Economist JP Koning recently blogged about the announcement by First Trust Bank of Northern Ireland that it would be discontinuing the issuance of its own
banknotes. Here's an excerpt. I had seen the story but hadn't grasped its significance beyond numismatics. -Editor
I was disappointed to see that First Trust Bank, a commercial bank based in Northern Ireland, will stop issuing its own brand of banknotes. Under different
names, First Trust has been in the business of providing paper money for almost two hundred years, starting with the Provincial Bank of Ireland back in
99.9% of the world's population uses government-issued banknotes. A small sliver of us-those who live in Northern Island, Scotland, Hong Kong, and
Macau-get to use privately-issued banknotes. Prior to First Trust's announcement, I count twelve private issuers scattered across the globe:
Northern Ireland: Bank of Ireland, Danske Bank (formerly Northern Bank), First Trust Bank, and Ulster Bank
Scotland: Bank of Scotland, Clydesdale Bank and The Royal Bank of Scotland
Hong Kong: HSBC, Standard Chartered, Bank of China (Hong Kong)
Macau: Banco Nacional Ultramarino, Bank of China (Macau)
Now there are just eleven.
To our modern sensibilities, privately-issued banknotes seem just strange. But before central banks emerged on the scene, privately-issued banknotes were
the norm. Larry White and George Selgin have chronicled how the Scots were particularly adept at this task. Scotland's banking system, which was much more
free than the British one, had relatively few bank failures in the 1700 and 1800s compared to the British one, which tried to put limits on banks' ability
to issue notes.
In the 1800s this Scottish "free banking" system was imported into my country, Canada, by Scottish immigrants. People might assume that private
banknotes were risky instruments, and that's why we needed governments to do the task. But as the chart below shows, between 1868 and 1910 Canadians
experienced almost no losses on banknotes.
I'll stop my excerpt there, but see the complete article online for more on the history and importance of private banknotes, and the implications for a
future without them. Thanks to JP for pointing out the significance of this event, and for the list of remaining private issuers. Great opportunity for a
specialized collection and exhibit. -Editor
To read the complete articles, see:
Death of a Northern Irish banknote
First Trust Bank to cease issuing its own banknotes (https://firsttrustbank.co.uk/banknotes)
Wayne Homren, Editor
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