Banknote Issuance Regulation Sees Decrease in Total Backing Requirement

The Bank of England regulates banknote issuance by six authorized banks in Scotland and Northern Ireland. The regulation, which came into effect on November 23, 2009, requires these banks to hold backing assets for their notes at all times.

These authorized banks include the Bank of Ireland (UK) plc, Bank of Scotland plc, Clydesdale Bank Limited, Northern Bank Limited, Royal Bank of Scotland plc, and National Westminster Bank plc. They must back their note issue with a combination of Bank of England notes, UK coin, or funds placed on deposit in sterling in an interest-bearing bank account at the Bank.

The regulation aims to provide noteholder protection, ensuring that holders of genuine banknotes receive a similar level of protection as those holding Bank of England notes. The authorized banks must comply with conditions set out in the Scottish and Northern Ireland Banknotes Rules and Statement of Penalty Policy.