Very bad).

20 BIllEtARIA no. 10 December 2011

Design and Production New clothes for the euro New clothes for the euro Reinhold Gerstetter Banknote designer

the introduction of the euro was an exception - al development in Europe’s often turbulent his - tory, and its banknotes and coins gave physical shape to the reality of the European Community in a practical form for the currency’s users both inside and outside the euro area. Banknote designer Reinhold Gerstetter / R G

When the moment came to exchange nation - The second series will also be circumscribed by this policy of using stylised images. The five-euro banknote is dedicated to the Classical period, the al currencies for the euro there was the possi - ten-euro banknote is Romanesque, while the 20, 50 and 100 euro denomin - bility that Europe’s citizens might resist the ations show stylised examples of Gothic, Renaissance, Baroque and Roco - co architecture, respectively. The 200 euro banknote represents modern new currency or reject it outright. However, in iron and glass architecture and the 500 euro banknotes portrays 20 th cen - the event, the number of people in favour of tury architecture. the euro grew to become the dominant group. this was partly due to the design of the bank - Interpreting the technical description of the security features notes, which highlighted the concept of com - The main objective is that citizens will have no difficulty locating the security munity. they convinced citizens and finally features in order to check them. The main advantage of the second series of euro banknotes lies in the fact that the more novel security features will won them over. be implemented, keeping pace with the technology. the second series of euro banknotes is more attractive and Features for visually impaired persons offers enhanced security The new design will accelerate and simplify the banknote recognition Ten years on, a new generation of euro banknotes is under preparation process also for visually impaired persons. The tactile features will be with a view to continuing our first single currency’s success story. The sig - improved to make it even easier to identify a banknote’s face value. nificant technical innovations introduced over the past decade will make the second series more attractive and even more secure than the first. Personal skills at the service of the global economy

Ages and styles of Europe The skills a banknote designer needs include, along with artistic talent and technique, a capacity for empathy, technical expertise and cooperation with The seven denominations of the current euro banknotes depict seven ages scientists and researchers. The designer’s knowledge, in turn, serves to of European cultural history, represented by typical architectural styles. The accelerate the innovation process, in conjunction with the printing industry, banknotes’ main obverse motifs are doors and windows, while the reverse in the unending quest for the highest possible levels of banknote security. shows bridges. The images portray stylised archetypes and structures rather than represent anything that actually exists anywhere in any of Europe’s One fundamental aspect of a banknote designer’s art is his or her skill at countries. finding synergies and applying the best possible technologies deftly. It is necessary to combine significant progress in paper technology with new and exciting hybrid substrates, and to include the latest developments in inks for offset, intaglio and silkscreen printing.

Signature designs that capture the spirit of the age

A group of neutral and independent designers exists who are well con - nected with the international community of banknote designers. It is always useful for this small circle of highly qualified experts to be able to compare their own opinions and points of view with those of their international peers. It is crucial to be involved in the main conferences and keep in close touch with experts in the fields of security technology, security inks and other spe - cific sectors of the printing industry.

The greater individual freedom, granted by a broad knowledge-base and the ability to evaluate technology trends, is an essential factor driving progress in graphic design. Banknote designers capture the spirit of the age and the cultural identity of nations and peoples, to distil them into rep - resentations with their own characteristic style. The second series of euro One of Reinhold Gerstetter's designs banknotes exemplifies this well.

BIllEtARIA no. 10 December 2011 21 Design and Production the design of the first series of euro banknotes The design of the first series of euro banknotes

Robert Kalina Former designer at Oesterreichische Nationalbank

Robert Kalina often wonders whether he My approach to design is intuitive. I draw from mental images that arise in response to a variety of influences and experiences. Reading, pho - should consider himself an artist, if his work is tography and artistic work constitute an important source of inspiration. a form of artistic expression, and concludes I live with my eyes open in a world of visual stimuli and perceive every - that more than art, it is a craft. Artists enjoy thing as images. I always thought that everyone looked at the world this way, but obviously this not so; I think I see a lot of things that most peo - complete freedom of expression, and, in gen - ple overlook. eral, create a unique work at a particular time, whereas Kalina has to work within fixed param - The ideas for my designs are based on an intuitive mix of intellectual and emotional processes, but the specifications and requirements always define eters. He considers himself a graphic artist my starting point. From the point of view of the creation of a functional prod - who, when asked to produce a specific design uct, I am always mindful of the need to include visible features of the cultural for a product, has to create something both and national heritage of the banknote issuing country. Moreover, I have to try to include in the design only that which is necessary and avoid an excess aesthetically pleasing and functional, while of ornamentation. I always take into account that the users of this “prod - keeping the demands of mass production in uct” have to identify with the aesthetic aspects, and the functional elements mind. Banknotes have to be useful and attrac - of the design. tive, with clearly defined technical, artistic and the European Monetary Institute’s selection competition security specifications, and the position, type, The European Monetary Institute (EMI), the forerunner of the European Cen - and number of banknote security features is tral Bank, ran a competition to select the designer of the first series of euro defined in advance. therefore, the designer’s banknotes. Competitors had six months to submit two different designs: “artistic” side consists of making decisions in one traditional, referred to as “Ages and styles of Europe” and the other, terms of perspective, style and composition. more modern, called “Modern/Abstract”. The jury first shortlisted five designs from each of the topics. The European An individual approach Monetary Institute then ran a market survey to find out which of the short - listed designs were preferred by the general public in Europe. Like the design of any other product, banknote design seems to follow cer - tain trends or fashions, although the decision-makers in the case of bank - All designs were then submitted to the EMI Council in December 1996, and note design are generally issuing central banks, which tend to prefer trad - the Council using information about the jury’s ranking, the results of the itional and indeed conservative designs. Perhaps for this reason banknote survey and some technical comments liked mine best. design is not considered a form of contemporary art.

Bridge design on the reverse of the 10 euro banknote

22 BIllEtARIA no. 10 December 2011 Design and Production the design of the first series of euro banknotes

My euro designs

I started with the “Modern/Abstract” design on its own, and as I made progress on it, I started with “Ages and styles of Europe.” As a result, I fin - ished both at the same time.

I think that, in a way, some of my original designs for the “Modern/Abstract” concept looked like banknotes for games. However, my series was includ - ed in the short-list of ten designs put forward for the final selection. Never - theless, I realised that I had to find something more real and tangible, and less abstract, with a more professional appearance able to attract a wide variety of nationalities. That is what led me to the idea of doors and win - dows.

Banknote motifs

The initial focus for the design of all the themes I submitted was centred on the functional aspects of the banknotes. I started with the specifications given: underlying colour, text, security elements and distinctive features such as, for example, a clear distinction between each denomination. Then I decided to put images of open doors and windows in various artistic styles on the obverse, keeping the reverse for various styles of bridge. I wanted the doors to convey the idea of an entry into a new era and a new world, and that the bridges would be a symbol of unification. Although my images are based on real structures, I always thought it would be best not to use objects that actually exist. My aim was to produce symbolic images and try to avoid possible disputes between countries over who had been given the privilege over the other euro member countries of having one of their Banknote designer Robert Kalina bridges or windows represented on the banknotes. In this article I am going to confess a secret: one of my bridges is based on a rail bridge in Vienna, although the version on the banknote shows a road going over it. the public find the doors and windows less symbolically significant than the bridges. The idea of “building bridges” between nations and cultures is a I think that if you asked European citizens what the images on the front of common metaphor in many languages and cultures, so it works well. It is the banknotes are, almost 70% would probably answer that they show interesting to observe how the public reacts to these two things. For exam - bridges, although the bridges are actually on the back. I feel that perhaps ple, some people think that the bridges are on the front of the banknotes.

Colour

Although the ECB defined the underlying colours for the banknotes, I chose the various hues with which the public was most familiar.

Perspective

I sometimes include a visual perspective in my designs, as a matter of taste and intuition. When the ECB asked me about the perspective used in the designs for the five-euro banknote, I answered that the banknote reflect - ed the start of a new era in world democracy.

Security features with design aspects: kinegrams

Another interesting task was the design of the kinegrams. This is and advanced security feature that I had introduced earlier in the design of the 5,000 Austrian schilling banknote. I was free to choose the position on the banknote, the form, and the images included in the kinegram.

My most interesting project

I have only carried out design projects for Austria and Europe. For me it was a really special honour for my design to be chosen for the first series of euro banknotes. It has been the high point of my career and a unique experience in my life that will stay with me for a long time.

Doorway design on the 10 euro banknote

BIllEtARIA no. 10 December 2011 23 Design and Production Euro banknote production Euro banknote production

Nunzio Minichiello Banca d’Italia

the launch of the euro required the involvement of same denomination not only had to be produced at different printing works, but there was the added complication of different production various National Central Banks (NCBs), each of processes using raw materials supplied by different manufacturers. which had previously produced their banknotes Nevertheless, the final product had to be entirely uniform, such that nei - and coins in different ways. the NCBs therefore ther the public nor professional cash handlers could tell banknotes from faced the dual challenge of developing a more different manufacturers apart. sophisticated product in the most uniform way The new currency, which it was anticipated would circulate internationally possible. Standardisation remains the biggest and be able to compete with the dollar, had to offer strong protection issue in euro banknote production. the European against counterfeiters. New security features were added to the three trad - itional steps in the printing process so as to increase its resistance to coun - Central Bank (ECB) set up a quality control system, terfeiting. Along with offset, intaglio and numbering, which are present on which has continued to be enhanced, enabling most banknotes, a silkscreen stage and a hologram patch were added. production to be shared out efficiently between However, the problem that arose was that these techniques were not well the NCBs and economies of scale to be exploited. known among many of the European printing works entrusted with pro - ducing euro banknotes. It was therefore necessary for them to install, test and familiarise themselves with these new technologies quickly. the challenge The volume of banknotes manufactured for the initial launch of the euro Euro banknotes were the first banknotes to be produced simultaneously far exceeded the total number of national banknotes that the countries at different printing works, as 15 banknote printers, both public and pri - involved had been issuing overall. All the printing works in the Eurosystem, vate, took part in producing the banknotes needed for the changeover. whether public or private, had to make a significant effort to meet the high level of demand arising from the need to replace the whole volume of Prior to 1999 banknote production in Europe had been a much simpler banknotes in circulation. It is worth recalling that prior to the placing into affair. Generally speaking, each country produced its banknotes at a sin - circulation of the euro, the normal practice was a staged replacement of gle printing works. Each denomination was printed using either a sheet- one series by another, denomination by denomination, so as to avoid put - fed or web-fed press, but never a combination of the two. At the same ting pressure on the process of printing new banknotes and to enable a time, the security features included in the banknotes were driven by fluid withdrawal of the old banknotes. national needs and traditions. Standardisation: a uniform production process The simultaneous placing into circulation of seven denominations of euro banknotes on 1 January 2002 was a totally new experience and required The first issue that had to be addressed was the design of the technical an unprecedented degree of coordination. With the new system, the specifications. The specifications for the euro had to take into account more than just the aesthetic, security and processing capacity aspects. It was also necessary to consider the pos - sibility of homogeneous printing at the public and private printing works that had produced national banknotes.

The second issue that immediately arose was that of distributing the materials necessary for the origina - tion process. These materials had to be based on a common stan - dard, whereas previously, to some extent for security reasons, the various printing works had adopt - ed formats, systems of production and reproduction of the printing materials that were often mutually incompatible.

The quality control processes were even more heterogeneous. The Quality Inspection: full automation of cutting, single banknote inspection and finishing process / Banca d’Italia majority did not follow international

24 BIllEtARIA no. 10 December 2011 Design and Production Euro banknote production

standards and were based on rules established according to the operat - ing conditions. First of all, it was necessary to draw up a Common Quality Plan, which was used to guide the quality control systems at the various printing works and among suppliers of raw materials. This obliged manu - facturers and suppliers to comply with the established reference stand - ards.

Controls

The Common Quality Plan covered the whole supply chain and was sub - divided into four parts. The first part was dedicated to the controls sup - pliers had to incorporate in their production processes to certify the quality of their products. The second part dealt with the verifications necessary for input materials to be accepted. The third part was dedi - cated to the process controls that banknote printing works had to carry out. Finally, the fourth part established the checks to be performed on finished banknotes.

In this regard it is worth mentioning that over the last decade a clear trend has emerged towards automating quality controls, thereby eliminating the subjective component implied by human intervention. The whole euro- banknote output was subjected to a single banknote automatic inspection to ensure print quality and that the security features were correct. The Automation of the packaging process / Banca d’Italia automation of on-line and off-line control processes is spreading through - out European printing works and has reached a very advanced stage. Systematically sampling banknotes during production allows the ECB to Finally, each production lot underwent final statistical checks to certify that carry out a continuous review of the uniformity of manufacturing at the it conformed to the specified parameters. various printing works, covering both visual aspects and compliance with the technical specifications. Regular checks were also made to evaluate the banknotes’ ability to with - stand the physical stresses and chemical attacks they would meet while Customer feedback makes it possible to evaluate the efficiency of the in circulation, so as to ensure resistance to abrasion, tearing, soiling, etc. quality control system and focus attention on those qualitative aspects which have shown themselves to be more susceptible to undetected Monitoring by the ECB defects, despite the existence of a monitoring network.

The ECB performs ongoing control and coordination in the form of: Distribution of the production workload

■ frequent audits of the quality control systems; Immediately after the changeover to the euro almost all the printing works produced the whole range of denominations. However, it soon became ■ approval of the reference sheets at printing works at the start of annual clear that the distribution of the production workload needed to be ration - production of each denomination and of paper mills annually before the alised in order to optimise the use of available resources. Concentrating start of paper manufacturing; production of a denomination at a single printing works undoubtedly offered benefits in terms of economies of scale and more consistent qual - ■ taking of samples of banknotes manufactured by the Eurosystem; ity. However, distribution costs also need to be taken into account, as does the need to ensure supplies even if a printing works is affected by ■ managing the customer feedback system in which all faults detected in production problems. circulating banknotes are recorded. The decentralised pooled approach to banknote production that was Additionally, since the 1990s, the ECB has set up a number of working adopted meets these requirements by distributing the production of each groups comprising national representatives focused specifically on monitor - denomination across more than one printing works. Each year the ECB ing production and quality issues with a view to introducing improvements. plans how the task of supplying the volumes of banknotes required by the Eurosystem will be shared out between the participating central banks: Quality control system audits basically focus on the control system, its suit - The production of banknotes is allocated based on each participant cen - ability, effectiveness and compliance with the requirements established. tral bank’s preferences and logistic limitations, on the basis of its share of the ECB’s capital. Central banks are responsible for producing the quan - Approving the reference sheets for a new production run at a banknote tities allotted to them. They do so either at their in-house printing works or printing works is a key element in the ECB’s coordination activity. This at the relevant public printing works, or through contracts with the private approval process serves to identify and, if necessary, correct, any devi - printing works operating in Europe. ation from the common standard. For this purpose banknotes being print - ed are compared with samples of banknotes printed more than ten years earlier and with banknotes of the same denomination produced at other printing works in the Eurosystem.The approved sheets become the refer - The production of the euro is not just an example of a challenge ence to which all the printing works have to comply in the following year. successfully met: above all it has been an opportunity for cooper - ation and to stimulate competition and growth among nations The approval of watermarked paper each year is also important. The spe - and cultures, with the participation of both the public and private cific composition of the paper gives the watermark intrinsic variability, and sectors. this has to be monitored carefully during production.

BIllEtARIA no. 10 December 2011 25 Background References Euro cash statistics Euro cash statistics

J. Darío Negueruela and María luisa leyva Banco de España

Just as monetary statistics are essential for not adopted the euro. The ECB uses these data to prepare cash statis - central banks to be able to perform their role tics on the European Union as a whole. in monitoring price stability, in their facet as Cash composition currency issuers, statistics on cash are a sta - In terms of value, the bulk of cash in circulation is in the form of banknotes, ple element of analysing and managing the as although there is a much larger number of coins in circulation their total evolution of demand for cash, allowing them value is far smaller than that of banknotes (Chart 1). In 2010, the value of to monitor the behaviour of the various agents banknotes in circulation, measured in millions of euros, was almost 40 times that of coins, while the number of coins was approximately seven in the cash cycle, citizens’ needs, the quality times that of the number of circulating banknotes. As a share of the total of the banknotes and coins in circulation, and stock of currency in circulation, banknotes accounted for 97% of total the effectiveness of anti-counterfeiting meas - value and 13% of pieces at the end of 2010. ures. In the case of the euro, the need for sta - Chart 1. Composition of euro cash (%) at the end of 2010 tistics takes on even greater importance, due to the complexity that comes with being cur - rency issued by 17 countries and with a sig - nificant international role. the European Central Bank (ECB) is probably the issuing institution that publishes most infor - mation about banknotes: its web site and Statistical Data Warehouse give extensive cov - erage to banknotes and coins, and its Annual Report devotes a chapter to the topic of cash. this article gives an overview of the official statistics on euro banknotes and coins that The euro banknote series comprises seven denominations, namely €5, the ECB has prepared since 2002. €10, €20, €50, €100, €200 and €500 banknotes. At the end of 2010, the most common denomination in circulation was the €50 banknote, the framework for the preparation of cash statistics accounting for 39% of the total number of banknotes. This was followed by the €20 note, which accounted for 20% (Chart 2). Of the total coins in circulation, 60% were 1, 2, and 5 cent coins, 28% were 10, 20 and 50 The ECB and the Eurosystem national central banks are jointly responsi - cent coins, and the remaining 12% were €1 and €2 coins (Chart 3). ble for preparing euro banknote statistics. And although the issuance of coins is the responsibility of the national Treasuries and not that of the Chart 2. Breakdown of banknotes in circulation central banks, in practice it is the national central banks, together with the ECB, that are given the task of collecting data also on coins and prepar - 4% ing the relevant statistics. Thus, the Eurosystem prepares coin statistics 1% 11% and forwards them to the European Commission, which publishes them 11% and prepares regular reports for the European Council.

Since 2002 the Eurosystem central banks have collected and compiled 14% statistics on cash using methodologies and computer applications shared by all its members. Each central bank uses its own locally managed data - base to compile banknote and coin information nationally, drawing on operational data submitted by credit institutions and received from authentication and quality-control processes. Central banks are also responsible for obtaining information from other entities and organisa - tions, such as Treasuries, acredited banknote printing works and mints, 39% and other government agencies. The national data are sent to the ECB in 20% the first few days of each month for loading them onto its database. It also receives currency information from the other EU Member States that have

26 BIllEtARIA no. 10 December 2011 Background References Euro cash statistics

Chart 3. Breakdown of coins in circulation There has been a slight upward trend in the number of coins since they were first issued, with the stock in circulation reaching almost 93 billion pieces at the end of 2010, with a total value of €22.2 billion, as can be seen in Charts 6 and 7.

Chart 6. Number of coins in circulation Millions of coins

Banknotes and coins in circulation

At the end of 2010 there were 14,171 million banknotes in circulation, with a total value of €839.7 billion (Charts 4 and 5). In the years between December 2002 and December 2010 banknotes grew at an annual rate, on Chart 7. Value of coins in circulation average, of 9% in terms of pieces, and 17% in terms of value, highlighting Billions of euros the more rapid growth in the number of larger denominations in circulation.

There was also growth in the circulation of banknotes relative to the income level and the size of population. The value of the stock of circulat - ing banknotes was 9.4% of GDP at the end of 2010, compared with 5.4% in 2002. The average number of banknotes per inhabitant in the euro area rose from 25.9 in 2002 to 42.8 at the end of 2010.

Chart 4. Number of banknotes in circulation Millions of banknotes

Banknote issuance

Over the last ten years the number of euro banknotes put into circulation each year has remained fairly stable at around 34,000 million pieces a year, with a value of approximately €1,100 billion, after the rapid growth in the first few years. Gross banknote issuance in the first nine months of 2011 came to 26,374 million banknotes, a figure almost identical to that in the previous year. In value terms, the banknotes issued between January and September 2011 were worth €824.4 billion, which was also close to the previous year’s figure.

Chart 5. Value of banknotes in circulation Chart 8. Gross banknote issuance in numbers of banknotes Billions of euros Millions of banknotes

BIllEtARIA no. 10 December 2011 27 Background References Euro cash statistics

Chart 9. Value of gross banknote issuance table 1. Allocation of banknote production Billions of euros

2003 2004 2005 2006 2007 2008 2009 2010 2011

DE CY ES AT FR DE ES ES DE IE ES FR FR €5 FR FR FI ES MT FR NL NL FR FR LU PT PT IE NL SI SK FI

DE DE DE DE DE DE DE DE DE AT Banknote production AT AT GR AT AT FR AT AT FR €10 FR FR FR GR GR GR FR FR GR Banknote manufacturing within the Eurosystem is decided annually well in GR GR AT IE IE NL GR GR IE advance, following the preliminary studies regarding the future needs. To IE NL PT IT calculate these needs the likely variations in demand for different denominations, the prospect of new countries joining the euro area, demand for euro banknotes outside the euro area, and the adjustments DE in contingency reserves in the Eurosystem are all taken into account. CY SI DE SI CY ES ES CY Annual banknote production is distributed based on a pre-established ES FR DE ES DE FI FI SK system that assigns responsibility for a share of total production to each FI MT ES FR ES FR FR SI central bank. This approach aims for national central banks to specialise FR FR LU €20 FR FI FR GR GR FI in two or three denominations at most, and that at least two central banks PT NL NL NL NL IT IE NL FR are responsible for each denomination. This dual principle is intended to IE SI PT PT PT IT IE NL enable more efficient production by exploiting economies of scale, while IT SK PT IT LU minimising the risk of production and quality problems. Table 1 shows the LU FI allocation of banknote production since 2003. 1 LU MT MT PT

DE DE DE DE BE DE DE DE BE BE BE BE BE ES BE BE BE DE €50 ES ES ES ES NL ES ES ES ES NL NL NL NL IT IT IT IT IT IT IT IT IT

AT NL DE FI FI €100 IT IT IT IT AT IT IT IT LU LU IT

DE €200 DE LU

DE DE €500 DE DE AT AT LU LU

BE: Belgium; DE: Germany; IE: Ireland; GR: Greece; ES: Spain; FR: France; It: Italy; CY: Cyprus; lU: Luxembourg Mt: Malta; Nl: Netherlands; At: Austria; Pt: Portugal; SI: Slovenia; SK: Slovakia; FI: Finland

1. Banknotes were initially produced by each of the central banks according to their own needs, with no sharing out of denominations (see Table 2 of the article “Euro issuing countries” in this Untitled / JDN issue of BILLETARIA).

28 BIllEtARIA no. 10 December 2011 Background References Euro cash statistics

Banknote production is the responsibility of the central banks, which may entrust this task to state-owned and private companies which have received prior accreditation from the European Central Bank. Chart 10 shows the production figures for euro banknotes between 2002 and 2012.

Chart 10. Annual banknote production Millions of banknotes

Annual banknote production takes into account the factors mentioned above. However, an important factor accounting for a large share of the production needs is the Eurosystem’s policy of actively ensuring that euro banknotes in circulation are of high quality. This demands the withdrawal and destruction of banknotes that do not comply with the minimum qual - ity standards. Chart 11 shows the development of the total number of banknotes sorted annually by central banks. Between 2006 and 2010 the number of banknotes sorted was slightly more than four times the total number of new banknotes produced in the euro area. In 2010 the num - ber of banknotes processed by the Eurosystem rose to 34,189 million, almost two and half times the number of banknotes in circulation. In the first nine months of 2011 the figure was 25,445 million pieces, a figure very close to that for the same period during previous year.

Chart 12 shows the annual variation in the number of banknotes destroyed in the Eurosystem between 2002 and 2010. The figure grew significantly in the first few years, stabilising after 2006 at a level of less than 6,000 million pieces, which is equivalent to approximately 16% of the total number of banknotes processed each year by the Eurosystem cen - tral banks. The number of unfit banknotes destroyed in first nine months of 2011 was 4,266 million pieces, slightly fewer than in previous years.

Chart 11. Banknotes sorted by the Eurosystem Millions of banknotes

Untitled / JDN

BIllEtARIA no. 10 December 2011 29 Background References Euro cash statistics

Chart 12. Banknotes destroyed by the Eurosystem Chart 14. Eurosystem central bank branches Millions of banknotes

The trend in the number of branches of credit institutions operating in Banknote counterfeiting the euro area has gone in the opposite direction to that of central banks, rising from 175,596 in 2002 to 188,193 in 2010: growth of 7%. Chart 15 shows the break in the upward trend and the drop in the num - The development of the number of counterfeits withdrawn from circula - ber of bank branches in the euro area in 2010. This development has tion each year is shown in Chart 13. As can be seen, the figure is very become more pronounced in 2011 as the financial crisis takes its toll small compared to the number of banknotes in circulation (Chart 4). In and the banks close branches to rein in costs, against the backdrop of recent years, except in 2009, counterfeits have remained stable at a reduction in the number of institutions as the process of consolida - around 500 to 700 thousand pieces a year. In the first nine months of tion in the banking industry progresses. The number of ATMs dispens - 2011 the total number of counterfeit euro banknotes withdrawn from cir - ing banknotes at the end of 2010 was approximately 320,000: an culation was 454 thousand pieces. This was a significant drop compared increase of 41% on the number of ATMs in comparision with 2002 to the same period in the previous year and a return to the lower figures (Chart 16). seen in earlier years. Chart 15. Number of branches of credit institutions in the euro area Chart 13. Counterfeit banknotes withdrawn from circulation Thousands of banknotes

Chart 16. Number of AtMs in the euro area

Branches providing cash services in the Eurosystem

Since the launch of the euro, Eurosystem central banks have been engaged in a process of raising efficiency and reducing costs, which has led to a significant reduction in the number of central bank branches. In 2002 the twelve central banks had a total of 480 branches (Chart 14). Nine years later, the 17 central banks had 258 branches, amounting to a reduction of over 46%.

The functions and tasks that had habitually been performed by the closed branches either became irrelevant with the introduction of the euro, were taken (*) Estimate over by other central bank branches, or were outsourced to private firms.

30 BIllEtARIA no. 10 December 2011 Background References the euro issuing countries The euro issuing countries Victor Andrés Banco de España

the launch of the euro as Europe’s single cur - rency represented the culmination of the third stage of EMU. 1 three years after the euro’s launch as an accounting currency, the first banknotes and coins were put into circulation on 1 January 2002. Just over 300 million citi - zens in 12 EU Member States (table 1) were able to make cash payments with the new European single currency. the issue of euro banknotes and coins was undoubtedly a mile - stone in the process of European integration, putting the most palpable expression of unity in Europeans’ hands, wallets and purses.

Since the initial changeover the euro has been the sole legal tender for all table 2. Banknotes and coins produced for the launch commercial and financial transactions in the euro area. This has made trav - elling around Europe easier as citizens no longer need to change currency Country Banknotes Coins when they cross borders between euro-area countries. As well as being more (millions of units) (millions of units) convenient, this eliminated the currency exchange costs that this entailed. Belgium 550 1,957 table 1. the launch of the euro. the pioneers in 2002 Germany 4,782 17,000 Ireland 294 1,078 Country Membership of the European Size Population Greece 617 1,333 2 Economic Community (Km ) (million) Spain 1,924 7,085 France 2,265 8,150 Belgium Founding Member 30,528 10.3 Italy 2,440 7,940 Germany Founding Member 356,854 82.4 luxembourg 46 120 Ireland 1973 70,000 3.9 Netherlands 659 2,800 Greece 1981 131,957 11.0 Austria 550 1,800 Spain 1986 504,782 41.0 Portugal 538 1,296 France Founding Member 550,000 61.4 Finland 225 1,052 Italy Founding Member 301,263 57.0 total 14,889 51,611 luxembourg Founding Member 2,586 0.4 Netherlands Founding Member 41,526 16.1 Source: European Central Bank Austria 1995 83,870 8.1 Portugal 1986 92,072 10.3 The process of replacing national currencies with euros took just two Finland 1995 338,000 5.2 months and by the end of February 2002 the value of the cash in circulation total — 2,503,438 307.1 in euros clearly exceeded that in national currencies.

Source: European Commission and Eurostat. Population data refer to 2002. the expansion of the euro area Putting the new currency into circulation simultaneously in 12 countries was Over the years new EU Member States have been able to meet the Maas - a logistical challenge of the first order for the countries concerned. The suc - tricht convergence criteria and so join the euro. 2 This group comprises a cess of the task of producing banknotes and coins for the initial launch and number of small Mediterranean countries and former Eastern-bloc coun - distribution (Table 2) and withdrawing the existing national banknotes and tries. Table 3 shows the timetable of membership of new euro Member coins in a relatively short period, required coordination and detailed plan - States. ning by the national authorities in each country, the ECB and national cen - tral banks (NCBs). One of the strategies used was the pre-distribution of banknotes and coins to the financial sector and retailers prior to the launch date (“frontloading”). Moreover, credit institutions, cash in transit compa - 1. The euro has been the European Union’s single currency since 1 January 1999. Twelve Mem - nies, retailers, the vending industry, banknote handling equipment manu - ber States initially adopted it for non-monetary transactions in 1999 and it became legal facturers, etc. made every effort to ensure the launch of the euro would be tender for all payments in 2002 when the banknotes and coins were put into circulation. a success. To which was added the enthusiastic welcome citizens gave 2. Denmark and the United Kingdom have an “opt-out clause” and Sweden has a “derogation the new currency, who queued up at ATMs and banks first thing in the clause.” New EU Member States do not have the right to an “opt-out clause” in relation to membership of the common currency, so are obliged to join the euro when they meet the morning on 1 January 2002 to obtain their first euro notes and coins. criteria convergence.

BIllEtARIA no. 10 December 2011 31 Background References the euro issuing countries

table 3. Successive additions to the euro area From the legal point of view, the ECB and the NCBs in the euro area have the authority to issue banknotes. Nevertheless, it is the NCBs that physi - cally put banknotes into circulation and withdraw them, and carry out all Countries Incorporation Size Population the tasks involved in banknote handling and sorting. The liability created by (Km 2) (million) the issuance of the total value of euro banknotes is allocated to the Eurosys - 4 Slovenia 2007 20,273 2.0 tem members on an objective basis, as the banknotes are legal tender in Cyprus 2008 9,250 0.8 all Member States that have adopted the euro and they circulate freely Malta 2008 316 0.4 throughout the euro area. The objective principle on which this allocation Slovakia 2009 48,845 5.4 of value is based is the “banknote allocation key.” Table 4 shows the bank - Estonia 2011 45,000 1.3 note allocation key corresponding to each of the members of the Eurosys - tem. 5 The internal Eurosystem balances arise out the difference in value Source: Eurostat. between the euros allocated to each NCB and the value of euro banknotes each NCB puts into circulation. The common denominator of the changeover in all these countries was the fluidity of the process of replacing national currencies with new banknotes table 4. Banknote allocation key from 1 January 2011 and coins. The euro-cash frontloading plans, the rapid adaptation of ATMs, % the existence of euro banknotes and coins before the launch, the experi - ence gained from the changeover in other countries in the euro area, and European Central Bank 8.0000 the warm reception given to the currency by the public meant that the Banque Nationale de Belgique 3.1895 changeover was more rapid even than in the pioneer countries. Deutsche Bundesbank 24.8995 Eesti Pank 0.2355 Central Bank of Ireland 1.4605 the map of the euro area today Bank of Greece 2.5835 Banco de España 10.9185 The euro is the official currency of 17 EU Member States and of the over - Banque de France 18.6985 seas departments, territories and islands of the euro-area countries. Under Banca d'Italia 16.4310 a formal agreement with the European Union, Monaco, San Marino and Central Bank of Cyprus 0.1800 the Vatican are allowed to issue euro coinage. Andorra, Montenegro and Banque centrale du luxembourg 0.2295 Kosovo use the euro unilaterally without there being a formal agreement in Central Bank of Malta 0.0830 De Nederlandsche Bank 5.2440 place. Oesterreichische Nationalbank 2.5530 Banco de Portugal 2.3015 In mid-2011 there were 14.224 billion banknotes in circulation, with a face Banka Slovenije 0.4325 value of 847 billion euros, and 95.649 billion coins, worth a total of 22.757 Národná banka Slovenska 0.9115 billion euros. It is estimated that, by value, between 20% and 25% of bank - Suomen Pankki 1.6485 notes in circulation are used outside the euro area, particularly in neigh - bouring countries 3. total 100

Fortress / Y. Barrera

3. 2010 Annual Report. European Central Bank. 4. The Eurosystem comprises the ECB and the NCBs of the Member States which have adopted the euro as the single currency. 5. Annex I of the Decision of the ECB of 13 December 2010 on the issue of euro banknotes (recast) (ECB/2010/29)(ECB/2010/29).

32 BIllEtARIA no. 10 December 2011 Background References the euro issuing countries

Future expansions of the euro area 2002

Currently 17 of the 27 Member States of the EU belong to the euro. The United Kingdom and Denmark have opt-out clauses, but the other eight states will be obliged to adopt the euro as their sole currency as soon as they meet the economic convergence criteria. Sweden, Latvia, Lithuania, Poland, the Czech Republic, Hungary, Romania, and Bulgaria are the Mem - ber States which have not yet joined the euro. No timetable has been set for their adoption of the common currency.

EURO area

EU Member States with opt-out clause

EU Member States that have not yet adopted the euro

New members

2007 2008

2009 2011

BIllEtARIA no. 10 December 2011 33 Background References legal framework of the euro Legal framework of the euro Roberto Ugena, África Pinillos and María José Fernández Banco de España

the editors of BIllEtARIA asked this article’s short list of references is offered for interested readers wishing to study the authors for a structured compilation of the le- legal framework in which the euro operates in more detail. gislation that, in broad terms, defines the legal the sources of Community law framework for euro banknote issuance. What is presented here, therefore, is not intended to ■ Primary law: the treaties be an analysis of the legal rules, or a study of The Treaties are the cornerstone on which the European Union is built and jurisprudence, interpretations or regulations on they set out the fundamental legal principles relating to the objectives, organ - isation and functioning of the Union. Of particular relevance for the euro is the subject. Nor does it aim to offer any kind of the 4th Protocol to the Treaty on the Functioning of the European Union, in-depth analysis, which, while undoubtedly of which includes the Statute of the European System of Central Banks (ESCB) interest, is not possible here both for reasons and of the European Central Bank (ECB), which constitute the basis on which the legal implementation of euro banknotes rests. of space, and in view of the goal we set, which was focused on facilitating the interested read - ■ Secondary law: regulations, directives, decisions, recommendations er’s task of querying and searching for the rel - and opinions evant rules. this list also includes other instru - The so-called secondary law consists of a body of legal instruments ema - ments that while not strictly legislative are of nating from the various EU institutions in the exercise of their powers. interest because of their significance in under - Schematically, the basic elements of secondary law are: standing the legal framework.

legal act Addressees Effects

Although the date of the physical introduction of the new currency was 1 BINDING INStRUMENtS * January 2002, the legislative process had already begun in 1997 1 when the Treaty on European Union was signed in Maastricht. This described Regulation General scope Binding in its entirety. the powers of the European Central Bank (ECB), national governments and Directly applicable to all Member States. National Central Banks (NCBs) in the countries concerned, with respect to Directive Member State Binds the Member State addressed as 2 the issuance of banknotes and coins in euros . The Treaty establishes that regards the result to be obtained. the ECB has the exclusive right to authorise the issuance of euro bank - Requires transposition into national law, 3 notes , but both the ECB and the NCBs have the right to issue currency, leaving some leeway in terms of the form and in practice NCBs are responsible for putting banknotes into circulation and means of application. as well as withdrawing them and ensuring an adequate and good quality supply of currency in circulation. Furthermore, under the Treaty, euro area Decision Specifically Binding in its entirety. Member States can only issue coins, « subject to approval by the European designated Only binding on any specifically mentioned Central Bank of the volume of the issue» . addressees addressees.

The adoption of the euro has meant building a complex legal structure with - NON-BINDING INStRUMENtS in Community law so as to cover the different phases, beginning with euro’s introduction as the official currency in the euro area, but also covering its Recommen- Member States, Not binding. use outside the euro area, the design of euro banknotes and coins, manu - dation other institutions A declaration that proposes a course of action facturing, issuance and accounting recording, circulation, and their legal and in some cases, to for the parties to which it is addressed. protection. This overview is structured so as to list the main legislation cov - citizens of the Union ering these phases. Opinion Not binding. In what follows, the scope of various Community regulations is first syn - A declaration setting out the point of view thesised, listing the addressees and effects, focusing in particular on the of the issuing institution. legal instruments that the ECB can draw upon. The main body of the report provides an ordered grouping of the main rules discussed and, finally, a * Instruments that impose direct obligations on third parties.

1. Previously, in December 1995, the European Council, meeting in Madrid, confirmed that the third phase of Economic Monetary Union would begin on 1 January 1999. Also, the monetary unit that would be introduced at the start of the third phase was given the name of “euro” and the calendar of events that would mark the adoption of the currency was announced. 2. The Statute of the European System of Central Banks (ESBC Statute) and the Statute of the European Monetary Institute (EMI Statute) are included in a protocol annexed to the EC Treaty. 3. The EC Treaty has been incorporated into the Treaty on the Functioning of the European Union. Article 128 of the Treaty expressly states that the ECB has the exclusive right to authorise the issue of banknotes. It also adds that only banknotes issued by the ECB and the NCBs will have the status of legal tender in the Union.

34 BIllEtARIA no. 10 December 2011 Background References legal framework of the euro

■ the legal instruments of the European Central Bank 1. Introduction of the euro

The ECB has certain recognised powers to issue legal acts in the exercise Document Contents of the functions entrusted to the ESCB. Using a classification analogous to that in the previous section, these are as follows: Treaty on the Functioning of the Regulation of the right to issue euro European Union (Art. 127 to 133 and banknotes and coins, the approval legal act Addressees Effects 282 to 284). of the volume of coin issuance, and the establishment and organisation BINDING INStRUMENtS of the ESCB, the ECB and the Eurosystem. ECB General scope Binding in its entirety. Regulation ** Directly applicable in all Member States. To the extent necessary for the ECB to dis - Protocol (No 4) on the Statute of the Regulation of the right to authorise charge its duties in terms of monetary policy, ESCB and of the ECB (Art.16). the issuance of banknotes and their minimum reserves, clearing and settlement sys - status as legal tender. tems and prudential supervision. Council Regulation (EC) No 1103/97 Equivalence between the euro and ECB Specifically Binding in its entirety. of 17 June 1997 on certain provi - ECU, continuity of legal instruments Decision designated Only binding on any specifically mentioned sions relating to the introduction of and standards on conversion and addressees addressees. the euro. rounding. ECB Guideline Addressed Sui generis inst ruments that are issued to to the NCBs ensure the principle of centralised decision- Council Regulation (EC) No 974/98 Measures and stages in the introduc - making and decentralised execution of operations. of 3 May 1998 on the introduction of tion of the euro and monetary law pro - the euro. visions to be applied by Member NON-BINDING INStRUMENtS States that have adopted the euro as Recommen- Member States, Not binding. their single currency. This is amended each time a new Member State dation other institutions The ECB may propose the adoption of Com - adopts the euro. Includes an annex munity legal acts within the scope of its powers, with the Member States participating or may encourage specific performance. in the euro area, euro adoption date and date of the introduction of euro Opinion Not binding. cash in each of them. Issued in cases where Community institutions or Member States forward a consultation to the ECB under the provisions of the Treaty or - Council Regulation (EC) No Irrevocably fixed conversion rates the Statutes, or where the ECB issues an 2866/98 of 31 December 1998 on between the euro and the currencies opinion on its own initiative, as it sees fit, on the conversion rates between the of the Member States adopting it. matters within its competencies. euro and the currencies of the This is amended each time a new Member States adopting the euro. Member State adopts the euro. ** To date, the ECB has passed regulations on the application of minimum reserves, the infor - mation that has to be sent for the preparation of the MFI consolidated balance sheet and sta - - Council Decision of 19 June 19 Fulfilment of the conditions for adopt - tistics on the interest rates these institutions charge and pay, and on the power of the ECB 2000, in accordance with Article ing the single currency in each of the to impose sanctions. 122(2) of the Treaty on the adoption Member States. by Greece of the single currency on 1 January 2001. legal framework of the euro: legislative instruments and other - Council Decision of 11 July 2006, in relevant documents accordance with Article 122(2) of the Treaty on the adoption by Slovenia of the single currency on 1 The current legal framework for the euro is basically composed of the January 2007 (2006/495/EC). legislation, standards and other related documents below. - Council Decision of 10 July 2007, in accordance with Article 122(2) of For clarity and ease of consultation, the instruments have been arranged the Treaty on the adoption by Malta under the following headings: 1) Introduction of the euro; 2) Issue of bank - of the single currency on 1 January notes; 3) The euro changeover; 4) Design, specifications, reproduction and 2008 (2007/504/EC). exchange of banknotes; 5) Design, specifications, reproduction and - Council Decision of 10 July 2007, in exchange of coins; 6) Production of banknotes; 7) Approval by the ECB of accordance with Article 122(2) of the Treaty on the adoption by the volume of coin issuance; 8) Allocation of monetary income; 9) Recircu - Cyprus of the single currency on 1 lation of banknotes and coins by professional cash handlers; 10) Protec - January 2008 (2007/503/EC). tion against counterfeiting; 11) Collection of statistical data; 12) Agreements - Council Decision of 8 July 2008, in for the issuance of the euro outside the euro area; and, 13) Cross-border accordance with Article 122(2) of transportation. the Treaty on the adoption by Slo - vakia of the single currency on 1 This list includes original legislation in force, but excludes amending acts January 2009 (2008/608/EC). and repealed legislation. Each topic is sorted by date and a brief note on - Council Decision of 13 July 2010 in the contents of the legislation is given. accordance with Article 140(2) of the Treaty on the adoption of the euro by Estonia on 1 January 2011 (2010/416/EU).

BIllEtARIA no. 10 December 2011 35 Background References legal framework of the euro

3. Euro changeover

Document Contents

Guideline of the ECB of 3 November Procedure for exchanging legal ten - 1998 on the implementation of Article der banknotes issued by the NCB of 52 of the statute of the ESCB and of another Member State. the ECB (ECB/1998/NP10). Consolidated version of Guideline ECB/2000/6 of 20 July 2000, on the implementation of Article 52 of the Statute of the ESCB and of the ECB after the end of the transitional period, as amended by Guideline ECB/2001/10.

Guideline of the ECB of 10 January Frontloading of banknotes and coins 2001 adopting certain provisions on the prior to their placing into circulation on 2002 cash changeover (ECB/2001/1). 1 January 2002.

Guideline of the ECB of 13 September Conditions for the frontloading of euro 2001 adopting certain provisions on banknotes outside the euro area. the frontloading of banknotes denom - inated in euro outside the euro zone (ECB/2001/8).

Recommendation of the ECB of 6 Recommends that Member States December 2001 regarding the abro - explicitly repeal any rules that limit the gation of participating Member amount of coins denominated in States’ provisions limiting the amount national currency to be accepted in a of coins denominated in a national single payment. currency unit that can be used in any single payment (ECB/2001/17).

Guideline of the ECB of 14 July 2006 Legal system governing the loan to a on certain preparations for the euro future Eurosystem NCB of euro bank - cash changeover and on frontloading notes and coins, and for their distri - and sub-frontloading of euro bank - bution and sub-distribution before the notes and coins outside the euro area introduction of euro cash. (ECB/2006/9).

Guideline of the ECB of 24 July 2006 Measures to ensure the exchange of on the exchange of banknotes after notes of a new participating Member the irrevocable fixing of exchange State: exchange at par value, dura - rates in connection with the introduc - tion of changeover period and rules tion of the euro (ECB/2006/10). regarding banknotes which do not qualify for exchange.

Commission recommendation of 10 Recommends how to plan and coord - January 2008 on measures to facili - inate the introduction of the euro in a tate future changeovers to the euro Member State, the information to pro - [notified under document number C vide to citizens, measures to facilitate (2007) 6912] (2008/78/EC). rapid introduction of cash, and how to prevent abusive practices. Untitled /JDN

4. Design, specifications, reproduction and exchange of banknotes 2. Issue of banknotes

Document Contents Document Contents Decision of the ECB of 20 March 2003 Description of the denominations and Recommendation of the ECB of 8 April Accounting treatment of the costs on the denominations, specifications, common technical specifications of 1999, on the on the accounting treat - incurred in the issue of euro bank - reproduction, exchange and withdraw - euro banknotes and rules concerning ment of costs incurred in connection notes. al of euro banknotes (ECB/2003/4). their reproduction and exchange. with the issue of banknotes (ECB/1999/NP7). Guideline of the ECB of 20 March Measures to be taken in cases of 2003 on the enforcement of meas - non-compliant reproductions of Decision of the ECB of 13 December Definition of banknote allocation key for ures to counter non-compliant repro - banknotes. 2010 on the issue of euro banknotes issue of euro banknotes by the ECB ductions of euro banknotes and on (recast) (ECB/2010/29). and the NCBs applicable as of 1 Jan - the exchange and withdrawal of euro uary 2011. banknotes (ECB/2003/5).

36 BIllEtARIA no. 10 December 2011 Background References legal framework of the euro

5. Design, specifications, reproduction and exchange of coins 7. Approval by the ECB of the volume of coin issuance

Document Contents Document

Council Regulation (EC) No 975/98 of Values and common technical speci - — Decision of the ECB of 23 December 1999 on the approval of the volume of 3 May 1998 on denominations and fications of euro coins. coin issuance in 2000 (ECB/1999/11). technical specifications of euro coins — Decision of the ECB of 14 December 2000 on the approval of the volume of intended for circulation. coin issuance in 2001 (ECB/2000/17). — Decision of the ECB of 20 December 2001 on the approval of the volume of Council Regulation (EC) No 2182/2004 Standards for the manufacture and coin issuance in 2002 (ECB/2001/19). of 6 December 2004 concerning medals sale of medals and tokens that could — Decision of the ECB of 19 December 2002 on the approval of the volume of and tokens similar to euro coins. be confused with coins. coin issuance in 2003 (ECB/2002/12). — Decision of the ECB of 28 November 2003 on the approval of the volume of Council Regulation (EC) No 2183/2004 Application of the rules concerning coin issuance in 2004 (ECB/2003/15). of 6 December 2004, extending to the medals and tokens similar to euro — Decision of the ECB of 14 December 2004 on the approval of the volume of non-participating Member States the coins to the non-participating Mem - coin issuance in 2005 (ECB/2004/19). application of Regulation (EC) No ber States, to ensure uniformity — Decision of the ECB of 9 December 2005 on the approval of the volume of 2182/2004 concerning medals and throughout the Union. coin issuance in 2006 (ECB/2005/14). tokens similar to euro coins. — Decision of the ECB of 24 November 2006 on the approval of the volume of coin issuance in 2007 (ECB/2006/19). Commission Recommendation of Defines a common framework for the — Decision of the ECB of 23 November 2007 on the approval of the volume of 19 December 2008 on common modification of the national sides of coin issuance in 2008 (ECB/2007/16). guidelines for the national sides and euro coins intended for circulation in — Decision of the ECB of 11 December 2008 on the approval of the volume of the issuance of euro coins intended the case of both normal and com - coin issuance in 2009 (ECB/2008/20). for circulation (2009/23/EC). memorative coins. — Decision of the ECB of 10 December 2009 on the approval of the volume of coin issuance in 2010 (ECB/2009/25). — Decision of the ECB of 29 November 2010 on the approval of the volume of 6. Production of banknotes coin issuance in 2011 (ECB/2010/25).

Document Contents 8. Allocation of monetary income

Guideline of the ECB of 16 Septem - Single Eurosystem tender procedure Document Contents ber 2004 on the procurement of euro for the procurement of euro bank - banknotes (ECB/2004/18). notes. Protocol (No 4) on the Statute of the Allocation of monetary income of ESCB and of the ECB (Art.32). NCBs. Decision of the ECB of 15 May 2008 on Establishes minimum security standards security accreditation procedures for for production, processing, storage and Decision of the ECB of 25 November Intra-Eurosystem balances in relation manufacturers of euro secure items for transport of euro banknotes and their 2010 on the allocation of monetary to euro banknotes in circulation. euro banknotes (ECB/2008/3). components. income of NCBs of Member States whose currency is the euro (recast) Decision of the ECB of 25 November Procedures to ensure that only (ECB/2010/23). 2010 on the quality accreditation pro - manufacturers meeting minimum cedure for manufacturers of euro quality requirements receive accredi - Decision of the ECB of 25 November Distribution of income from euro bank - banknotes (ECB/2010/22). tation for producing euro banknotes 2010 on the interim distribution of the notes in circulation. and their raw materials, and the quali - income of the ECB on euro banknotes ty of banknotes is independent of in circulation and arising from securities where they are produced. purchased under the securities markets programme (recast) (ECB/2010/24). Decision of the ECB of 21 June 2011 Procedure to ensure that only manu - on the environmental and health and facturers that conform to minimum 9. Recirculation of banknotes and coins by professional cash handlers safety accreditation procedures for environmental and health and safety the production of euro banknotes requirements receive accreditation to Document Contents (ECB/2011/8). carry out euro banknote production activity. Commission Recommendation Recommended practices for authen - 2005/504/EC of 27 May 2005 con - tication and verification of euro coins cerning authentication of euro coins in circulation, in order to withdraw and handling of euro coins unfit for counterfeit coins, coins similar to euro circulation. coins and euro coins unfit for circula - tion from the cash cycle.

Decision of the ECB of 16 September Standard rules on the recirculation of 2010 on the authenticity and fitness euro banknotes, automated authenticity checking and recirculation of euro checking of euro banknotes, statistical banknotes (ECB/2010/14). information, and common procedures for testing banknote handling machines.

Regulation (EU) No. 1210/2010 of the Rules and procedures for the authen - European Parliament and of the Coun - tication, handling and withdrawal of cil of 15 December 2010 concerning unfit euro coins from circulation. authentication of euro coins and hand - ling of euro coins unfit for circulation. Madrid /JDN

BIllEtARIA no. 10 December 2011 37 Background References legal framework of the euro

10. Protection against counterfeiting Council Regulation (EC) No 1338/2001 Measures on the circulation of euro of 28 June 2001 laying down meas - banknotes and coins to ensure their Document Contents ures necessary for the protection of the protection against counterfeiting. Obli - euro against counterfeiting. gations of entities involved in the pro - ECB Recommendation of 7 July 1998 Addressed to the Council of the Euro - cessing and delivery to the public of regarding the adoption of certain pean Union, the European Parliament, banknotes and coins. measures to enhance the legal pro - the Commission of the European Com - tection of euro banknotes and coins munities and the Member States for the Council Regulation (EC) No 1339/2001 Extension of Regulation 1338/2001 to (ECB/1998/7). protection of the euro, its copyright and of 28 June 2001, extending the effects those Member States which have not to protect it against counterfeiting. of Regulation (EC) No 1338/2001 lay - adopted the euro as their single cur - ing down measures necessary for the rency. Guideline of the ECB of 26 August Operation of the Counterfeit Analysis protection of the euro against counter - 1998 on certain provisions regarding Centre and the counterfeit currency feiting to those Member States which euro banknotes, as amended on 26 database. have not adopted the euro as their sin - August 1999 (ECB/1999/3). gle currency.

Council Framework Decision of 29 This supplements the 1929 International Decision of the ECB of 8 November Conditions regarding the access and May 2000 on increasing protection by Convention for the Suppression of 2001 on certain conditions regarding use of the central database holding all criminal penalties and other sanctions Counterfeiting Currency to strengthen access to the Counterfeit Monitoring the technical and statistical information against counterfeiting in connection the protection of the euro, by means of System (CMS) (ECB/2001/11). on counterfeit euro banknotes and with the introduction of the euro. criminal penalties and other sanctions coins denominated in euros. against counterfeiting of the currency. Council Decision of 6 December 2001 On cooperation between the compe - on the protection of the euro against tent authorities in the Member States, counterfeiting. the ECB, NCBs, Europol and Eurojust, for the purpose of forwarding the results of expert analysis.

Council Decision of 17 December 2001 Establishment of an international train - establishing an exchange, assistance ing and operational, technical and sci - and training programme for the pro - entific support programme to protect tection of the euro against counterfeit - the euro against counterfeiting. ing (the ‘Pericles’ programme).

Council Decision of 17 December Extension of the Pericles Programme 2001, extending the effects of the deci - to Member States that have not adopt - sion establishing an exchange, assis - ed the euro as their single currency. tance and training programme for the protection of the euro against counter - feiting (the ‘Pericles’ programme) to Member States which have not adopt - ed the euro as their single currency.

Agreement between the European Agreement on coordination, information Police Office (EUROPOL) and the ECB exchange and effective cooperation to (2002/C23/07). combat counterfeiting of the euro.

Competent National Authorities under List of competent national authorities the letter b) of Article 2 of Council Reg - responsible for the detection of coun - ulation (EC) No. 1338/2001 terfeits. (2002/C173/02).

Council Decision of 8 December 2003 Gives the Commission the task of concerning analysis and cooperation establishing the European Technical with regard to counterfeit euro coins and Scientific Centre for the analysis (2003/861/EC). and classification of counterfeit coins.

Council Decision of 8 December 2003 Extension to the Member States that extending the effects of Decision have not adopted the euro as their sin - 2003/861/EC concerning analysis and gle currency. cooperation with regard to counterfeit euro coins to those Member States which have not adopted the euro as their single currency.

Cooperation Agreement between the Sets the framework for cooperation ECB and The International Criminal between the ECB and Interpol for the Police Organisation – INTERPOL - prevention and detection of counterfeit (2004 / C 134/06). banknotes worldwide, and especially, in countries outside the European Union. Autumn /JDN

38 BIllEtARIA no. 10 December 2011 Background References legal framework of the euro

12. Agreements for the issuance of the euro outside the Euro area Commission Decision of 29 October Creation of Technical and Scientific 2004 establishing the European Tech - Centre (ETSC), attached to the Euro - nical and Scientific Centre (ETSC) and pean Anti-Fraud Office (OLAF), for Document Contents providing for coordination of technical analysis of counterfeit currency and to actions to protect euro coins against provide assistance to coin national - Council Decision of 31 December Agreements with the EU to use the counterfeiting (2005/37/EC). analysis centres (CNAC) and the police. 1998 concerning the monetary euro as the official currency, and in arrangements in the French territorial some cases, to issue euro coins, in Council Decision 2005/511/JHA of 12 Designation of Europol as the Central communities of Saint-Pierre-et- countries outside the euro area: Saint July 2005 on protecting the euro Office for combating euro counterfeit - Miquelon and Mayotte (1999/95/EC). Pierre and Miquelon and Mayotte, San against counterfeiting, by designating ing. - Monetary Agreement between the Marino, Monaco, Andorra and Vatican Europol as the Central Office for com - Italian Republic, on behalf of the Euro - City. bating euro counterfeiting. pean Community and the Republic of San Marino [Official Journal C 209, ECB Recommendation of 6 October Proposal on the transport of counter - 27.7.2001]. 2006 on the adoption of certain meas - feit notes within the EU and enlarge - - Monetary Agreement between the ures to protect euro banknotes more ment of the powers of NACs and Government of the Republic of France effectively against counterfeiting NCBs so that they can keep examples on behalf of the European Community (ECB/2006/13). of counterfeits identified and analysed. and the Government of His Serene Highness the Prince of Monaco [Offi - Council Decision of 20 November 2006 Extension of the Pericles Programmes cial Journal L 142, 31.5.2002]. extending to the non-participating Mem - to Member States that have not adopt - - Commission Decision of 2 August ber States the application of Decision ed the euro as the single currency, 2006 which updates the annexes to 2006/849/EC amending and extending resulting from the modification of Deci - the Monetary Agreement between the Decision 2001/923/EC establishing an sion 2001/923/EC. Government of the French Republic, exchange, assistance and training pro - on behalf of the European Commu - gramme for the protection of the euro nity, and the Government of His against counterfeiting (the Pericles pro - Serene Highness the Prince of Mona - gramme) (2006/850/EC). co (2006/558/EC). - Monetary Agreement between the European Union and the Vatican City 11. Collection of statistical data State (2010/C28/05). - Council Decision of 12 July 2011 on the signing and conclusion of the Document Contents Monetary Agreement between the European Union and the French Guideline of the ECB of 22 December Rules on the protection of the statisti - Republic on keeping the euro in Saint- 1998 concerning the common rules and cal information obtained by the ECB Barthélemy following the amendment minimum standards to protect the con - and the NCBs. of its status with regard to the Euro - fidentiality of the individual statistical pean Union (2011/433/EU). information collected by the ECB assist - - Monetary agreement between the ed by the NCBs (ECB/1998/NP28). European Union and the Principality of Andorra (30/06/2011).

Guideline of the ECB of 11 September Eurosystem standards and content for 2008 on data collection regarding the the collection of data on banknotes, 13. Cross-border transportation euro and the operation of the Currency coins and cash infrastructure in each Information System 2 (ECB/2008/8). state. Document Contents

White Paper. Professional cross-bor - Commission initiative to facilitate pro - der transportation of euro cash by road fessional cross-border transportation between Member States in the euro of euros. area (18/05/2009).

References — PRIEGO, J., “El estatuto jurídico del euro: la fungibilidad funcional de las monedas nacionales y el euro”, Revista de derecho bancario y bursátil, no. 64, 1996, pp. 985-998. — Council of the European Union, “Marco legal para la introducción del euro” in Perspectivas del sistema financiero , no. 58, 1997, pp. 113-118. — WEENINK, H., “The Legal Nature of Euro Banknotes”, Journal of International Banking Law and Regulation, vol. 18, no. 11, 2003, p. 434. — DE LAPASSE, P., “The legal status of the euro”, in Legal Aspects of the European System of Central Banks-Liber Amicorum Paolo Zamboni Garavelli , ECB, 2005, p. 235. — KRAUSKOPF, B., “How Euro Banknotes Acquire the Properties of Money”, in Legal Aspects of the European System of Central Banks-Liber Amicorum Paolo Zamboni Garavelli , ECB, 2005, p. 245. — HANSPETER K. SCHELLER, The European Central Bank - History, role and functions , ECB, Frankfurt, 2004, 2nd revised edition, 2006.

BIllEtARIA no. 10 December 2011 39 Background References Information campaigns for euro cash changeovers Information campaigns for euro cash changeovers

Olivier Radelet European Central Bank

In order to provide a better understanding of ■ A partnership programme: over 3,000 partners provided a platform for cooperation with various sectors of society, as well as a network for the the communication activities carried out with - distribution of materials. In this regard, it is worth highlighting the increased in the Eurosystem for euro cash changeovers, reach of the training programmes conducted by the NCBs. this article will give a brief summary of: i) the ■ A dedicated website: this served not only as a reference point for all Euro 2002 Information Campaign for the intro - deliverables and activities for partners, such as commercial banks, police duction of the euro banknotes and coins on 1 forces, retailers, etc. but also as an important tool for the Eurosystem to January 2002; and ii) the joint information cam - respond to enquiries from the public.

paigns conducted by the European Central ■ The centralised and joint development of all tools and activities: this Bank (ECB) and the respective national central ensured a “single voice” and implementation at both the national and bank (NCB) for the introduction of the euro in international levels by the NCBs and ECB respectively.

other EU Member States since 2002. ■ The close coordination of the campaign: other key players, such as the European Commission and the national changeover boards, were also the Euro 2002 Information Campaign involved in the cash changeover.

The objective of this information campaign was to familiarise the public with Some lessons learnt from the Euro 2002 Information Campaign: their new banknotes and coins, in particular the visual appearance of the euro banknotes, their security features and the changeover modalities. It ■ the website essentially consisted of a collection of information, which, contributed to the smooth introduction of the new banknotes and coins – was an innovative concept at the time, but did not maximise the poten - an operation without historical precedent – and played a key role in how tial of this communication channel; they were received by the public. Furthermore, the campaign’s strategy was to use the same creative concept and common key messages in 11 ■ the number of partners involved in the partnership programme varied con - languages to reach the public in the 12 countries of the euro area at the siderably from country to country, highlighting that this action was also time, as well as targeted communication activities to inform the rest of not exploited to its full potential in some countries. Europe and beyond. An integrated multi-channel approach was adopted and proved to be successful in achieving the objective of the campaign. Euro Information Campaigns since 2002 The various communication channels included the mass media, a press and public relations programme, partnership programmes with key stake - The information campaigns conducted for cash changeovers since 2002 holders, a dedicated website, publications, direct marketing, staff com - have been based on the communication mix used for the Euro 2002 Infor - munications, events, training courses, etc. This approach provided a good mation Campaign. In 2005, in view of the likely enlargement of the euro infrastructure, as well as the right mix for spreading the common messages area, the approach was tailored to the new requirements and also took into and at the same time maintaining the flexibility to be able to react as account qualitative research. necessary to changes not only in the national, but also the international environment. The campaign was approved and executed by the Eurosys - Likewise, the objective of these campaigns has been to familiarise the pub - tem, which at the time comprised the ECB and 12 euro area NCBs. lic with the visual appearance of the euro banknotes and coins, their security features and the changeover modalities. They have also aimed at reassur - The success of this campaign can be attributed to the following key actions. ing people about the changeover to the euro and the long-term conse - quences of its adoption. ■ The mass media campaign: despite differences in the media environment across Europe, the mass media was the only channel capable of address - The deliverables for these campaigns have also all been prepared jointly ing the public at large in the 12 euro area countries. Overall, the reach of with the respective NCB, with the specific details, including the allocation of the campaign was over 90% in each country. tasks and responsibilities, being outlined in a memorandum of under - standing between the ECB and the NCB. ■ The development of research-based creative material and information tools: in this way, the needs of the public, in particular the key stake - The communication mix has included publications, the internet, a press holders and multipliers, for authoritative information on the new bank - and public relations programme, and research activities. A mass media notes and coins were met. campaign was only conducted for the cash changeover in Estonia. In the case of all the other countries that have joined the euro area since ■ The provision of high-quality materials: the information provided directly to 2002, the use of TV advertisements and other mass media channels was the public and to multipliers was approved by the ECB and the NCBs. approved and financed by the respective national changeover board. With the support of the ECB, most of the NCBs in question used direct ■ The public and media relations programme: the aim of this was to ensure marketing as their key communication tool. All households were sent a the spreading of the messages and information. In this regard, the campaign “public information leaflet” with a euro calculator or a security features “events” in particular received a very wide and positive media coverage. motion card.

40 BIllEtARIA no. 10 December 2011 Background References Information campaigns for euro cash changeovers

According to the results of omnibus surveys conducted to evaluate each Euro Conversion Card campaign, this communication mix has proven to be very efficient, with sat - Description: The euro conversion card is a lenticular card that can be isfaction levels being at almost 70% among the Slovenes, Cypriots, Mal - inserted in a wallet and enables to see two or more images according to tese, Slovaks and Estonians. The public information leaflet was considered the angle under which it is looked at. This type of card is particular eye- either very helpful or helpful by 64% of Slovenes, 67% of Cypriots, 77% of catching as it provides images in movement and enables to have for Maltese and 82% of Slovaks, but only by 54% of Estonians, who appear instance on the front side a series of 50 prices in euro expressed in their to prefer electronic deliverables to printed materials. equivalent in the former legacy currency and on the reverse side the main security features of a €20 banknote. The next challenges in terms of cash communication activities are related to the launch of the second series of euro banknotes. For this too, the Front side - 2 superposed images Eurosystem will conduct an information campaign in order to familiarise the public with the new features, of the banknotes as well as with the modali - ties of their introduction.

Public Information leaflets, Din-long format Description: Leaflet on the introduction of the euro banknotes and coins, and the cash changeover modalities for the introduction of the euro.

Reverse side - 2 superposed images

Quick Guide Flyer Real or Fake for Cashiers Description: Detailed 24-page Description: detailed 14-page leaflet leaflet describing the most important that explains the security features of security features on each of the euro the euro banknotes and compares banknotes – from €5 up to €500. them with some examples of fake features.

BIllEtARIA no. 10 December 2011 41 Background References Information campaigns for euro cash changeovers

“€ OUR money” folded A2 poster Description: poster showing the euro banknotes and coins, includ - ing the designs for the common side of the coins (both before and after 2004) and the country-specif - ic designs for the national side.

A3 Security features poster Description: poster showing the euro banknotes and their main security features.

Flyer At a Glance for Cashiers Description: short 4-page leaflet showing the security features of the euro banknotes.

42 BIllEtARIA no. 10 December 2011 Background References Spain's cash-communication activities

Spain’s cash-communication activities María Eulalia Andonegui Banco de España

The communication activities run by the central banks in the Eurosys - standing of the banknotes and coins tem have two facets. On the one side these activities are a conduit in an enjoyable way. La Caja Fuerte is relaying information the ECB wishes to disseminate according to the intended for use in school classrooms principle of a “single message and a single voice.” On the other, cen - with primary school children, while El tral banks have full authority to run their own communication initia - Cofre de Dinero is more suited to tives, adapted to the individual situation and characteristics of their being played with family and friends. different countries and needs. Professional cashiers Communication campaigns and actions To improve the quality of the euro The activities that have been carried out to date are of three main types: banknotes in circulation, the Banco de España has established a pro - a) Information campaigns aimed at the general public. These gramme of training on euro bank - campaigns usually aim for a specific goal, explaining or disseminating notes, accompanying the framework particular news items or circumstances. Public information campaigns for the recycling of euro banknotes. may also aim to identify a problem or stimulate attitude changes, such Specifically, this involves an annual programme of information ses - as raising public awareness about banknote security elements, or sions on euro banknotes and manual banknote sorting, aimed at pro - encourage the public to look after the banknotes they receive. fessional cash handlers working for credit institutions and cash-in- transit companies, so as to ensure they are able to distinguish b) training activities on euro banknotes and coins. These are aimed legitimate banknotes from any counterfeits that may appear in circu - at a more specialised audience —professional cashiers and cash lation. The programme is held at the Banco de España’s Madrid handlers— who are on the front line in the battle against counterfeit premises and it is envisaged that other courses will be run in other banknotes and coins. cities in Spain. An interactive course to qualify professional cash hand - lers will be available online in the future. c) Activities for students. These activities aim to teach young peo - ple about euro banknotes and coins in a fun and engaging way. They the public include school contests, board games, visits to central banks and banknote and coin museums, training sessions to accompany exhi - In 2006 the Banco de España began a national public information bitions run on euro banknotes and coins, and travelling exhibitions campaign on the condition of banknotes. The aim was to raise pub - visiting various cities throughout the country, backed up with a train - lic awareness about the importance of raising the quality of circulat - ing program, etc. ing euro banknotes, particularly those of lower denominations.

Activities of the Banco de España The campaign, entitled “ Ayúdanos a conservarlo. Está en tu mano ” (Help us conserve it. It is in your hand” was supported by financial As a Eurosystem central bank, the Banco de España has a sched - institutions and cash-in-transit firms, who distributed leaflets and visu - ule of communication activities on banknotes and coins aimed at all al materials throughout the country. The intermediate objectives of the three of these audiences. campaign were to:

Students ■ Raise the public’s awareness about keeping banknotes in good con - dition, for reasons of hygiene, security, image and their nature as a The activities aimed at students can be accessed through a dedicated public good. portal within the Banco de España’s website entitled “ El Portal Educa - ■ Inform the public about their right to change damaged banknotes tivo ” (The education portal). The portal hosts a variety of materials includ - free of charge at credit institutions and the Banco de España. ing videos, games, comic strips, etc. jointly produced by the Banco de ■ Involve the public in looking after banknotes, highlighting their cen - España and other Eurosystem central banks. It also includes activities tral role and asking for their help. such as visits to the Bank’s premises, a school competition, etc. and has two specific areas for secondary and primary school pupils, entitled The message was put across by printing posters and stickers for the “ Aula Virtual ” (Virtual class - distribution through the banks’ dense networks of branches and room) and “ El Rincón Educati - through small retailers throughout the country. The positive response vo ” (the education corner), by the general public led to a significant volume of unfit banknotes respectively. to the Banco de España for replacement by new banknotes. The campaign enabled the state of low denomination banknotes in cir - Among this broad range of culation to be improved. content it is worth mentioning the board games created by The initiative was an important milestone in the experience and knowl - the Banco de España: La edge of new systems of communication and interaction with citizens Caja Fuerte (the safe) and El in the cash management policy. It highlighted that the involvement, Cofre del Dinero (the money awareness and cooperation of banking institutions, professional cash chest). These are both devot - handlers and the public were the essential ingredients of any policy ed to promoting an under - to ensure that banknotes in circulation are of high quality.

BIllEtARIA no. 10 December 2011 43 Background References Basic bibliography on euro banknotes and coins

Basic bibliography on euro banknotes and coins BIllEtARIA

the number of publications, studies or other literature on cash management is fairly limited, particularly so in the case of banknotes. the technical aspects of banknote production, the latest innovations, the different techniques used when putting cash into circulation, distribution systems, different ways of managing optimal banknote stocks, implementing quality policies, automated operations systems, the various anti-counterfeiting measures, are all issues on which there is a dearth of literature.

In some ways, the euro is the exception to the rule. the European Central Bank and the issuing central banks have made progress towards creating a set of publications and studies which constitute a body of information with which to study issues concerning euro banknotes. In particular, considerable efforts have been made to set up websites with a wealth of visual information about the common currency (see “list of contacts” at the end of this issue of BIllEtARIA). these usually include a “frequently asked questions” section, offering readers guid - ance on many of the commonest queries they might have concerning banknotes and coins. Central banks’ annu - al reports also increasingly feature a section with highlights of cash management.

this section presents a selection of publications with a short summary of their content.

I. Publications on the introduction of the euro and the changeover from national currencies

Euro 2002. Information on the introduction of euro banknotes and coins Deutsche Bundesbank. July 2000, October 2000, February 2001, May 2001 and September 2001, 20 pp. Published to mark the introduction of euro banknotes and coins in Germany. It describes the preparations for introduction and information on the design of banknotes and coins, frontloading prior to issue, protection of the euro, the changeover and the information campaign.

National Cash Changeover Plan Bank of Greece – Ministries of National Economy and Finance. December 2000. 31 pp. Book published to mark Greece’s joining the euro. Contains a description of the banknotes and coins.

El Banco de España y la introducción del Euro Ricardo Fernández and Nuria Horcajada. Banco de España. Madrid, 2002. 252 pp. Summary of the various stages of the introduction of the euro in Spain. The preparations, the changeover and the public information campaign. Includes tables with information about changeover processes in the countries that adopted the euro in 2002.

44 BIllEtARIA no. 10 December 2011 Background References Basic bibliography on euro banknotes and coins

How the euro became our money. A short history of the euro banknotes and coins ECB. 2007. 94 pp. Book describing the various stages in the process of the creation of the euro as a currency, culminating with euro banknotes and coins being put into circulation in 2002. It also describes the tasks carried out by the Eurosystem to guarantee fluid circulation of euro banknotes and coins. It ends with a review of the Eurosystem’s project for the design of a new series of banknotes and coins, due to be launched in the near future.

Euro Banknote Design Exhibition Catalogue ECB. September 2003. 106 pp. Catalogue of the exhibition organised by the ECB in 2003 showing the sketches of the euro banknote designs presented to the international competition run in 1996 by the Council of the European Monetary Institute to select the design of the first series of euro banknotes.

Evaluation of the 2002 Cash Changeover ECB. 2002. 102 pp. Describes the scenario for the preparation prior to the changeover in the countries that joined the euro in 2002, the initial stage of its being placed in circulation, and the issues encountered and lessons learned from the first phase.

the making of the euro. A mosaic of history Claudio Hills. ECB. 2002. 118 pp. Catalogue of the exhibition of photographs organised by the ECB which was on show to the public at the Banco de España in Madrid and Barcelona in the summer of 2002.

ECB’s Monthly Bulletin • Implications of the euro cash changeover on the development of banknotes and coins in circulation May 2002, pp 67-74. • Euro banknote preparations: from cash changeover to post-launch activities January 2002, pp 55-59. • the Euro cash changeover in markets outside the euro area October 2001, pp 65-68. • the introduction of Euro banknotes and coins April 2001, pp 63-69.

Bulletin de la Banque de France • l´introduction des pièces et des billets en euros: préparation et mise en œuvre Alain Vienney. Nº 85, January 2001, pp 53-57. • Bilan à cinq mois du passage réussi à l´euro fiduciaire Gilles Lardy. Nº 101, May 2002, pp 47-56.

Für die Euro-Einführung Peter Buchegger, Oesterreischische Nationalbank. December 2008, 43 pp. Evaluation of the public information campaign on the introduction of the euro in Austria.

Practical issues arising from the euro Bank of England. December 2001, 120 pp. May 2002,160 pp. Before and after the introduction of the euro: the contribution of central banks and the banking industry.

BIllEtARIA no. 10 December 2011 45 Background References Basic bibliography on euro banknotes and coins

II. Publications describing euro banknotes and coins

Die Euro-Münzen Deutsche Bundesbank. December 2010. 36 pp. Description of the euro coins, including the national sides of the 17 issuing countries and technical characteris - tics.

Press Kit ECB. 2011. 14 pp. Publication to mark the 10th anniversary of euro banknotes and coins being brought into circulation. Includes information on the euro for distribution to the press.

Anna & Alex take on the banknotes forgers ECB. 2010. 44 pp. Comic for children aiming to teach them how to recognise euro banknote security features.

trainers’ Guide. to the euro banknotes and coins ECB. 2007. 24 pp. Trainer training manual on euro banknotes and coins with detailed information on the design and the security fea - tures, worn, damaged and unfit banknotes. It also gives guidance on how to act when a suspect counterfeit banknote is detected.

Euro- Münzen in Österreich Oesterreischische Nationalbank. 2011. 31 pp. Description of the euro coins with the 17 national sides, the commemorative coins issued and Austrian collector’s coins.

Notas e Moedas de euro. Cadernos do Banco de Portugal nº 8 Banco de Portugal. 2011. 44 pp. Information on euro banknotes and coins: design, security features, reproduction, damaged banknotes, coun - terfeiting, exchanging escudos and other EMU national currencies. It also includes frequently asked questions, community and national rules.

EURO: a currency of the European Union InterCrim-press. 8 th edition (revised) 2012. 96 pp. Catalogue with information on euro banknotes and coins. It provides a description of the euro banknotes design and security features, and a procedure to check the euro banknotes that enables to detect counterfeits.

III. Publications relating to the issuance and management of the euro

Deutsche Bundesbank Monthly Bulletin • Foreign demand for euro banknotes issued in Germany January 2011, pp 29-41. • the banknote cycle and banknote recycling in Germany January 2011, pp 17-27. • the use of cash and other payment instruments –a behavioural study using micro data March 2010, pp 33-42. • the development and determinants of euro currency in circulation in Germany June 2009, pp 45-58.

Boletín Económico del Banco de España • the Banco de España´s auxiliary depositories Banco de España. July-August 2005. 8 pp.

BIllEtARIA. Banco de España • the coin packaging system. An element in the fight against coin counterfeiting in Germany Franz-Josef Behringer. Deutsche Bundesbank. October 2010. • the European legal framework protecting the euro against counterfeiting: an overview Javier Priego, Banco de España and Pedro Machado, Banco de Portugal. October 2010. • A multilateral approach to the fight against counterfeiting Allister McCallum. ECB. October 2010. • Cash deposit systems Kari Takala. Bank of Finland. April 2010.

46 BIllEtARIA no. 10 December 2011 Background References Basic bibliography on euro banknotes and coins

BIllEtARIA (cont.)

• Mechanical banknote sorting: an empirical study Mariano Martínez, Eduardo Kropnick and J. Darío Negueruela. Banco de España. October 2009. • Commemorative euro coins María José Fernández Lupiáñez and J. Darío Negueruela. Banco de España. April 2009. • Cash communication has an encouraging future! Oliver Radelet. ECB. October 2008. • Banco de España National Cash Survey. María Luisa Leyva. Banco de España. October 2008. • How to manage cash policy in 15 countries? Antti Heinonen. ECB. April 2008. • the Eurosystem´s legal competence regarding banknote issuance Pedro Machado. Banco de Portugal. April 2008. • Improving banknote and coin statistics: a condition for efficient cash management J. Darío Negueruela. Banco de España. April 2008. • Coin cycle management in Portugal Helder Rosalino. Banco de Portugal. October 2007. • the Banco de España counterfeit currency database Víctor Andrés. Banco de España. March 2007. the European Central Bank, the Eurosystem and the European System of Central Banks ECB. 2009.

ECB’s Monthly Bulletin

• the use of euro banknotes – results of two surveys among households and firms April 2011, pp 79-90. • Euro banknotes – A tangible symbol of integration May 2008, pp 139-144. • Circulation and supply of euro banknotes and preparations for the second series of banknotes October 2007, pp 101-107. • the Euro banknotes: developments and future challenges August 2005, pp 85-91. • Euro banknotes: first years of experience August 2004, pp 79-86. • Early experience of the management of Euro banknote printing and issuance July 2003, pp 53-59. • the demand for currency in the euro area and the impact of the euro cash changeover January 2003, pp 39-51.

Bulletin de la Banque de France

• le traitement des billets. l’évolution de la réglementation et de recyclage par le secteur privé en France Martine Bodilis and Michel Brondel. Nº 185, 3rd quarter 2011, pp 121-130. • la qualité de la circulation des billets. Un rôle essentiel de la Banque Central S. Mirigay, J. Moreau. Nº 179. 1st quarter 2010, pp 65-74. • la formation des professionnels à l’authentification des billets de banque Direction de l’Entretien de la Monnaie fiduciaire et des Relations avec la clientèle institutionnelle. Nº 176. 2nd quarter 2009, pp 47-53. • le statut juridique de la monnaie unique Jean-Christophe Cabotte, Anne-Marie Moulin. Nº 108. December 2002, pp 35-58. the Roles of De Nederlandsche Bank in euro banknote circulation De Nederlandsche Bank. 2001, 16 pp.

Bank of Finland. Monthly Bulletin

• Euro Cash is as popular as ever Antti Heinonen. May 2009. 9 pp. • Finland’s currency supply system Urpo Levo and Kari Takala. May 2004. 9 pp.

BIllEtARIA no. 10 December 2011 47 Background References list of contacts of the European System of Central Banks

List of contacts of the European System of Central Banks 1

Eurosystem

European Central Bank Banque Nationale de Belgique Press and Information Division Boulevard de Berlaimont 14 Kaiserstrasse 29 B - 1000 Brussels D-60311 Frankfurt am Main Tel: +32 2 221 21 11 Tel: +49 69 1344 7455 Fax: +32 2 221 31 00 Fax:+49 69 1344 7404 www.nbb.be www.ecb.europa.eu [email protected] [email protected]

Deutsche Bundesbank Eesti Pank Wilhelm-Epstein-Str. 14 Estonia Blvd .13 D-60431 Frankfurt am Main 15095 Tallinn Tel: +49 69 9566 3511 Tel: +372 66 80 719 Fax: +49 69 9566 3077 Fax: +372 66 80 836 www.bundesbank.de www.eestipank.info [email protected] [email protected]

Central Bank of Ireland Bank of Greece PO BOX 559 21 E. Venizelos Avenue Dame Street GR 102 50 Athens Dublin 2 Tel: +30 210 320 1111 Tel: +353 1 224 6000 Fax: +30 210 320 3922 Fax: +353 1 671 65 61 www.bankofgreece.gr www.centralbank.ie [email protected] [email protected] Banque de France Banco de España Direction de la Communication/Documentation Alcalá, 48 et Relations avec le Public 28014 Madrid 48, rue Croix-des-Petits-Champs Tel: +34 91 338 5000 75049 Paris Cedex 01 Fax: +34 91 338 6887 Tel: +33 1 42 92 39 08 www.bde.es Fax: +33 1 42 92 39 40 [email protected] www.banque-france.fr [email protected]

Banca d’Italia Central Bank of Cyprus Via Nazionale 91 80, Kennedy Avenue 00184 Roma 2 CY-1076 Nicosia Tel: +39 06 47923782/4878 Tel: +357 22 71 41 00 Fax: +39 06 47923896 Fax: +357 22 71 49 93 www.bancaditalia.it www.centralbank.gov.cy [email protected] [email protected]

Banque centrale du luxembourg Central Bank of Malta 2, Boulevard Royal Pjazza Kastilja L-2983 Luxembourg Valletta , VLT 1060 Tel: +352 4774-1 Tel: +356 2550 0000 Fax: +352 4774-49 10 Fax: +356 2550 2500 www.bcl.lu www.centralbankmalta.org [email protected] [email protected]

De Nederlandsche Bank Oesterreichische Nationalbank Westeinde 1 Otto-Wagner-Platz 3 1017 ZN Amsterdam A 1090 Wien Tel: +31 20 524 91 11 Tel: +43 1 404 20 6666 Fax: +31 20 524 25 00 Fax: +43 1 404 20 6696 www.dnb.nl www.oenb.at [email protected] [email protected]

1. In accordance with EU practice, the EU countries are listed using the alphabetical order of the country names in the national languages.

48 BIllEtARIA no. 10 December 2011 Background References list of contacts of the European System of Central Banks

Banco de Portugal Banka Slovenije Quinta do Chacão Slovenska 35 2580 Carregado 1505 Ljubljana Tel: +351 263 856 500 Tel: +386 1 471 90 00 Fax: +351 263 851 300 Fax: +386 1 251 55 16 www.bportugal.pt www.bsi.si cncontrafaccoes@bportugal,pt [email protected]

Národná banka Slovenska Suomen Pankki Imricha Karvasa 1 Snellmaninaukio PL 160 813 25 Bratislava FIN-00160 Helsinki Tel: +421 2 5787 1111 Tel: +358-10 8311 Fax: +421 2 5787 1100 Fax: +358 9 174 872 www.nbs.sk/sk/titulna-stranka www.suomenpankki.fi [email protected] [email protected]

National Central Banks of non-euro area countries

Balgarska Narodna Banka Ceská národní banka 1, Knyaz Alexander I Sq. Na Príkope 28 Sofia -1000 115 03 Praha 1 Tel: (+3592) 91459 Tel: +224 411 111 Fax: (+3592) 980-24-25 Fax: +224 412 404 www.bnb.bg/index.htm www.cnb.cz/en/index.html [email protected] [email protected]

Danmarks Nationalbank latvijas Banka Havnegade 5 K. Valdemara iela 2ª DK-1093 Copenhagen K LV-1050, Riga Tel: +45 33 63 63 63 Tel: +371 6702 2300 Fax: +45 33 63 71 03 Fax: +371 6702 2420 www.nationalbanken.dk www.bank.lv [email protected] [email protected]

lietuvos bankas Magyar Nemzeti Bank Gedimino pr. 6 1054 Szabadság tér 8/9 LT-01103 Vilnius 1850 Budapest Tel: +370 5 268 00 29 Tel: +36 1 428 2752 Fax: +370 5 262 81 24 Fax: +36 1 428 2569 www.lb.lt www.mnb.hu [email protected] [email protected]

Narodowy Bank Polski Banca Nat¸ionalaˇ a României ul. Swietokrzyska 11/21 25 Lipscani Street, Sector 3 00-919 Warszawa 030031 Bucharest Tel: +48 22 653 10 00 Tel: +4021-313.04.10 Fax: +48 22 620 85 18 Fax: +4021-312.38.31 www.nbp.pl www.bnro.ro [email protected] [email protected]

Sveriges Riksbank Bank of England Brunkebergstorg 11 Threadneedle Street SE-103 37 Stockholm London EC2R 8AH Tel: +46 8 787 00 00 Tel:+44 020 7601 4444 Fax: +46 8 21 05 31 Fax:+44 020 7601 5460 www.riksbank.se www.bankofengland.co.uk [email protected] [email protected]

BIllEtARIA no. 10 December 2011 49 Background References Securiy features of the euro banknotes and coins

Security features of the euro banknotes and coins Jean Michel Grimal European Central Bank Fernando león Banco de España

the euro banknotes include a wide range of security features so as to allow both public and professional cash handlers to recognise genuine banknotes. the general public can check the security features by using their senses, essentially by looking closely at features with opti- cal effects and by feeling the special properties of the paper and the relief effect of the printing in some areas of the bank- note. the current recommendation is to use the LOOK/FEEL/TILT approach for easy authentication. the features used for this approach are called level 1 features. Features developed specifically for cashiers and retailers, as well as for vending machines, enable a reliable authentication of the banknotes with the aid of dedicated tools or sensors designed for professionals. Such equipment detects well-defined properties of the banknotes. these features are referred to as level 2 features. Decisions on the banknotes’ authenticity can be taken by the professional cash handler (level 2A) or by the equipment (level 2B). the euro banknotes also incorporate several covert features that can be detected by special sensors in the high-speed sort- ing machines of the Eurosystem central banks. these features are based on sophisticated physical effects which enable 100% authentication at high speeds (up to 40 banknotes per second) and prevent any retro-engineering of the features. Security fea- tures are classified as level 3 features if they fulfil the requirements laid down in the standards for authentication at last resort. Part of the security offered by some features results from the use of sophisticated printing techniques/machines that are not accessible to the general public and that have characteristics which cannot be properly reproduced by commercially avail- able equipments.

Security features of euro coins

The €1 and €2 coins likewise have a number of security features, such as the combin- ation of two colours –silver and gold– as well as the lettering along the edge. In add- ition, the “sandwich” composition of €1 and €2 coins, and their unique magnetic prop- erties, make their use in vending machines more secure. The coins are composed of two parts: an outer part and an inner part with three layers which have copper and nick- el components.

Common features for the recognition of euro banknotes

1. The name of the currency written in both the Latin (EURO) and the Greek (EYPΩ) alphabets.

2. The initials of the European Central Bank, in the five linguistic variants –BCE, ECB, EZB, EKT, EKP– covering the 11 official languages of the European Union at the time when the euro banknotes were first introduced.

3. The symbol © indicating copyright protection.

4. The flag of the European Union.

5. The signature of the President of the European Central Bank. Euro banknotes bear the sig- nature of Willem F. Duisenberg, the first President of the European Central Bank, or that of Jean-Claude Trichet, who succeeded him on 1 November 2003. Banknotes with either sig- nature are valid.

50 BIllEtARIA no. 10 December 2011 Background References Securiy features of the euro banknotes and coins

Banknote security features for the general public and for visually impaired people (level 1)

FEEl

1. Cotton-based paper : this provides recognisably crisp and firm 2. 2. substrates for banknotes. 2. Intaglio printing : this printing technique yields a uniquely sharp relief impression for easy authentication. 1. 3. 3. tactile marks : special intaglio printed marks for visually impaired are applied on the €200 and €500 banknotes. lOOK

1. Watermark (multitone/electrotype): Image incorporated into the 1. 2. paper that becomes visible when the banknote is held against the light. It is created during the paper-making process by varying the thickness of the paper. 2. Security thread : a special thread that is embedded in the sub - 3. strate and can easily be recognised by both the general public and cashiers. 3. See-through number : the partial images printed on the front and the back of the banknotes are carefully aligned so as to produce a specific design (the number giving the denomination) when held against the light. tIlt

1. Hologram stripe : a gleaming silver stripe attached to the paper 1. 4. with the aid of hot stamping techniques. Its optical effects are based on the diffraction of light by microscopic structures. It is used on the €5, €10 and €20 banknotes. 2. Hologram patch : a gleaming silver patch with the same physical effects as the hologram stripe that is used on the €50, €100, €200 and €500 banknotes. 3. 3. Glossy stripe : a stripe that exhibits a clear shifting of the reflect - ed light when the viewing angle is changed. It is used on the €5, €10 and €20 banknotes. 2. 4. Colour-changing number (OVI) : the special ink used for this number has embedded pigments that act as interference filters for light. The feature is used on €50, €100, €200 and €500 bank - notes.

Banknote security features for professional cash handlers (level 2)

1. Microprinting : tiny printed characters that can be detected by 1. 2. cashiers. 2. Magnetism (in the printing, thread and numbering): magnetic properties are given to various parts of the banknote. They can be detected with the aid of dedicated tools.

3. Ultraviolet (UV) properties : pigments embedded in the fibres 3. used for the substrate and in the ink used for printing which emit colours when held under UV light. 4. Infrared (IR) properties in the printing: the ability of some mater - ials to absorb infra-red light are exploited in design features applied by intaglio printing.

BIllEtARIA no. 10 December 2011 51 B I L L E

Europa recens descripta by W. Blaeu, 1635. T EUROPEAN CENTRAL BANK ART COLLECTION, Frankfurt am Main. BILLETARIA YEAR V ISSUE 10 DECEMBER 2011 A

BIllEtARIA Secretariat December 2011 Cash and Issue Department, Banco de España R Alcalá, 522 Published by 28027 Madrid Banco de España / Cash and Issue Department Tel.: +34 91 338 6310 www.bde.es Fax: +34 91 338 6887 Editorial Committee J. Darío Negueruela Manuel Galán the opinions expressed in the articles published here are Wolfgang Söffner those of their authors and do not necessary reflect those Luis Fiore of their respective employers or the Banco de España, I unless otherwise stated. Editorial Staff Reproduction of the content of BIllEtARIA , in whole María Luisa Leyva or in part, is permitted, provided the source is Víctor Andrés

acknowledged. A Fernando León María Eulalia Andonegui For subscriptions and contributions, please contact: José Moreno [email protected] Special Advisors © Banco de España Bernardo Calvo Legal deposit: M-45.124-2010 Hélder Rosalino Printed in Spain, by Artes Gráficas Palermo, S. L .