Finnish Police Want €500 Banknotes to be Taken Out of Circulation

[Bimat]

ECB to phase out 500 euro note slowly after German backlash: Sources

The European Central Bank looks set to stop printing the 500 euro note, arguing it is used to finance crime, although the purple bill will only be phased out gradually due to resistance from Germany, several sources familiar with the matter told Reuters.

By: Reuters | Published: April 15, 2016 10:04 PM

The European Central Bank looks set to stop printing the 500 euro note, arguing it is used to finance crime, although the purple bill will only be phased out gradually due to resistance from Germany, several sources familiar with the matter told Reuters.

ECB President Mario Draghi said in February the bank wanted to "make changes" to the 500 euro note due to fears it may be used by terrorists and criminals, leading to speculation the banknote may be scrapped.

This prospect triggered a backlash in Germany, where the use of large bills as a means of payment and saving is deeply rooted, leading the ECB to choose a gradual process of withdrawal.

Euro zone central banking sources told Reuters the ECB's banknote committee has tabled several options and the most likely scenario is that the purple banknote will instead simply stop being printed and distributed at cash points and bank branches in 2018.

"The most likely outcome is a very gradual phasing out," an ECB insider said.

People would likely be allowed to exchange their banknotes indefinitely, mirroring the policy adopted by Germany's own central bank when the euro replaced the Deutsche Mark in 2002.

A decision is expected at an upcoming non-policy meeting of the ECB's Governing Council and probably as early as May.
The ECB declined to comment.

Even this compromise solution was unlikely to be backed by Germany's central bank, which still fears that any restriction encroaches on citizens' right to cash, one of the sources said.

One Bundesbank director, in fact, disputed that scrapping the note would help tackle terrorism and warned that this could instead see a little bit of "freedom" die.

Germany was one of the early champions of the 500 euro note to match the value of its old 1,000 mark note and cater to Germans' traditional preference for cash over electronic money.

THE 'BIN LADEN'

The 500 euro note is worth more than five times the value of the largest U.S. denomination — the $100 bill — and has been dubbed the 'Bin Laden' for its alleged links to terrorism and the difficulty of finding it.

Nearly a third of the 1 trillion euros circulating last year was stored in 500 euro notes, ECB data showed.

Yet 56 percent of European Union citizens have never seen one, according to a 2011 ECB survey, because the note is mainly used for hoarding cash, rather than paying.

There is no official data about the use of 500 euro notes by criminals.

But studies by the European Union police agency Europol, former banking executive Peter Sands and the United Nations Office on Drugs and Crime link it to crime, mostly citing anecdotal evidence.

In a 2015 report, Europol went as far as saying authorities should consider stopping issuing the banknote unless they found evidence it was used legitimately.

"As long as there is a credible allegation that the 500 note is used for illicit activity, the ECB has a moral obligation to act," one of the sources said.

But critics argue the 500 euro note serves a legitimate purpose as a store of value, particularly at a time when bank deposits are not remunerated, several lenders are in distress and financial markets are turbulent.

By making it more cumbersome to store money in cash, the ECB decision would indirectly force savers to park some of their cash at banks, and therefore in the financial system, critics say.

They also stigmatise the loss of privacy stemming from switching to electronic payments, which are recorded on banks' databases.

"It's a slippery slope," another source said. "If people got the idea that cash was going to disappear, that would be very dangerous."

The ECB has been trying to encourage euro zone households and companies to put some of their cash to work by adopting an ultra-loose monetary policy in recent years but, so far, its success has been limited.

Source: The Financial Express

[Bimat]

According to an article in Business Standard, ECB will decide the fate of €500 banknote today.

Aditya

[chrisild]

Yes, news sites here reported that too. Guess that in countries like Austria and Germany it is not so much the €500 note itself that people care about - after all, in everyday life it is pretty much non-existent.   By the way, the last time that the Bundesbank commissioned the production of €500 notes was seven years ago; the last or latest production in the euro area was in 2014, commissioned by the Austrian OeNB. Nah, most concerns around here are about the trends or even campaigns in parts of Europe against cash in general.

My guess is that the 500 will simply be phased out in the sense of not making any new ones. If the ECB wants to accelerate the process in any way, the Bundesbank may not be terribly happy - after all, it would have to pay about one fourth of the related cost. We're not talking about billions here though ...

Christian

[eurocoin]

ECB ends production and issuance of €500 banknote

Today the Governing Council of the European Central Bank (ECB) concluded a review of the denominational structure of the Europa series. It has decided to permanently stop producing the €500 banknote and to exclude it from the Europa series, taking into account concerns that this banknote could facilitate illicit activities. The issuance of the €500 will be stopped around the end of 2018, when the €100 and €200 banknotes of the Europa series are planned to be introduced. The other denominations – from €5 to €200 – will remain in place.

In view of the international role of the euro and the widespread trust in its banknotes, the €500 will remain legal tender and can therefore continue to be used as a means of payment and store of value. The Eurosystem, which comprises the ECB and the euro area national central banks, will take steps to ensure that the remaining denominations are available in sufficient quantities.

The €500 banknote, like the other denominations of euro banknotes, will always retain its value and can be exchanged at the national central banks of the Eurosystem for an unlimited period of time.

[Enlil]

And then my friends, crime and terrorism will cease to be.

[chrisild]

Maybe according to what Yves Mersch calls the Law and Order Camp.   He wrote a op-ed for Der Spiegel (German) about the decision. Mersch is a member of the ECB's Executive Board.

He emphasizes that the €500 note will continue to be legal tender, and that the ECB also decided to have more €100 and €200 notes produced. Then he writes about three major groups behind the anti cash campaign: the alchemists (negative interest rates), the fintech alliance, and the law and order camp ... and he seems to not be in any of those camps. By the way, earlier this year Doris Schneeberger, head of the ECB's Currency Management Division, stated that less cash does not mean less "shadow economy", and mentioned Sweden as an example.

Christian

[eurocoin]

An employee of the European Central Bank today told me that they were first considering to keep issuing the 500 euro banknote in small numbers as a collectors item.

[chrisild]

Meh. People who really want a €500 note can just get one now and keep it. I am not really fond of denominations (and, with coins, years) that are made solely to make money with and from collectors ...

Christian

[Bimat]

500-euro note gets last print run

12/31/2018 9:25:06 AM

(MENAFN - AFP) The eurozone is moving to stop printing 500-euro banknotes, the violet-coloured bills that authorities fear are favoured by criminals, with most of the 19 nations in the currency bloc to halt issuing them next month.

"As of 27 January 2019, 17 of the 19 national central banks in the euro area will no longer issue 500-euro banknotes," the European Central Bank said on its website.

However, Austria and Germany will both continue printing the banknotes until April 26 "in order to ensure a smooth transition and for logistical reasons", the ECB said.

The 500-euro notes in circulation remain legal tender and can be used to make payments.

The ECB announced in May 2016 that it would halt issuing new 500-euro notes, saying at the time that it expected to do so around the end of 2018, due to "concerns that this banknote could facilitate illicit activities".

The largest denomination banknote in the single currency area is one of the world's most valuable bills, alongside the 1,000 Swiss franc ($1017 or €888) note.

Because of its high value and portability, experts believe the 500-euro note had become prized by criminals for money laundering and even terrorist financing, earning the nickname "Bin Laden" in some circles.

According to ECB statistics, 500-euro bills account for just 2.4 percent of the total number of banknotes in circulation, but a little over 20 percent of the total value. At the end of November there were 521 million of the banknotes in circulation.

The 500-euro banknotes were actually last printed in 2014, with demand satisfied since from stocks.

Source: MenaFN

[eurocoin]

Although I certainly understand they had good reasons for doing so, it remains disappointing that the concept of the design series is now ruined.