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Banknote
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Banknote
A banknote or bank note – also called a bill (North American English) or simply a note – is a type of paper money that is made and distributed ("issued") by a bank of issue, payable to the bearer on demand. Banknotes were originally issued by commercial banks, which were legally required to redeem the notes for legal tender (usually gold or silver coin) when presented to the chief cashier of the originating bank. These commercial banknotes only traded at face value in the market served by the issuing bank. Commercial banknotes have primarily been replaced by national banknotes issued by central banks or monetary authorities.
By extension, the word "banknote" is sometimes used (including by collectors) to refer more generally to paper money, but in a strict sense notes that have not been issued by banks, e.g. government notes, are not banknotes.[better source needed]
National banknotes are often, but not always, legal tender, meaning that courts of law are required to recognize them as satisfactory payment of money debts. Historically, banks sought to ensure that they could always pay customers in coins when they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history of central banks backing their currencies in gold or silver. Today, most national currencies have no backing in precious metals or commodities and have value only by fiat. With the exception of non-circulating high-value or precious metal issues, coins are used for lower valued monetary units, while banknotes are used for higher values.
Today, a central bank or treasury is generally solely responsible within a state or currency union for the issue of banknotes. However, this is not always the case, and historically, private banks frequently handled all of a country's paper currency. Thus, many different banks or institutions may have issued banknotes in a given country. Commercial banks in the United States had legally issued banknotes before there was a national currency; however, these became subject to government authorization from 1863 to 1932. In the last of these series, the issuing bank would stamp its name and promise to pay, along with the signatures of its president and cashier on a preprinted note. By this time, the notes were standardized in appearance and not too different from Federal Reserve Notes.
In a small number of countries, private banknote issuing continues to this day. For example, by virtue of the complex constitutional setup in the United Kingdom, certain commercial banks in two countries (Scotland and Northern Ireland) continue to print their own banknotes for domestic circulation, even though they are not fiat money or declared in law as legal tender anywhere. The UK's central bank, the Bank of England, prints notes which are legal tender in England and Wales; these notes are also usable as money (but not legal tender) in Scotland and Northern Ireland (see Banknotes of the pound sterling). The Bank of Scotland was the first bank in Europe to successfully print its own paper banknotes, and entered circulation in 1696. The Bank of Scotland is currently the longest continuous issuer of banknotes in the world.
In the two special administrative regions of the People's Republic of China, arrangements are similar to those in the UK; in Hong Kong, three commercial banks are licensed to issue Hong Kong dollar notes, and in Macau, banknotes of the Macanese pataca are issued by two different commercial banks. In Luxembourg, the Banque Internationale à Luxembourg was entitled to issue its own Luxembourgish franc notes until the introduction of the Euro in 1999.
As well as commercial issuers, other organizations may have note-issuing powers; for example, until 2002, the Singapore dollar was issued by the Board of Commissioners of Currency, Singapore, a government agency that was later taken over by the Monetary Authority of Singapore.
As with any printing, there is also a chance for banknotes to have printing errors. For U.S. banknotes, these errors can include board break errors, butterfly fold errors, cutting errors, dual denomination errors, fold over errors, and misalignment errors.
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Banknote
A banknote or bank note – also called a bill (North American English) or simply a note – is a type of paper money that is made and distributed ("issued") by a bank of issue, payable to the bearer on demand. Banknotes were originally issued by commercial banks, which were legally required to redeem the notes for legal tender (usually gold or silver coin) when presented to the chief cashier of the originating bank. These commercial banknotes only traded at face value in the market served by the issuing bank. Commercial banknotes have primarily been replaced by national banknotes issued by central banks or monetary authorities.
By extension, the word "banknote" is sometimes used (including by collectors) to refer more generally to paper money, but in a strict sense notes that have not been issued by banks, e.g. government notes, are not banknotes.[better source needed]
National banknotes are often, but not always, legal tender, meaning that courts of law are required to recognize them as satisfactory payment of money debts. Historically, banks sought to ensure that they could always pay customers in coins when they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history of central banks backing their currencies in gold or silver. Today, most national currencies have no backing in precious metals or commodities and have value only by fiat. With the exception of non-circulating high-value or precious metal issues, coins are used for lower valued monetary units, while banknotes are used for higher values.
Today, a central bank or treasury is generally solely responsible within a state or currency union for the issue of banknotes. However, this is not always the case, and historically, private banks frequently handled all of a country's paper currency. Thus, many different banks or institutions may have issued banknotes in a given country. Commercial banks in the United States had legally issued banknotes before there was a national currency; however, these became subject to government authorization from 1863 to 1932. In the last of these series, the issuing bank would stamp its name and promise to pay, along with the signatures of its president and cashier on a preprinted note. By this time, the notes were standardized in appearance and not too different from Federal Reserve Notes.
In a small number of countries, private banknote issuing continues to this day. For example, by virtue of the complex constitutional setup in the United Kingdom, certain commercial banks in two countries (Scotland and Northern Ireland) continue to print their own banknotes for domestic circulation, even though they are not fiat money or declared in law as legal tender anywhere. The UK's central bank, the Bank of England, prints notes which are legal tender in England and Wales; these notes are also usable as money (but not legal tender) in Scotland and Northern Ireland (see Banknotes of the pound sterling). The Bank of Scotland was the first bank in Europe to successfully print its own paper banknotes, and entered circulation in 1696. The Bank of Scotland is currently the longest continuous issuer of banknotes in the world.
In the two special administrative regions of the People's Republic of China, arrangements are similar to those in the UK; in Hong Kong, three commercial banks are licensed to issue Hong Kong dollar notes, and in Macau, banknotes of the Macanese pataca are issued by two different commercial banks. In Luxembourg, the Banque Internationale à Luxembourg was entitled to issue its own Luxembourgish franc notes until the introduction of the Euro in 1999.
As well as commercial issuers, other organizations may have note-issuing powers; for example, until 2002, the Singapore dollar was issued by the Board of Commissioners of Currency, Singapore, a government agency that was later taken over by the Monetary Authority of Singapore.
As with any printing, there is also a chance for banknotes to have printing errors. For U.S. banknotes, these errors can include board break errors, butterfly fold errors, cutting errors, dual denomination errors, fold over errors, and misalignment errors.
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