Thursday, 22 January 2009

British Bank-Notes

The head honcho of the Financial Services Authority (FSA), Lord Turner, has stated that the whole British banking industry needs a major overhaul. I have no doubt that this is true; it's a terrible indictment of the Government, too, because they have allowed us to reach this sorry state of affairs.

If there is to be an overhaul, I'd like them to examine the regulations and Act of Parliament whereby Scottish and Northern Ireland banks are enabled to print their own bank-notes. This phenomenon is an anomaly to me. As far as I can see, the local banks began to print their own notes in order, simply, to make a profit; and a massive one at that.

It has been explained to me before, about how this actually happens. It has something to do with a local bank depositing the equal amount of funds with the Bank of England and then printing that amount in bank-notes. Consequently, they make a neat profit in interest from this. I don't fully understand the process, but it is a bit like that.

It begs the question: why can't Barclay's Bank or Lloyd's Bank print their own notes? This is an anomaly.

I reckon there should be one issuing authority for bank-notes in the UK; one bank-note. Personally, I'd be quite happy with Bank of England notes. I haven't heard many complaints from Welsh people about them.

The Government and the FSA ought to re-examine the regulations which mean that regional banks in the UK can print their own notes. It would be so much simpler, too. There'd be no more confusion arising from retailers and others re the acceptability of local notes, which is a nuisance to those of us who try to spend a local note elsewhere or, indeed, abroad.

How many other countries permit commercial banks to print their own notes?

One United Kingdom, one bank-note.


Mick Stella said...

I agree. I hate being treated with suspicion on the Mainland when I attempt to pay with N.Irish notes. Plus the banks here in Belgium give a lower exchange rate for non Bank of England notes.

Mick Stella said...

Wikipedia have more information on N.I, banknotes...

Timothy Belmont said...

I used to work in banking, so I witnessed the piles of bank-notes they issued!

The banks which are allowed to issue their own bank-notes do not continue this exercise for patriotic nor altruistic reasons; they do it because it generates substantial profits for them.

The banks which have traditionally issued their own notes have been the Clydesdale Bank, Bank of Scotland, Royal Bank of Scotland, Northern Bank, Ulster Bank, Bank of Ireland and First Trust Bank.