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April 01, 2005

Coin Of The Realm

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Table of Contents - Overall
Table of Contents – Apr 2005

Coin Of The Realm

Are Northern Bank's Post-Robbery Notes Worth the Paper They're Printed On?

Cindy Ellen Hill
1775 words

In the wake of the December 20, 2004 robbery which allegedly netted the equivalent of
$53 million, officials of Northern Ireland's Northern Bank announced an
'unprecedented' bank-note exchange: withdrawing nearly all their £300 million of
currently-circulating £10, £20, £50 and £100 notes and replacing them with different
colors and styles. Northern Bank CEO Don Price announced that the purpose of the
exchange, which began mid-March 2005, was to make it harder for the robbers to spend
their cash.

However, BBC reports Price admitted the old notes will continue to be legal tender for
all the robber's frillies at Marks and Spencer even after the official exchange
period, unless it's on one of the lists of stolen-note serial numbers. Lists which
have – oopsie! – led thus far to a woman tourist in Australia and some blokes buying
chips in England being hauled in for police questioning, because the lists don't
actually correspond with the stolen cash. Such incidents, much like the confusion
over exactly how much moolah was missing, are to be forgiven – banking is, after all,
an inexact science, and what with billions of bills floating around in so many
different denominations, it's unfair to expect bankers to tally up what was in their
vault yesterday, subtract the amount in their vault today, and come up with a figure
indicating what went missing over off-business hours.

Americans find all this talk of bank notes, pounds, and different colors disorienting.
Our money is hard cold cash, legal tender, in any shade you want as long as it's
green, and it's issued by the U.S. Treasury, not banks. Can you imagine "Bank of New
York" or "Citicorp" bank notes? They'd be covered top to bottom with advertisements
for credit cards and car loans. How would we tell money from junk mail? No, we stick
with government-issued Crane-paper intaglio press printed cash here the old U. S. of
A., and confine discussions about it to the pressing issues of where to get more, and
whichcret societies are represented by the chopped-off pyramid and beaming eye.

In Great Britain, however, where the citizens are called 'subjects' and it's treason
to insult the Queen, bills are issued by the Bank of England, and called bank notes.
The Bank of England has an official royal monopoly on the issuance of bank notes.
Despite the term "pounds sterling", British bucks were never backed by silver. With a
few years off due to war and other inconveniences to the Empire, British pounds were
backed by gold until 1931. Then, just like in America, they became pieces of paper
backed by other pieces of paper called securities. No longer can you go to the bank
and trade either American dollars or British pounds for gold. In fact, you can't even
trade them for the securities that back them, because securities are more like
theoretical pieces of paper.

Getting back to that Bank of England 'monopoly': like many aspects of order in the
British empire (or, heck, to be honest, in the U.S., too), this 'monopoly' is
imperfect. The 'old lady of Threadneedle Street', as the Brits fondly nickname the
Bank of England (in a near-French example of complicating the overly simple for no
apparent reason), is the National Central Bank of Great Britain. But a few 'non-NCB'
banks are also authorized to issue bank notes of their own.

The non-NCB note-issuing banks comprise three banks in Scotland, one each on Jersey,
Guernsey, and the Isle of Man, and four in Northern Ireland, including Northern Bank.
The cost of actually printing the notes must be borne by each of these banks. Yet
they bear the burden cheerfully, viewing it as the price of maintaining their distinct
idiom – or perhaps it's the value of the advertising from having their name placed on
all those pieces of paper that people seem so obsessed with passing hand-to-hand
through the course of a day.

Any suggestion of terminating the practice of local banknote issuance has been met
with vehement opposition. For example, when a November 2000 report of the European
Central Bank recommended a total ban on issuance of banknotes by non-NCB's should
Great Britain join the EU, Scottish Member of the European Parliament Struan Stevenson
called it an assault on cultural identity.

In the case of the Northern Bank reissuance, the expense of printing a new nearly £300
million batch of notes is estimated at £5 million; it takes money to, literally, make
money. Speaking of which, Northern Bank's plastic £5 notes will not be exchanged, but
remain in circulation, so you can still trade in your plastic Northern Bank notes for
paper Northern Bank notes for paper Bank of England notes for.... well, you get the

There is, however, one more condition of non-NCB banknote issuance: every banknote
issued must be backed, pound for pound, with actual deposits in the Bank of England.
Every locally issued banknote can, accordingly, be traded in for a Bank of England
note, which, as previously discussed, can then be traded in for a theoretical security
interest that probably exists in a digital database someplace. But, nostaligia for
the gold standard aside, at least these fun little local bills that gym-shoe wearing
American tourists can't help calling Monopoly money can be traded in for genuine
British Bank of England pounds. (There's a small exemption; each of these banks can
float a few million pounds representing their cash on hand when this program was
adopted in the mid-nineteenth century.)

This is where, in the case of the Northern Bank Great Robbery Replacement Program, the
waters get muddy. The banknote exchange must have been approved by the Bank of
England, arbiter of all things financial in Great Britain. But, did Northern Bank
deposit full funds to cover the reissuance pound-for-pound in the Bank of England
vaults? If so, where did it come from? And if they didn't – what does that mean in
terms of guaranteed value of the new notes?

The precise policy for issuance and exchange of Northern Ireland bank notes is not
posted on the Bank of England or HM Treasury websites, in their press releases or
newsletters, or in any of their publicly disclosed committee minutes. But why would
it be? According to Northern Bank CEO Price, this present maneuver has never been
done before. Sure, banks have changed the pretty pictures on their bills and issued
new ones, slowly removing old ones from circulation as they wear out, but never has an
event billed as a short-term "exchange" taken place in British banks.

The question of whether Northern Bank deposited a new £300 million in the Bank of
England to cover this new banknote issuance ha not been publicly addressed by Northern
Bank, its new owner Danske Bank, the Bank of England, the royal Treasury, or the
Police Service of Northern Ireland who, we know, is all over the situation like leaves
on a tree (we won't mention in what season). If they made the deposit, it would be
curious to learn where they got such an awesome sum of free cash, equivalent to their
entire circulation, available (plus the extra £5 million for printing, making it more
than they have in circulation). It is unlikely that Danske, who just paid £967
million to buy both Northern Bank and it's troublesome sister, the much larger
National Irish Bank, would quietly drop another £300 million just to get over this
little hurdle.

Press statements have carefully referred to this project as a "reissuance" or
"exchange" of banknotes. This could lead discerning ponderers to conclude this was
deemed a wash, and no additional £300 million was put up to guarantee the issuance.
In other words, let's presume that the £300 million in new post-robbery notes was
issued against the £300 million already in the Bank of England guaranteeing the money
already in circulation.

That means that at the instant the new notes roll off the press, Northern Bank has
£600 million backed by £300 million on deposit at the Bank of England. That hardly
seems fair to the other non-NCB banks in Scotland, Ireland, and the isles, who don't
get to print free money. It would appear to create what capitalistic American
citizens might call a competitive disadvantage. But let's assume that's temporary,
because the minute those new notes hit the very cash center in Belfast that was
robbed, old notes start coming in. With each old note that comes in and gets stuck in
the burn pile, the discrepancy shrinks. Within some short period of time, £300
million old notes should vanish, and Northern Bank will be back on par, except for
being out the £5 mill printing costs.

Except that we all know £300 million is not going to come in. The £16.5 million
allegedly stolen for which the bank has posted serial numbers isn't coming in anytime
soon – unless, of course, it already has, but that's another line of pondering. So
Northern Bank gets to balance its books regarding this whole robbery thing by simply
printing replacements. Steal all ya want, we'll print more. Sure beats having to
actually make up the stolen cash, carry insurance, or dip into reserves designed to
stabilize the currency, like any robbed American bank would have to do.

But what else won't come in? How many millions of pounds in mattresses, cookie jars,
small business vaults, tied up in estates, or circulating in smaller criminal
enterprises around the region are not going to be promptly cashed in for lovely new
pieces of paper? Each and every bill not promptly exchanged is, if the assumption is
correct regarding the lack of a new backing deposit, free, unguaranteed cash for the

Will the Bank of England monitor the banknote exchange, setting a deadline upon which
every pound of new issuance which has not seen its corresponding old pound come in be
backed by a deposit in the vaults at Threadneedle Street or destroyed? Will the
Police Service of Northern Ireland take evidentiary custody of every old note that
comes in, noting its serial number and filing it, under adequate security, so that
when – if – anyone is ever charged with this robbery they can inspect the notes for
exculpatory evidence, such as to challenge the assertions regarding how much money was
taken and what the serial numbers were?

The denominations of the new Northern Bank notes are printed right on them, along with
a new bank logo that looks shockingly modern. But the value of these newly issued
notes when weighed against the ultimate monetary standard – the role of money in the
spheres of community and justice – has yet to be proven.


Cindy Hill is vice chair of the Green Mountain Unit of Irish Northern Aid. Please
direct any questions or comments to the unit Chair, Graydon Wilson,

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Table of Contents – Apr 2005
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