INTERNATIONAL REVIEW ON CASH MANAGEMENT...Banco de España, following the path taken by the Russian publication “News bulletin. Banknotes of the World”, has prepared a brief cata-logue

I N T E R N A T I O N A L R E V I E W O N C A S H M A N A G E M E N T

YEAR I ISSUE 2 OCTOBER 2007

Opinion2 Editorial

3 Interview with Wolfgang SöffnerThe Chief Cashier of the Deutsche Bundesbank shares with us his professional experience

6 Strategic plan for cash managementA general view of the strategic challenges of treasury management

Prabir Biswas. Reserve Bank of India

11 Risks and security for the custody of cashThe Banco Central do Brasil reports on the various means of implementing the custody of cash

Joao S. De Figueiredo. Banco Central do Brasil

13 Coin cycle management in PortugalThe management of coins in the Banco de Portugal adapts to the new European scenario

Helder Rosalino. Banco de Portugal

Banknotes and Coins15 Colombian banknotes

Bernardo Calvo. Banco de la República

17 The Treasury Department of the Banco Central del UruguayAlfredo Allo. Banco Central del Uruguay

Cash activities and Technology19 Intaglio printing

The most traditional technique modernises itself. The present and future of a traditional art

Vicenzo Ciaramella. Banca d’Italia

21 The finishing stage of the banknote production processAutomation in the finishing stage of the banknote production process

Francisco Lacuesta. Fabrica Nacional de Moneda y Timbre. España

23 Smart solutions for banknote processingTechnological development in banknote sorting

Alfred Schmidt. Giesecke und Devrient

CIGE27 IV International Course on Cash Management

Miscellaneous28 International events

30 Central banking news

32 Publications devoted to cash

33 Banknote security features

EditorialOpinion

2 BILLETARIA n. 2 October 2007

EditorialJ. Darío Negueruela Banco de España

We would like to express our gratitude to the numerous colleagues andfriends at central banks around the world who have congratulated,encouraged and supported us in this new initiative to enable profes-sionals in the field of coins and banknotes to communicate and gettogether. Our thanks go to everyone, and we remain committed tomaking further efforts to improve the review, with the aid and collabo-ration of all.

� BILLETARIA remains faithful to the basic ideas we set out in the firstissue:

� It is a review for central banks by central banks; although, of course,public banknote printing works are also invited to participate.

� It is open and markedly international in nature, and is not exclusive tothe participant countries.

� It takes a dual approach, combining opinion and information articles.Clearly, the responsibility for the texts published lies with their au-thors and not with the Banco de España.

� The idea of including a personal interview with a leading figure in thebanknote world, whose experience and position are benchmarks forall professionals, has been maintained, whenever possible.

� The review tries to strike a delicate balance between the necessaryrigour and quality of the articles published and their brevity and ac-cessibility, so as to make the review easy to read. More detailed re-search work is reserved for special and thematic issues.

� Collaborations with the main private companies relating to the worldof banknotes will be included, allowing them to contribute theirknow-how and information regarding technologies of interest to cen-tral banks. No commercial or promotional articles will be published.

The Banco de España does not pay contributors or allow subsidiesor sponsorship. The editorial independence of a central bank reviewsuch as this is a critical feature.

� The original aim was for the countries of Latin America to be the re-view’s main audience, although this has now been broadened con-siderably. Nevertheless, the Latin American emphasis will remain aconstant feature of the review.

BILLETARIA will always offer the Intenational Cash ManagementCourse, a significant initiative launched four years ago as a joint effortby the Banco de España, the Banco de México and the Banco Centralde la República Argentina, a forum for spreading of knowledge. Theexpansion of the number of central banks included in the initiative, andthe high academic and professional level of the Course, are making it abenchmark worldwide for the technical training of cash managers. Webelieve that this is an initiative worth supporting.

In terms of its format and publication, this second issue of BILLETARIAincorporates some significant changes in response to the commentsand suggestions made by our readers: the size has been reduced, it isnow both in Spanish and in English, and the characteristics of thereview have been changed to improve the appearance and quality ofthe images.

The content of this second issue places the emphasis on two basiccharacteristics: quality and diversity. Contributions from central banksin Europe, Asia and America give a broad view of different interests,concerns and points of view. The interesting work presented by theReserve Bank of India on their strategy for cash management, and theBanca d’Italia Printing Works on intaglio printing, are published herealongside contributions by the Banco de Portugal on coin issues, andGiesecke und Devrient on smart banknote processing applications. TheBanco Central do Brasil and the Real Casa de la Moneda-FábricaNacional de Moneda y Timbre in Spain join the central banks ofColombia and Uruguay to complete a diverse and enriching range oftopics, views and opinions. We would like to take this opportunity toreiterate our invitation to all our friends and colleagues to take part inBILLETARIA, whose doors are always open to all professionals in thecash sector. At the same time, the Cash and Issue Department of theBanco de España, following the path taken by the Russian publication“News bulletin. Banknotes of the World”, has prepared a brief cata-logue of the main banknote security features, which we hope will be ofvalue to our readers. And of course, our warmest thanks go to ourfriend and mentor, Wolfgang Söffner, for generously giving his time toshare with us his authority and wisdom in relation to the activity towhich we devote so much of our time.

José Barone, whose support and collaboration were decisive in thelaunching of both the International Cash Management Course andBILLETARIA, is giving up his cash-related work to take on new respon-sibilities at the Banco Central de la República Argentina (BCRA). Wewish him the best of success. He has been replaced in the EditorialCommittee by Guillermo Zuccolo the new Treasury Deputy Manager atthe BCRA.

Collaborators

Wolfgang Söffner Chief Cashier of the Deutsche Bundesbank.J. Darío Negueruela Director of the Cash and Issue Department. Banco de España.Prabir Biswas Executive Director. Reserve Bank of India.Joao S. de Figueiredo Chief of the Treasury Department. Banco Central do Brasil.Helder Rosalino Deputy Director of the Issue and Treasury Department. Banco de Portugal.Bernardo Calvo Director of the Treasury Department. Banco de la República. Colombia.Alfredo Allo Chief of the Treasury Department. Banco Central del Uruguay.Vincenzo Ciaramella Deputy Chief of the Printing Works. Banca D’ItaliaFrancisco Lacuesta Head of the Production Service. Real Casa de la Moneda–Fábrica Nacional de Moneda y Timbre. España.Alfred Schmidt Chief of the Banknote Processing Systems Department. Giesecke und Devrient.Claudio Hils Photographer and communications designer. Mitglied der Deutschen Fotografischen Akademie.Fernando León Head of the International Currency Unit. Banco de España.

BILLETARIA n. 2 October 2007 3

Interview with Wolfgang Söffner, Chief Cashier of the Deutsche BundesbankOpinion

I met Wolfgang Söffner in 2003, inFrankfurt, when, right after hisdesignation to carry out the re-sponsibilities in the field of cash ofthe Deutsche Bundesbank, hestarted his participation in theBanknote Committee in the Eu-rosystem. Since, he has playedan extraordinary role in the Eu-rosystem’s banking community,taking the moral leadershipamongst his colleagues , boost-ing initiatives and helping to cre-ate a climate of positive coopera-tion within the project of the euro.His experience in other profes-sional fields, as well as in complexinternational relationships, hasbeen remarkably useful in a mo-ment in time in which it was nec-essary to re-define strategies andimplement new policies in cashmanagement, both in the domes-tic and cross-border spheres.Furthermore, he has demonstrat-ed the skill and ability to handlevery difficult situations. It is an hon-

our for me to hold this interviewwith Wolfgang, with whom I amlinked both through friendship andin a professional capacity.

Q. The current collaborativeenvironment between centralbanks and, in particular, be-tween Cash Departments, is itjust a trend or maybe a perma-nent change in the relationshipmodels?

A. Increased cooperation is es-sential. Those who, like us, havebenefited from increased interna-tional communication and coop-eration do not want to turn backthe clock. Central banks’ tasksand problems require more andmore coordination and this is notonly the case in Europe.

Q. Concerning the Eurosystem:What are the main changes theBundesbank’s Cash Depart-ment has gone through in the

last 6 years, from the DeutscheMark to the euro?

A. The introduction of the euronot only meant a change of cur-rency but also a change in theframework under which the Bun-desbank carries out its publicmandate. As part of a structuralreform, the Bundesbank soughtto discharge its tasks more cost-effectively and to streamline andcentralise its management struc-ture to ensure that it is ready forEurope. Since then, the Bundes-bank has had five business areasat the centre of its strategic orien-

tation, with a particular emphasison an efficient infrastructure andcash supply.

Q. How has your internal man-agement model been affectedby the shift from an autonomouspolicy designed for a country of80 million inhabitants to a com-mon policy oriented to an areaof 300 million European citi-zens?

A. Of course the changeover froma national monetary policy to aEuropean monetary policy hassignificantly changed the Bundes-

Interview withWolfgang Söffner,chief cashier of the Deutsche Bundesbank

J. Darío Negueruela Banco de España

Mr. Wolfgang Söffner was bornon 8 May 1943 in Berlin. In1970, after two years’ militaryservice, he graduated inbusiness management fromthe University of Münster. Hejoined the Bundesbank in 1971and held various managerialposts in informationprocessing at theBundesbank’s Central Officeand represented the institutionin the Group of ComputerExperts at the Bank forInternational Settlements (BIS)from 1983 to 1990. From 1993to 2003 he was the Head ofOrganisation, Information Technology, Payments and Control atthe Land Central Bank in Hesse and from 1995 to 2002 he wasthe Bundesbank representative on Clearstream AG’s (DeutscheBörse Group) Customer Advisory Board. For more than twentyyears between 1981 and 2002 he played an important role as aspecial technical central bank consultant in various countries.Since 2003 he has been Head of the Deutsche Bundesbank’sCash Department, responsible for all policy issues in the field ofcash payments such as banknote development and issuance,cash management and counterfeit money matters, as well asbanknote processing and its automation. Among other tasks, Mr.Söffner is also entrused with the duties of Bundesbankrepresentative on the Banknote Committee of the EuropeanSystem of Central Banks. From 2004-2006 he was Chairman ofthe European Banknote (Printers) Conference.



bank as a whole, as well as thecash handling activities. The eraof a national federal structureended for the Bundesbank withthe introduction of the euro. InMarch 2002 the Land CentralBanks lost their independenceand became Regional Offices ofthe Bundesbank (in the previousstructure of the Bundesbank, theindependent Land Central Banksconducted the domestic businessfor specific regions in Germanyand the Directorate in Frankfurtcoordinated these activities andwas responsible for foreign con-

tacts). Since then an ExecutiveBoard, based at the Central Officein Frankfurt, has been the sole ex-ecutive body. This leaner organi-sational structure leaves the Bun-desbank well equipped to effec-tively bring its competence to theEuropean System of CentralBanks and to accomplish its widevariety of national tasks.

Q. Has the Bundesbank de-signed a strategic action planregarding the central bank’srole in German / European soci-ety? Has it defined basic princi-

ples – or limits – regarding itsbanknote and coin manage-ment?

A. At national level,it is very im-portant for a central bank to beperceived by the public as a ca-pable institution which performsits professional duties convincing-ly. The consistent implementationof the structural reform, in partic-ular, further improved the Bundes-bank’s public identity as an effi-cient, transparent and open insti-tution. Furthermore, crucial policydecisions were made, for exam-

ple in the area of cash payments,in reaction to the declining de-mand for central bank services innon-urban areas. By means ofclosures, the branch network,which used to consist of morethan 200 branches, will have beenreduced and focused to 47 loca-tions by the end of 2007. As partof the change in the range ofservices offered by cash pay-ments, the Bundesbank is partic-ularly concentrating on quality as-surance in banknote processingand has scaled back its activitiesin the area of coins.

We should pay attention tothe quality of banknotes. Ithelps to maintain and supportpublic acceptance of the euroas legal tender . Theunrestricted use of banknotesin cash dispensers andvending machines should beensured. Only if thebanknotes in circulation are ingood condition can weassure that humans canreliably detect counterfeitswith their senses.

In order to achieve theseaims, numerous qualitycontrol regulations have

already been passed atEuropean level. In this context,an important instrument hasbeen established, the “minimumstandards”, which tell theindividual central banks at whatlevel of wear and tear or soilingthe banknotes should bewithdrawn from circulation.

In addition, central bankshave to be concerned abouthow private professional cashhandlers, particularly creditinstitutions and cash-in-transitcompanies, can contribute toachieving these aims. Alongsidethe obligation to detain

counterfeits immediately andpass them onto the competentauthorities, the new EuropeanBanknote Recycling Frameworkis vital as it obliges professionalcash handlers, who process thebanknotes themselves, to checkthe banknotes at a standardsimilar to that of the centralbanks. This aim is primarilyachieved by testing the sortingaccuracy of the banknoteprocessing systems used byprivate cash handlers bothbefore they are operated for thefirst time and also during theirongoing operation.

Central banks themselvesmake the most importantcontribution to good banknotequality. The sortingperformance of their banknoteprocessing systems is

monitored intensively andcontinuously. This ensures theissuance of good qualitybanknotes. Furthermore, it isimportant that creditinstitutions are required toreport irregularities found in thebanknotes as quickly aspossible. In turn the centralbanks should analyse suchreports very carefully and, ifneed be, to remedy thesituation as quickly as possible.

An appropriate central bankinvolvement in banknoteprocessing is the way toachieve and maintain the highquality of banknotes incirculation. The involvement ineach country will be different,according for example, to theform and structure of the cashcycle.

Wolfgang Söffner’s guidelinesto deal with the quality ofbanknotes in circulation



A. Our “one-step policy” is basedon multi-denomination lodge-ment, which should reduce thetime it takes cash to get fromwholesale and retail trade to us.Multi-denomination lodgementhas rendered obsolete the “two-step process” (which involved

pared” cash. In other words, thebanknote bundles do not have tobe aligned, separated accordingto denomination, counted or val-ued. The associated reductions incosts and gains in efficiency actu-ally occur twice over. Firstly asonly around half of the prepara-

sation and functioning for aCash Department?

A. One key aspect is carrying outour statutory mandate in a frame-work of optimised costs. At thesame time, we need to not onlyoptimise our internal operations inline with the state of the art butalso ensure the overall economicefficiency of the cash processes.In my opinion, confidence in thecurrency forms the cornerstone ofour work. We must nurture andpreserve this confidence by en-suring that the banknotes are al-ways in good condition, that theirauthenticity can be verified quick-ly and contingency plans forcrises are also in place. Concern-ing the central bank’s organisa-tion, I think we all agree that thereis no ideal one-scheme-fits-allmodel, as the differences be-tween the national frameworksand particularities are too great.

Q. To what extent is the centralbank branch meant to be: acontact point with society, abanknote storage and custodyallocation, a distribution andcollecting point or a banknotesorting centre?

A. Our branches unite more orless all of these aspects. Cashprocessing is just as important asdirect contact with banks andcash-in-transit companies, whilelodgements and withdrawals atBundesbank branches form thebasis of the Bundesbank’s role asan agent of quality assurance inthe cash cycle.

Q. Does cash management faceany considerable challenges inthe forthcoming decade?

A. Perhaps the efforts to pushahead with coordination betweencentral banks in the euro area andassimilate our business policiesinter se, but also with third par-ties, could be seen as a big chal-lenge. At this point, I personallywould like to describe the creationof the Eurosystem as the greatestachievement of the Europeancentral banks. Whatever followson from this will build on this im-portant first step.

Q. Does the Bundesbank thinkthat a central bank should offercash services to the citizens orshould it focus its activity ex-clusively on the professionalcash handlers instead?

A. Traditionally, central banks arethe “banks’ bank”. However, inrecent years we have all beenable to observe that credit institu-tions have retreated more andmore from the cash cycle, whileother market participants (particu-larly cash-in-transit companiesand the wholesale and retail trade)have gained in significance. TheBundesbank responded to thischange by introducing multi-de-nomination deposits and has thuscontributed to shortening thecash cycle and, in so doing,speeded up the entire process. Inother words, we have thus actual-ly increased overall efficiency andnot only shifted costs. Only a lim-ited volume of cash services forcitizens is necessary if the tasksare not taken on by banks.

Q. Should the term “profession-al cash handlers” only be ap-plied to credit institutions orshould it also relate to realeconomy agents who need tomanage important amounts ofcash (eg superstores, the vend-ing machines sector, gamblingsector, etc.)?

A. Merely in terms of cash alone,the aforementioned groups mayalso be regarded as professionalcash handlers, as the volumes oftheir lodgements often exceedthose of smaller savings banks orpeople’s banks. Therefore, itmakes little sense to subdividewholesalers according to sectors.However, as a central bank, westil l have to take other aspectsinto account, such as statutoryregulations on money launderingand prudential supervision. Thislegal framework must particularlybe taken into account when in-cluding the retail sector, vendingmachines sector or gambling sec-tor in the group of professionalcash handlers.

Q. What is the Bundesbank’s“one-step policy”? How haveyou implemented it? What areits advantages?

preliminary processing in a cashcentre, where the banknotes wereprocessed in accordance with theBundesbank’s terms and condi-tions for lodgements). Thechangeover to the multi-denomi-nation processing, which startedat our branches at the beginningof 2006, should be completed bythe end of 2008. Then all branch-es of the Bundesbank will be ableto receive lodgements of “unpre-

tion stages market participantsused to have to complete are nowrequired. Secondly the Bundes-bank’s costs are also reducedthrough smaller reject rates andlarger reconciliation units.

Q. In your opinion, what are thekey aspects that are encoun-tered in the modern manage-ment of a Cash Department? Isthere an ideal model of organi-


Strategic plan for cash managementOpinion

Management of currency hasbeen one of the oldest core func-tions of a central bank and thevalue of currency1 in circulationhas been a major constituent ofmoney supply. As such the valueof currency in circulation is relat-ed to the overall figures of moneysupply. In most countries the ra-tio of value of currency in circula-tion to overal l f igure of moneysupply bears a constant ratio2

unless warranted by develop-ments like high rates of inflation3

or deflation, large fluctuations inliquidity, and / or volatility in inter-est rates and exchange rates4.At the same time central bankshave to also ensure the integrityof the currency in circulation andavailabil ity of good quality cur-rency (banknotes as well ascoins) in adequate numbers in allparts of the country. While dis-charging its responsibility, centralbanks have to depend on thenetwork of bank branches foroperations like distribution, stor-age and retrieval, and on thebanknote printing presses andthe mints for t imely supply offresh banknotes and coins. Andfinally central banks have to en-sure that costs associated withprinting to final disposal of soiledbanknotes and coins are com-mensurate with the benefits. Andsince currency is the most visibleface of a central bank to themembers of the public, any issueor lapse or adverse developmentcauses harm to the image or rep-utation of the central bank. Such

issues or lapses or adverse de-velopments include poor designsof the banknotes, counterfeitbanknotes, security lapses re-sulting in robbery, circulation ofsoiled banknotes, denominationsof banknotes and coins notmeeting the public requirementfor transactions, drying up of au-tomated tel ler machines, poorchoice of technology in printing5,etc.

Strategic planning for currencymanagement thus consists of (a)forecasting demand for value of

currency in circulation, (b) deci-sions on denominations of bank-notes to be circulated, (c) design-ing of banknotes including selec-tion of substrate, security fea-tures, and types of printing, (d)designing and management ofthe supply chain for distribution,storage and retrieval of bank-notes, (e) maintenance of integri-ty of the banknotes6, (f) securityin operations, (g) customer serv-ice, (h) cost effectiveness, (i) poli-cies related to outsourcing, and(j) contingency planning and dis-aster management.

Forecasting demand for bank-notes depends on projectedgrowth in money supply and pro-jected growth of other modes(other than cash) of payment andsettlement7, public preference fordenominations, circulation life ofeach denomination of banknotes,printing capacity, cost, changesin designs and security features,and threats of counterfeiting. Ingeneral public preference for oth-er modes for payments and set-tlements depends on their costand easy accessibil ity on onehand and the safety of using such

Strategic planfor cash management

Prabir Biswas Reserve Bank of India



modes on the other hand. So faras denominations are concerned,public mostly prefer lower de-nominations, which have com-paratively lower circulation life re-sulting in printing of large quanti-ties annually to replace the exist-ing banknotes in circulation8.Central banks have to review reg-ularly the costs of banknotes vis-à-vis their circulation lives, anddecide on their coinisation in aphased manner9. Central bankscan also think of coating of bank-notes to increase their circulationlives (like £5 banknotes issued byBank of England) or using envi-ronment friendly durable sub-strates (l ike Bank of Thailand).

printing by reducing the volumeof banknotes in circulation, whilemeeting the higher demand forvalue of banknotes in circulation.For i l lustration, expenditure onprinting was brought down by15.6 per cent from 2003-04 to2004-05 in India by reducing thenumber of banknotes in circula-tion while meeting the demandfor higher value. The value ofbanknotes in circulation in-creased by 12.2 per cent from2003-04 to 2004-05, while thevolume reduced by 4 per centover the same period11.

Designing of banknotes, selec-tion of security features, etc.,

for banknotes in lower denomina-tions. Further, according to theInterpol, intaglio printing offersthe best possible way to preventcounterfeiting12, as desktop print-ers cannot make intaglio printing.If a decision is taken to use in-taglio printing, then due planningis necessary since intaglio print-ing takes longer time than offsetprinting.

Management of the supply chainis most vital in managing curren-cy circulation, and this aspect ismost neglected all over the world.First, in almost all the commercialbanks, and even in most centralbanks, posting in the currency

in reducing cost and in improvingeffectiveness. This in turn needsa comprehensive policy relatingto all the operations and risks as-sociated with them. There mustbe prescribed procedures andaccounting methodologies foroperations ranging from (a) sim-ple handling of cash, (b) verifica-tion, processing and sorting ofbanknotes, (c) disposal of non-is-suable banknotes, (d) treatmentof counterfeit banknotes, (e) re-source management, (f) remit-tance, (g) records and manage-ment information system, (h) se-curity, (i) audit and inspection, (j)cit izens' charters, codes, andstandards, (k) redressal of griev-

Changes in security features anddesigns also necessitate largequantities for replacement. For il-lustration, if large quantities ofcounterfeit banknotes in a partic-ular denomination are noticed, itmay be advisable to recall all thebanknotes of that design and de-nomination and replacing thesame with the new ones10.

Decisions on denominations ofbanknotes are vital on twocounts, first, such decisions mustmeet the public demand, andsecond, by judiciously choosingthe denominations, a centralbank can bring down the cost of

have three major implications.First, the banknotes must be at-tractively designed and shouldnot be cramped by security fea-tures. Second, the banknotesshould not become easy targetsfor counterfeiters. Third, the costof printing a banknote cannot bedisproportionate to its utility. Inmany banknotes, designs areanything but aesthetic becauseof too many security features. Se-curity features are necessary toprevent counterfeiting, but sinceall the denominations are not tar-getted by the counterfeiters,there may not be any need to se-lect too costly security features

department or cash departmentis considered as a punishmentposting for routine work. Second,commercial banks consider han-dling of cash as a costly affair,and more often than not out-source these activities resulting inincreasing risk due to outsourc-ing13, increasing cost, and poorerservice to the customers (as evi-denced by long queues in front ofcash counters). In my opinion, thehandling of cash should beviewed as part of supply chainmanagement, and managementof currency supply chain is as im-portant as managing comput-erised numerical control systems

ances, (l) right to information, (m)contingent planning, and (n) dis-aster recovery management. Myexperience of years has taughtme that even when these are inplace, banks do not pay attentionin ensuring their implementation.This apathy or complacency re-sults in lack of innovations (bothtechnological and strategical) inprocesses to meet the challengeof increasing volume and com-plexities (particularly counterfeitbanknotes) in currency manage-ment. Any innovation needsknowledge, and it is more so inrespect of process innovation.Without knowledge within an or-



ganisation or a firm, it is not pos-sible to design and create newprocesses that will work. Sadly,most of the managers in ban-knote issuing authorities shunsuch innovations and rather pre-fer to continue with the existingmethods. At best they tend toadopt product innovations evenat the cost of increasing expendi-ture without commensurate in-creasing benefits. In most cases,physical objects and products aremore appreciated than ideas thatwill lead to changes that will bringbenefits. This tendency is strangeas all the banknote issuing au-

causes for an unsuccessful sup-ply chain are (i) focus on efficien-cy rather than on effectiveness,(ii) globalisation of supply chains,(i i i ) focussed sources and cen-tralised distribution, (iv) increasingtendency to outsource, (v) reduc-tion of the supplier base, and (vi)absence of supply chain re-silience.

Physical security has always beenand wil l be a major concern inhandling currency. My personalconclusion after all these years isthat there is no such thing as "to-tal security", and we should

exchange soiled banknotes, andfacilities to exchange coins intobanknotes and banknotes intocoins. In India the central bank,Reserve Bank of India, takes allthe decisions regarding policiesand operations of the 'supplychain' in consultation with thebanks, law enforcing agencies,state governments, etc. There are18 full f ledged regional officesand 2 sub-offices of the ReserveBank across the country, whichare responsible and accountablefor managing the inventory, distri-bution and servicing of currencyunder their jurisdiction. There areabout 4500 currency chests (re-ceptacles for both banknotes andcoins)14 and about 3500 smallcoin depots (receptacles for small

denomination coins) with thecommercial banks (a few withother financial institutions includ-ing co-operative banks) throughwhich the Reserve Bank has toensure compliance with thestatutory requirements of ensur-ing adequate supply of goodbanknotes and coins15. In thepreamble to the RBI Act, it hasbeen stated, "Whereas it is expe-dient to constitute a ReserveBank of India to regulate the is-sue of banknotes, keep reserves,with a view to securing monetarystability in India and generally tooperate the currency and creditsystem of the country to its ad-vantage Act." To improve thecustomer service the ReserveBank during the years, 2002 to

thorities enjoy total monopoly andhence should take the challengeof developing new processes.The successful management ofcurrency notes or banknotes infuture will depend not merely onpublic demand for banknotes,but on the ability of the banknoteissuing authorities to be open tonew ideas while capturing thebenefits of the new technology.“Innovation is like virtue; it is im-portant, we would l ike to havemore of it, but few know how toget it and even fewer know howto keep it.” Banknote issuing au-thorities should realise that inno-vations are comparable to supplyof fresh water to a river, withoutwhich a river dries up very soon.In my view the most common

rather plan for strengthening se-curity for those operations wherethe probability and the impact ofsecurity risk are high. Such plan-ning calls for having security per-sonnel who can look at securityissues through a business prism,and not look at business issuesthrough a security prism.

Customer service has been oneof the major concerns of all cen-tral banks, as quite often com-mercial banks and other institu-tions may not share the same lev-el of concern for the customersas central banks do. Such cus-tomer service in currency man-agement means ensuring circula-tion of good quality banknotes ofall the denominations, facilities to



2004, made major changes in thepolicies and procedures like pro-gressive automation of the verifi-cation, processing and sorting ofbanknotes, simultaneous shred-ding and briquetting of soiledbanknotes, build-up of denomi-nation-wise and chestwise dataand information, etc. However,perception about what consti-tutes customer service differsfrom one age-group to another,from rural to urban areas, etc.,and it is a continuous process fora central bank and commercialbanks to make their operationseffective to not only meet thecustomers' needs but also to re-duce the risks16 associated withcurrency management. Personal-ly I am of the view that the bestway to improve customerservice17 is to keep members ofpublic aware of their rights andresponsibilities.

Finally, in today's world disas-ters18 (man-made as also natural)occur with much faster frequencyand with much higher impacts,and unless contingency plans arein place and there are clear poli-cies and procedures for disastermanagement, currency manage-ment will progressively becomemore complex and may lead toloss of image or reputation19. InIndia many places suffer fromfloods every year. Because ofsubmergence of buildings fordays in some places, banknotesstored in currency chests andother bank branches becomeheavily soiled and unfit even forhandling besides being healthhazards. And of late terrorism hasadded another dimension in thesense that counterfeit banknotesare used for funding the activity.

Strategic Plan for currency man-agement means linking each ofthe activity with the overall opera-tions in the banking system andintegrating currency risk manage-ment with the overall risk man-agement structure. While doingso, we need to realise that bank-ing activity all over the world hasgradually changed from 'liabilitydriven banking' to 'asset drivenbanking'. Making a choice aboutinnovative ideas rather thandreaming them up is one of thetoughest decisions facing banks

in general and in currency man-agement in particular. My own ex-perience has taught that successin innovation depends on peopleand events up and down the val-ue chain, and accomplishmentstend to depend largely on man-aging expectations.

The other important segment ofstrategic planning for currencymanagement is to put in place anappropriate risk managementpolicy and procedures. Such riskmanagement approach can bebased on either qualitative orquantitative risk measurementapproach, if not both. The quali-tative approach through struc-tured formats help in identifyingthe operational risks, and thequantitative approach helps inidentifying the key risk indicators.

The challenges of currency man-agement are enormous and testa person or a team of persons re-garding one's or team's ability tobe innovative and managechanges while meeting the ex-pectations of the public withoutincreasing risk to the bankingsystem.



1. Currency is commonly known as banknotes denoting the liability of the issuer, mainlycentral banks. Banknotes are papers issued by banks promising to pay the bearer ondemand a specific sum of money. Banknotes differ from promissory notes in that theymay be reissued after payment.

2. This relation normally shows a constant ratio if nominal data is adjusted for inflationand other factors and figures are taken at constant prices.

3. Latin American inflation and capital flight in the Eighties and the Nineties resulted in asharp increase in demand for cash, particularly, high denomination banknotes. Suchsituation often leads to regulatory actions like demonetisation (Gesselli, Silvio, "TheNatural Economic Order" published in 1929). In India, banknotes of Rs.1000, Rs.5000and Rs.10000 denominations were demonetised in the Eighties.

4. A central bank normally affects fluctuations of output in the economy in the short andmedium term by choosing between tight money and an easy money policy. In Indiashare of currency in broad money has come down from nearly 40 per cent to margin-ally more than 15 per cent in the recent years. However, 'broad money' grew at 21.6per cent (year-on-year on July 06, 2007) as against 19.0 per cent (y-on-y on July 07,2006). And value of notes in circulation increased from Rs. 4424 billion (July 21, 2006)to Rs.5101 billion (July 13, 2007).

5. In some countries change of substrate used for printing made the inks and printingdisappear in quick time from the banknotes printed on the new substrate. Crumplingof banknotes during handling also results in such printed banknotes turning into plainsubstrate.

6. Even in ancient times counterfeiting was a hanging offence. In Dante's Inferno forgerswere placed in one of the lowest circles of the hell. In recent times, the Bank for Inter-national Settlements has constituted a dedicated group to combat counterfeiting.

7. All over the world, there has been significant growth in other modes of payment andsettlements, particularly, cheques, cards and electronic banking, and collectivelythese other modes can help in reducing the value as well as the volume of banknotesin circulation by about 2 to 5 per cent per annum. And strategically a central bank canformulate and pursue policies that will encourage growth of other modes so as tobring down the demand for banknotes.

8. For example, in India it was observed in the early Nineties that put together denomi-nations in Rupee 1, Rupees 2, and Rupees 5, constituted about 57 per cent of thevolume of notes in circulation, and contributed about 7 per cent of the value of notesin circulation. It was, therefore, decided to discontinue their printing and these de-nominations were coinised in a progressive manner.

9. In many countries decision to stop printing of banknotes in lower denominations wasnot preceded by adequate supply of coins in these denominations resulting in short-age of these denominations resulting in hue and cry from the members of public. Andas it happens in times of shortages, members of public start hoarding these denomi-nations resulting in further aggravation.

10. Threat of counterfeit banknotes is far higher today than in the past due to availabilityof low-cost desktop publishing systems. It has been reported that at present 40 percent of the seized counterfeit banknotes are digitally printed as against only 1 percent a decade back.

11. The author was then in-charge of currency management.

12. Interpol Conference, 2002.

13. As noted by the Bank for International Settlements.

14. The banknotes in the currency chests belong to the central bank (RBI) in India. Main-tenance of the currency chests by the RBI helps in avoiding extensive and frequentphysical movement, as these currency chests store stocks of banknotes and coins,they facilitate distribution, exchange, and remittance of banknotes. As and when acommercial bank deposits or withdraws cash from the currency chest, the bank re-ports the matter to the Reserve Bank of India, and in turn its account with the RBI iseither credited or debited. One of the key factors to reduce costs in operations aswell as to reduce risks in India during the years, 2003 to 2005, was streamlining theoperations of these currency chests and improving their effectiveness as also report-ing system (MIS). The RBI also commissioned in 2004 a project for computerisedand integrated reporting of currency chest operations.

15. The Reserve Bank derives its powers for management of currency from the provi-sions of the Reserve Bank of India Act, 1934, and in terms of Section 22 of the saidAct, Reserve Bank is the sole authority for issuance of currency in India. In additionthere are other legislations like (a) Indian Coinage Act, 1906, dealing with mintingand issuance of coins, (b) Small Coins (Offences) Act, 1971, prohibiting melting ofsmall denomination coins, (c) Currency Ordinance of 1940 dealing with the printingand issuance of Rupee One notes (Printing of Rupee One notes has been discontin-ued since about ten years back), (d) Legal Tender (Inscribed Notes) Act, 1964, in-tended to prevent use of notes for conveying political slogans and messages, (e)Chapters XII and XVIII of the Indian Penal Code, 1860, read with the Code of Crimi-nal Procedure, 1898, relating to offences in respect of currency and coinage, and (f)Foreign Exchange Management Act, 1999, relating to export and import of coinsand banknotes from and into India.

16. Operational risk is the risk of direct or indirect loss resulting from inadequate or failedinternal processes and systems or from external processes. In currency manage-ment, such operational risks may arise on account of (a) lack of security, (b) out-sourcing, (c) lack of specialised processing operations, (d) lack of technical upgrada-tion, (e) too much of reliance on technology, (f) complexity of the operations, and (g)lack of strategy. The probability of occurrence of operational risks and the impactcan be reduced, if not eliminated, by improving internal control environment andmechanisms, developing risk management policies and procedures, and employingrisk transfer techniques.

17. Biswas, Prabir K., 'Banks and Customers : Yesterday, Today and Tomorrow' –House Journal of Views Exchange, Volume 9, Number 7, January, 2007, andBiswas, Prabir K., 'Know your customer or know your bank?' – Vinimaya, VolumeXXVIII, Number 1, April – June, 2007, National Institute of Bank Management, Pune,India.

18. Disaster is 'anything ruinous or distressing that befalls', or 'a sudden or great misfor-tune, or a mishap, or a calamity'. The great Indian economist-cum-statesman-cum-strategist, Chanakya (3rd Century B.C.), wrote (Kautilya's Arthashastra, Chapter8.1.2) "A calamity of a constituent, of a divine or human origin, springs from ill luck,or wrong policy”.

19. For illustration if banks hold too much of cash, it reduces their profitability. On theother hand if they do not have cash to meet public demand, it may induce a run onthe bank (worse on the banking system) as people consider non-availability of cash(either across the counter or through the ATM) as sign for failure.

Footnotes


Risks and security for the custody of cash Opinion

given that, to the eyes of society,the liability continues to lie with thegranting central bank. Somemeasures may be adopted by cen-tral banks with a view to minimis-ing such risks: regulation, safetyand supervision.

Regulation includes laying downrules and defining penalties, in-cluding financial penalties, as wellas creating instruments and meansof control to ensure compliancewith the established procedures.Formal rules signal to the marketthe central banks’ expectations interms of services to be provided,and permit new participants tojoin, in a context of low informationasymmetry.

The stage of regulating the cus-tody account service may involvethe participation of the user institu-tion. Some of the positive aspectsof this interaction would be:

� Discussions with the users, pro-moting mutual understanding

and permitting future rules to bein immediate direct contact withthe reality of the organisations.This may be reflected in terms ofbringing down implementationand operational costs; and

� Participation which in general im-proves the cooperation level andwidens the understanding of thebenefits to be provided to socie-ty.

The safety of the valuables in cus-tody should be ensured by a num-ber of material and institutionalconditions minimising the risk ofloss. Among material conditions,the following should be highlight-ed:

1) physical safety of the premises,the requirements of whichshould be determined in such amanner that the custody ac-count would be held in premisesthat are appropriate to the safe-keeping of and transactions withvaluables;

Maintaining central bank valuablesin custody accounts with third par-ties, with a view to guaranteeingwithdrawal and deposit transac-tions by commercial banks, hasbeen an alternative adopted by dif-ferent central banks across theworld. In general, the custodianshall operate on behalf of the cen-tral bank, in line with regulationsestablishing operational routinesand obligations intended to ensurethe quality and reliability of theservices.

The custody account can hold ei-ther banknotes, coins or both, andis intended to meet its own and/orother institutions’ requirements. Itsconfiguration depends on the pur-poses, ranging from improving thesupply of small amounts up to amodel fully complying with all cashrequirements, including the cus-tody, processing and sorting of un-fit banknotes.

The advantage of the custody ac-count for the system also consists

in the possibility that the financialresources deposited with bank re-serve accounts of financial institu-tions are immediately available,usually at lower costs, dependingon the self-custody option or onthe proximity of the custodian inregions where the highest possiblenumber of institutions is located.When adopting some of thesemodalities, central banks incur twotypes of risk:

� Operational risk, resulting fromthe fact that the custodian maycease to provide a satisfactoryservice, failing to supply bank-notes and coins meeting thequantities and quality standardsrequired by central banks; and

� Risk of loss, possibly dependingon the undue utilisation, loss ortheft of the valuables, or evenbankruptcy of the custodian.

Both risks have a common addi-tional feature: the risk of damagingthe reputation of the central bank,

Risks and security forthe custody of cash

João S. FigueiredoBanco Central do Brasil

Currency in circulationamounts presently toapproximately R$ 80billion, 3.2% of GDP,accounting for 12billion coins and 3.5billion banknotes. Thefederal republic iscomposed of twentysix states and a federaldistrict with 5,561municipalities andmore than 188 millioninhabitants. Anefficient currencysystem is thereforeessential for theeconomicdevelopment of thecountry.

Banco Central do Brasil – Rio de Janeiro (at the beginning of the 20th century).


Risks and security for the custody of cash Opinion

2) definit ion of cei l ings to thesafekeeping of and transac-tions with valuables. If possi-ble, valuables should be wide-ly distributed across differentlocations, and the respectivebalances should be allocatedto a higher number of branch-es. Closer proximity with theusers is thus obtained andvaluables are less concentrat-ed in few locations. The ceil-ings are associated with oper-ational needs of moving valu-ables;

3) collateralisation with the mone-tary authority. A percentile maybe used on the total valuablesin custody, the equivalent ofwhich in public securitieswould be available for the cov-erage of losses;

4) setting up of a reserve fund,the value of which may be apercentage of or even totalvaluables in custody, with aview to covering losses;

5) taking out an insurance;

The institutional conditions, inturn, are related to the economic-financial health of the custodians,which are usually financial institu-

tions, but may also be cash-in-transit companies.

The selection of financial institu-tions may be advantageous forthe safekeeping of and transac-tions with valuables on behalf ofthe central bank. These institu-tions are the primary users of theservices, given that in moderneconomies the issuance model isadopted through the intermedia-tion of commercial banks. Bankswould therefore be interested inand prone to require and carryout such services – due to opera-tional reasons and for possiblecost cut. Another aspect is relat-ed to the fact that commercialbanks are supervised by the cen-tral bank, and shall comply withprudential limits in order to carryout their banking transactions,with a view to maintaining thestability of the financial system.The banking supervision areamay monitor the performance ofbanks and of the system as awhole, thereby mitigating thebankruptcy risk of the custodian.

The selection of cash-in-transitcompanies chiefly depends onthe degree of technical and insti-tutional maturity of that segment.These conditions are reflected on

The implementation of

the concepts above

analysed has been

developed further

since the adoption of

the present model for

the management of the

currency in circulation,

which includes the

custody of valuables in

a financial institution

under contract.

The regulations

governing this model

are laid down in the

Resolution of the

National Monetary

Council N. 3322 of

2005, regulated by

Central Bank Circular

N. 3298, which lays

down the Regulation

governing the custody

of cash; Circular-Letter

N. 3214, which defines

operational procedures

of the currency

circulation system,

within the scope of the

Brazilian payment

system; and Press

Release N. 13828,

which discloses the

Regulation of the

Technical Council on

the custody of cash, all

of which are available

on the Banco Central

do Brasil’s website, at

www.bcb.gov.br

the level of reliability regarding thesafety of the valuables and thequality of the services.

Finally, reference should be madeto the supervision of the custodi-an by the issuance and treasuryareas. The main objective of su-pervision is to ensure ongoingmonitoring from the point of viewof compliance with the regula-tions, the quality of the servicesprovided, and the existence ofthe valuables in custody. The fre-quency may be established ac-cording to a methodology that re-sorts to a risk matrix to evaluateand weight all activity risks. Com-pliance with the procedures maybe accomplished according towell-known supervisory methods.

As regards the fulfilment of custo-dian users’ requirements, regularconsultation contributes to themanagement of the system andevaluates objectively whether so-ciety if taking advantage of all ben-efits of the model adopted. Thepurpose of the whole issuanceand treasury activity is to providecurrency in circulation under goodand safe conditions, with the nec-essary quality standards and ade-quate quantity to meet the require-ments of the public.

Operations with cash.


Coin cycle management in Portugal Opinion

Aiming to facilitatethe settlement of coincirculation and, at thesame time, toguarantee strictcompliance with theCommunity ruleprohibitinggovernmentfinancing, Banco dePortugal signed anagreement with theState, which providedthe Central Bank witha permanent debitauthorisation,according to thefollowing rules:“Whenever requestsfrom creditinstitutions fordeposits of coins maylead the value ofstocks in coins heldby Banco de Portugalto exceed the 10%limit established inArticle 6 of CouncilRegulation (EC)N.3603/93 of 13December 1993, theexcess amount will besettled by debitingthe account ofDirecção Geral doTesouro(DirectorateGeneral ofthe Treasury) withBanco de Portugal,with prior notice”.This was anunprecedentedmeasure at nationallevel and allowedBanco de Portugal toact in a completelyflexible andautonomous mannerin the management ofthe issuance andsettlement of coins incirculation inPortugal, even if notbeing the institutionresponsible forcurrency issuance.

counters, free of charge, aimingat ensuring an efficient and regu-lar circulation of coins within thenational territory.

In 2004, a coin reception centrewas specifically created in one ofthe branches of Banco de Portu-gal, supported by a coin countingand packaging system in order toallow not only the reception, butalso the handling and subsequentwithdrawal of volumes of coinscounted and packaged accord-ing to the standards adopted inPortugal.

Deposits made at that centrewere processed under the directcoordination of Serviço Centralde Tesouraria (Central TreasuryService) of the Carregado com-plex. These must be scheduled inadvance with the credit institu-tions, due to the fact that: a) theratio of coins held by Banco dePortugal to total coins in circula-tion must be monitored to verifythat they are not above a 10% toensure that they are not a creditfacility provided to the public sec-tor (according to the CouncilRegulation (EC) No 3603/93 of13 December 1993), and b) thebranch’s work and storage ca-pacity must be managed, by co-ordinating the withdrawal and de-posit flows.

In operational terms, deposit re-quests by credit institutions aremanaged by Serviço Central deTesouraria through an analysis ofthe stocks in coins held by Bancode Portugal together with the

2. Holdings by the European Central Bank or by National CentralBanks of metal coins issued by the public sector and entered to thecredit institutions of the latter shall not be considered a credit facilityunder Article 104 of the Treaty, provided they do not exceed 10% ofthe coins in circulation.

Managing the coin system

In Portugal, the management ofthe coin system is a shared re-sponsibil ity of the State, whichhas exclusive competence for theissuance, of Imprensa NacionalCasa da Moeda (PortugueseMint), responsible for the produc-tion, and of Banco de Portugal,which puts the coins into circula-tion.

In addition, Polícia Judiciária(Portuguese Criminal Police) is ul-timately responsible for checkingthe authenticity of coins throughLaboratório de Polícia Científica(Forensic Laboratory) and as Na-tional Counterfeit Analysis Cen-tre. Banco de Portugal also par-ticipates in close cooperationwith the Police, and, to that end,created a laboratory for the analy-sis of counterfeit coins.

Furthermore, Portuguese creditinstitutions and cash-in-transitcompanies also participate inmanaging the coin cycle. The lat-ter are generally responsible forthe physical distribution of coinson behalf of the credit institutionsto the banking sector and othereconomic operators.

With the introduction of the euroin 2002, it was necessary to har-monise strategies and functionalcooperation among the partiesinvolved in managing the coinsystem in order to better distrib-ute currency to the economy, en-sure its regular circulation andmonitor matters relating to the

participation of Portugal withinthe Community bodies responsi-ble for this area.

Thus, Banco de Portugal, in part-nership with the Portuguese Mintand the State, decided to createa contact group to monitor coin-related issues. This group aims tomonitor and discuss matters re-lated to the issuance, minting,putting into circulation, distribu-tion and marketing of normal use,commemorative and collectorcoins.

The intervention of Banco dePortugal in the logistics

Up to the introduction of the euroin 2002 the intervention of Bancode Portugal in this field was limit-ed to an annual request for coinsto the Portuguese Mint and toputting normal use or collectorcoins into circulation. In fact, onthe assumption of a self-regulat-ed market, no deposits of coinswere accepted at the counters ofBanco de Portugal.

The circulation of a single curren-cy in an enlarged area originatedmigratory phenomena (currencyinflows and outflows) across thewhole Eurosystem led to imbal-ances in the national currencymarkets. Aware of these imbal-ances and acting as the institu-tion responsible for regulating thecirculation of coins, from 2004onwards Banco de Portugal al-lowed deposits of excess curren-cy by credit institutions at its

Coin cycle managementin Portugal

Helder Rosalino Banco de Portugal

1. With the introduction of the euro, the Member States became res-ponsible for the issuance of coins, whereas the ECB is competent toapprove the volume of the said issuance, in accordance with Arti-cle106 (2) of the EC Treaty.


Coin cycle management in Portugal Opinion

coins to be handled in order notto compromise the 10 % ratio orto cause constraints in currencyhandling centres.

At the moment, coin activities areconducted in two handling cen-tres, one located in a regional del-egation and the other in the Car-regado complex, both equippedwith the SCAN COIN 4000 sortingsystem. The coins not fulfilling theauthenticity and quality require-

bank in training its specialists inorder to cover all fields of relevantknow-how concerning coins,aware of the higher competenceof this central bank in the subject.The counterfeit analysis laborato-ry was furnished with precisionequipment (scales, vernier cal-lipers, conductivity and magneticmoment measuring equipment)and optical equipment (magnify-ing glasses, stereoscopic magni-fying glasses, microscopes),

ments will be sent to the counter-feit analysis laboratory, where theyare analysed and classified, andcounterfeits are registered in theCounterfeit Monitoring System.As a strategic basis underlying thecoin-sorting project, and consid-ering the counterfeit levels in theEuropean area, it was deemedappropriate to centre the sortingactivity, at an earlier stage, onhigh denomination coins (2 and 1euro coins and 50 cent coins).

With the aim of fulfil l ing its newtasks concerning coins, Banco dePortugal obtained new technicalexpertise, namely by technicallyand scientifically strengtheningthis field and acquiring laboratoryanalysis equipment. In addition,Banco de Portugal requested thecooperation of Deutsche Bundes-

which are considered essential inthe analysis and classification ofcounterfeit coins.

The Centro Nacional de Con-trafacções (National CounterfeitCentre) of Banco de Portugal isalso in charge of a project for on-going training focused both onbanknotes and coins and aimedat all professional cash handlers.

Authenticity and fitness check-ing

The authentication of euro coinsand handling of euro coins unfitfor circulation follow commonrules and procedures in the euroarea Member States seeking toguarantee an adequate level of in-tervention in coin recycling (as

regulated by the CommissionRecommendation 2005/504/ECof 27 May 2005)

In Portugal, the verification of au-thenticity and sorting of euro coinsconducted outside Banco de Por-tugal is regulated by a Decree-Law published on 10 May 2007.All professional cash handlers,namely credit institutions andcash-in-transit companies, are re-quired to hold counterfeit coins or

institutions and cash-in-transitcompanies) by checking, collect-ing and handling relevant data.

� Management of the NationalCounterfeit Centre, which facili-tates the use of the CounterfeitMonitoring System by differentnational authorised users.

� Disclosure of know-how and in-formation on genuine and coun-terfeit coins to third parties by

coins suspected of being counter-feit which they may encounterduring their professional activity.

The following new tasks in thefield of coins has been conferredon the Banco de Portugal by theaforementioned Decree-Law:

� Development of activities forhandling coins deposited in itsown centres and subsequentverification of their authenticityand quality.

� Analysis, classification and regis-tration in the Counterfeit Moni-toring System of counterfeits de-tected during the coin authenti-cation process.

� Monitoring of the recyclingprocess by third parties (credit

defining adequate communica-tion and training policies.

In the near future, Banco de Por-tugal will present a model con-tract to entities recycling eurocoins. The contract will regulate,in operational terms, the relation-ship between the Bank and thesaid entities, in compliance withthe new legal framework. In paral-lel, Banco de Portugal will createa model aimed at supervising andmonitoring their activity in the fieldof coin recycling.

Coin sorting system.Coin conductivity measuring equipment.


Colombian banknotesBanknotes and Coins

Features of the 50,000 peso banknote

Design and printing substrate

With the 50,000 peso banknote, the Banco de la República pays hom-age to the Colombian writer Jorge Isaacs (1837 – 1895), author of thenovel La María, which has left its mark on many generations of Hispanicreaders since it was first published. By the end of the 19th century therehad already been 50 editions and in 1967, its centenary year, it was saidto be the most-read novel in Latin America. Immortalised by the novel,Isaacs was much more than a writer: he was also a politician, journalist,diplomat and President of the State of Antioquia.

On the front is the figure of the writer printed in intaglio. On the upperpart is the figure of María set against a Cauca Valley landscape, crossedby the Cauca river, and to the left of centre the signatures of the Bank’sGeneral Manager and Deputy General Manager and the date of issue.The 8-digit series number is printed vertically in green ink on the upperpart of the note and in red ink on the lower part. On the upper area ofthe banknote appears the word “COLOMBIA” in two colours schemesand, on the lower part, “BANCO DE LA REPÚBLICA” can be read.

On the back of the note is a depiction of the El Paraíso country house,the scene of the novel; in the foreground stands a shaman tree, charac-teristic of the area, and in the background the mountains that frame theCauca Valley. A fragment of the novel, describing an evening in theregion, is superimposed. On the upper left-hand side is printed thenumber 50 and the words “MIL PESOS” in coffee and violet tones,underneath which is the writer's figure, taken from a personal photo.

Statistical data (2006) Pesos Euros

Total value of banknotes in circulation (millions) 23,910,016 7,993.9

Average value of banknotes in circulation 17,675.6 5.9

Number of banknotes in circulation (millions) 1,352.7

Banknotes in circulation per capita 66.5

Value of banknotes in circulation as a proportion of GDP 7.9%

Printing techniques

Intaglio: This printing technique which offers a tactile relief is used for theportrait on the front, the main motif on the back, the letters and numbers ofthe face value of the banknote and for the optically variable ink of the num-ber 50 on the front.

Offset: Is used for the security backgrounds on the front and back printedin rainbow. Also, a see-through register is incorporated into the back-grounds, the complete image of which can be seen when the note is heldup to the light.

Letterpress: Is used in the vertical numbers on the front, one of which isred and the other green.

Data: End-2006. NS is new series of banknotes

20.000

10.000

5.000

2.000 NS

2.000

1.000 NS

1.000

50.000

15%

35%6%

1%

11%

2%

13%17%

Colombian banknotesBernardo Calvo Banco de la República

The Political Constitution of Colombia of 1991 (Article 371) determinedthat the Banco de la República should exercise the functions of a cen-tral bank, including that of issuing the legal currency of Colombia. TheBanco de la República is empowered by the State to issue, exclusivelyand without delegation, the legal currency in the form of banknotes andcoins (Law 31 of 29 December 1992).

The Banco de la República performs the industrial activity of producingbanknotes and coins, for which purpose it has a banknote printingworks, to produce the banknotes requested by the Treasury Depart-ment. Since 2002 the currency has consisted of six peso banknotedenominations, with the same dimensions (70mm x 140 mm). However,on the occasion of the entry into operation of the Bank's new produc-tion facilities at its Cash Management Centre, the production of a newseries of banknotes was initiated, commencing with the 1,000 and2,000 peso denominations, which are 65 x 130 mm in size.

At the end of 2006 the value of the six denominations of banknotes incirculation amounted to 23,910 billion pesos and the number of bank-notes in circulation was 1,352.7 million. The breakdown by denomina-tion is shown in the adjoining chart. It should be noted that in 2006, withrespect to the previous year, there was a 15.9% increase in the numberof banknotes in circulation and a 24.8% increase in their nominal value.The growth in the banknotes in circulation may be explained by thestrength of the Colombian economy and by the reduction in inflationduring the year. In the period 1986-2006, the banknotes destroyedamounted to 83.6% of the whole volume of banknotes issued.

The 50,000 peso banknote is considered the most representative ban-knote of the country. It is the highest denomination note and the onlyone with a vertical design, unlike the other denominations which havehorizontal designs.

Structure of the banknotes in circulation


Colombian banknotesBanknotes and Coins

Security features for the public

� Watermarks: When the note is held up to the light, a multitone water-mark can be seen with the image of the writer Jorge Isaacs and an elec-trotype watermark with the text “50MIL”.

� Security threads: there are two horizontal threads, one opaque andembedded in the paper and the other a window-type metallic which hasfive segments on the front side and the text “50 MIL PESOS COLOM-BIA” visible in a yellow tone under ultraviolet light.

� Colour-shifting ink (OVI): The inks used for the figure “50” on the frontenable the surface to change colour when observed at an angle of 45º,changing from gold to green. This element deters reproduction of thebanknote using colour photocopiers.

� Tactile printing - Intaglio: Areas of the note printed in strong tones,perceptible to the touch, which make up sharp images composed of finelines and well defined outlines. At the top-left on the front of the note isthe word “COLOMBIA” in two tones and on the back, the letters “BRC”which make up the complete design of the tree.

� See-through register: There are geometric figures on both sides of thenote in the form of a book. When seen against the light from either side,the white areas of these figures become coloured, their outlines exactlycoinciding.

� Microprinting: With a magnifying glass the texts “BANCO DE LAREPÚBLICA COLOMBIA”, “50 MIL PES0S” and “50 MIL BRC” can beread repeatedly on the front.

� Ultraviolet (UV) properties: Under UV light the texts “50MIL” and “50MIL PESOS COLOMBIA” can be seen on the front in a green tone. Also,the banknote serial numbers are fluorescent under UV light.

Information about the substrate, dimensions and colours

Substrate Paper 100% of cotton fibres

Substrate weight 90 g/m2

Dimensions 70x140mm

Dominant colours Violet and green on the front and violet and blue on the back.

Note: The number which appears beside each of the security elements in the 50,000 pesos banknote refers to the numeration which that certain feature has in the section “Banknotesecurity features” which can be found in the Miscellaneous section of this magazine. A more detailed description of each security feature can be found there.

1 and 2. Watermarks

16. Microprinting

6. Intaglio printing

4. Window thread

12. OVI ink 20. See-through register 17. UV properties

3. Embredded thread

16. Microprinting

THE 50,000 PESO BANKNOTE


The Treasury Department of the Banco Central del UruguayBanknotes and Coins

� There is an Advisory Committee for banknote and coin matters re-sponsible for designing and updating the cash security features, onthe basis of the technological innovations on the international mar-ket. In addition, the Committee is involved in the preparation of theterms and conditions of tenders for the purchase of banknotes andcoins.

� Reception of shipments of US dollar-denominated banknotes fromthe Federal Reserve of the United States. Likewise, the Banco Cen-tral del Uruguay sends to the Federal Reserve shipments of US dollardamaged and low-denomination banknotes received from credit in-stitutions and the public.

� Cash analysis and supervision: a Committee set up for the purposecarries out studies of banknotes and coins, broken down by denomi-nation. In particular, issues of great importance for decision takingare analysed, such as the lifetime of banknotes, destruction rates,buffer stocks, threshold alerts for new banknote orders, etc. TheCommittee also prepares a monthly management report with the De-partment’s main statistics, and a quarterly summary that is distrib-uted to Directors and Board.

� Auditing of remote vaults: with the prior authorisation of the BancoCentral del Uruguay, financial institutions may deposit banknotes inremote vaults. The management of these vaults is the responsibilityof the financial institutions. The Cash Unit is responsible for inspect-ing banknote deposits belonging to the Banco Central del Uruguaylocated at remote vaults. Their task is essentially to verify compliancewith the rules on remote vaults issued by the Banco Central delUruguay.

� Custody of valuable items, objects and documents: the Cash and Is-sue Unit provides a safekeeping service for valuable items, objectsand documents to the Bank’s various divisions and departments andto those financial institutions that request it. The Managers of Provi-sional Savings Funds (pension fund management entities) depositwith this Department, as they are required to do by law, the certifi-cates representing their investments.

� Public debt related services: the payment of interest to the publicand the redemption of the physical public-debt certificates issued.

The Cash Handling Unit, with 8 members of staff, counts and sortsthe banknotes received from the financial system and from the public.Banknote processing is carried out using a BPS 1040 sorting machine,equipped with an on-line destruction system and a Kusters briquettingsystem. Reports are made daily on the quantity of banknotesprocessed and destruction percentages, to help avoid deviations fromthe rates approved by the Department Head.

Poor quality high-denomination banknotes are all processed, while lowand medium-denomination ones are counted by sampling with con-ventional counting machines, in accordance with percentages estab-lished by the Internal Audit Division.

The Counterfeiting Prevention and Analysis Office, with 4 membersof staff, has a database of the counterfeit banknotes retained by thewhole financial sector, with information broken down by currency. Theinstitutions introduce the data on these banknotes into the databaseand send the counterfeits, together with the form generated by thecomputer system, to the Counterfeiting Prevention and Analysis Office.The database Administrator, upon receiving the banknotes, first checkstheir quantity and value, and then sends the whole consignment ofbanknotes of doubtful authenticity to the National Technical Police

The Treasury Department of theBanco Central del Uruguay

Alfredo Allo Banco Central del Uruguay

The Economic Policy and Markets Directorate of the Banco Central delUruguay is responsible for the Monetary and Liability Management Divi-sion, to which the Treasury Department reports. This Department isresponsible for cash management, in the broad sense.

The Bank’s cash activities are carried out at its head office in Montev-ideo and at remote vaults where banknotes belonging to the BancoCentral del Uruguay are deposited. The Bank has no branch networkoperating throughout the country. Banknotes to be issued are obtainedthrough tenders, since the Central Bank lacks an owned printing worksand mint to manufacture banknotes and coins.

The Treasury Department has twenty-five staff, around 5% of the totalstaff of the Bank. It is made up of 3 Units: Cash and Issue, Cash Han-dling and Counterfeiting Prevention and Analysis.

The Cash and Issue Unit has the largest variety of tasks and thelargest number of staff (12 in all). Its basic functions include theissuance, distribution, custody and management of the country’s bank-notes and coins, and the withdrawal and destruction of poor qualitybanknotes. In addition, the Unit also performs the following activities:

� The Treasury Department maintains a permanent sample of nationalcurrency and a foreign collection (obtained through exchanges withcentral banks and other issuing bodies) at the Numismatic Museum.Aware of the importance of the Internet as a means of disseminatinginformation, the Cash Unit is also responsible for keeping up to datethe “Virtual Museum”, which can be accessed from the Bank’s web-site.

� The Treasury Department is also responsible for planning and coordi-nating the minting of numismatic and commemorative coins. It alsohas a specialised library whose function is to conserve and dissemi-nate the numismatic collection and to give advice to collectors andthe public in general.

� The electronic Clearing House, reporting to the Treasury Department,manages and supervises the use of cheques by the financial system.

Treasury Department

Cash and Issue Cash HandlingCounterfeitingPrevention and

Analysis

Monetary and LiabilityManagement Division

Economic Policy and MarketsDirectorate


The Treasury Department of the Banco Central del UruguayBanknotes and Coins

Directorate so that the latter can prepare the relevant expert’s report.When this task has been finished, the database information is com-pleted, which may be consulted by financial institutions. As regards USdollar-denominated banknotes, in the event of doubt regarding theirauthenticity, they are sent to the US Federal Reserve for consultation.

This Unit also organises seminars on banknote security features forcashiers from all branches of economic activity, with the aim of reduc-ing the circulation of counterfeits by making information available tousers. With the same objective, descriptive leaflets are designed fordistribution among financial institutions and retailers, which dissemi-nate the security features of banknotes and information for their care.The Unit has also made a telephone line and e-mail address availableto the public for queries regarding banknotes and coins.

In addition, there is a Fraud Committee to combat the counterfeiting ofcash, cheques, cards, passports and bonds, made up of representa-tives of the Central Bank, Interpol, Economic Offences, TechnicalPolice, Treasurers and private bank Security Heads. As a result ofthese measures counterfeiting levels recorded are low ant it is not aproblem for the Uruguayan authorities.

Plans for the future

The Treasury Department is currently in the process of obtaining qualitycertification for its management processes, in accordance with therequirements of ISO standard 9001-2000. For this purpose, officialshave completed training courses and it is planned that this certificationbe obtained during 2008.

Statistical data1 2004 2005 2006

Banknotes in circulation

Amount 13.819.745 16.833.963 21.445.430

Volume 77.862 82.294 86.161

Banknote withdrawals from the Central Bank

Amount 39.191.945 44.098.967 49.707.913

Volume 77.216 77.956 82.164

Banknotes paid in to the Central Bank

Amount 37.382.542 40.694.150 46.826.860

Volume 71.952 73.297 81.762

Banknotes processed by the Central Bank

Amount 30.373.530 36.553.956 38.772.786

Volume 40.041 49.208 51.382

Destruction rate2 63% 34% 59%

1. Amounts expressed in Uruguayan pesos and volume in thousands of banknotes.2. Volume of banknotes destroyed / volume of banknotes processed.

The Numismatic MuseumThe Banco Central del Uruguay has a NumismaticMuseum located at the Bank, which was set up to enablevisitors to find out about Uruguay's numismatic history.Opened in 1997, it houses examples of Uruguayanbanknotes issued since 1826 and of coins minted since1840. These exhibits are supplemented by the banknotesand coins of 150 countries, old public debt certificates,money boxes and materials used for printing and mintingnotes and coins. The museum was awarded the MorosoliPrize in 2006 for its contribution to culture anddissemination of the country’s numismatic history.

The Museum receives a great variety of visitors, withdifferent interests and professional profiles, includingtourists, collectors and schoolchildren. In addition, theBank's website hosts a virtual museum which iscontinuously updated, disseminating information on andpictures of the security features of banknotes incirculation and photographs of coins issued since 1840and of banknotes put into circulation since 1896.

Each year, to coincide with National Heritage Day, theMuseum organises thematic exhibitions on currency. The2007 exhibition is on the flora and fauna on banknotesand coins.

Premises of the Banco Central del Uruguay in Montevideo.


Operativa y tecnología 19

Intaglio printingVincenzo Ciaramella

Banca d’Italia Printing Works

Intaglio printing is acknowledgedtoday to be one of the most effec-tive banknote security features,having two characteristics thatare practically inimitable: the highprinting definition and the tactileeffect produced by ink in relief.The first characteristic makes theprinted lines extremely sharp,even though very thin and closeeach other, with no smudges orink smears, while the tactile effectis produced by the combined ef-fect of the embossing of the pa-per against the plate engravingand the large quantity of ink trans-ferred during the printing to thepaper. Given that these effectscannot be achieved with otherprinting techniques and also thatintaglio equipment is very expen-sive and not widely available, be-ing restricted to accredited print-ers, this technique makes coun-terfeiting much more difficult andis therefore very secure.

At the beginning of the 20th cen-tury the intaglio technique beganto be used as an element to en-sure the authenticity of bank-notes. The printing was done byprimitive machines capable ofprinting only one banknote at atime at a very low speed (see theJohnston machine in the picture).The transition to more advancedtechniques allowing higher print-ing volumes took place around1930 when the ability to duplicatethe original engraving throughmechanical and/or galvanicprocesses made it possible to ob-tain plates with more than oneoriginal. After the end of the sec-ond world war, a high speed mul-ticolour intaglio press was devel-oped by Gualtiero Giori, founderof the homonymous company: itwas the beginning of a new age inwhich intaglio printing was in-creasingly used as a banknote se-curity feature. In subsequentyears, the fast progression oftechnical innovations and im-provements – both in the printingprocess and ink formulation –helped make intaglio printing even

more secure and effective. In thisregard it is worth mentioning thefollowing achievements:

� The progressive increase of theprint size up to the current “su-per size” used today by the vastmajority of banknote printers;

� The progressive fine tuning ofthe pre-press activities to facili-tate the complex plate-makingprocesses while ensuring, at thesame time, complete fidelity tothe original;

� The abandonment, thanks tothe formulation of new inks, oftrichloroethylene for plate wip-ing, a highly toxic substancethat has been replaced by a wa-ter based solution;

� The production of quick-dryinginks, which avoid the transfer ofink between piled sheets.

Recent developments

As a consequence of the wide-spread use of intaglio as a secure

printing technique, it has been re-alized that the large quantity ofink transferred to the paper canbe used as a vehicle for other se-curity features. Certain pigmentsmake the inks optically variable orgive them properties invisible tothe naked eye, such as magnet-ism or infrared light reflection.Even intaglio printing without ink(blind embossing) – alone or incombination with other features –can produce special tactile/visualeffects, increasing the overall se-curity level of a banknote.

Computerised laser engraving

While the pre-press and printingprocesses have evolved and beenimproved until the present highlevels of quality and productive ef-ficiency have been achieved, theengraving process did not under-go any major change from the15th century until a few yearsago. Only very recently have com-puters been used in this field.First, graphic software was adapt-ed to simulate the burin engravedlines and photo-etching process-es were developed to transferthem to the plate. Neverthelesssuch a system is not able to con-trol the engraving depth, so that ithas been necessary to adapt theoriginal engraving, often even bymeans of burin or chemical etch-ing, in order to give the rightdepth to the various areas of theengraving .

Today this drawback has beenovercome by computer aidedlaser engraving, the latest techno-logical development in this field.These systems are able to ensurethree-dimensional micrometriccontrol and to engrave multipleversions of an original, withouthaving to replicate the first originalto achieve multiple printed forms.Some printers have alreadyadopted the new system and theresults obtained, so far only on anexperimental basis, are quite re-markable. The advantages of thenew technique are the following:

� The possibil ity of performingvery fine (up to 10 microns) orvery deep (up to 100 microns)engravings. The latter are easy

British-made “Johnston” intaglio press(1919), able to print one banknote at timeat a rate of 550 cycles per hour. The prin-ting takes place plane against plane; theplate dry-wiping is done with paper; thesheets are fed and removed manually.(Banca d’Italia; Banknote Museum)

Background

The first examples ofintaglio reproductionsappeared in Europe duringthe 15th century in thefield of goldsmiths’ art, thesubject being hand-engraved on a copper orzinc plate by means of ahard metal point (burin).

In order to make theengraving easier, the platewas sometimes protectedwith a layer of wax onwhich the drawing wasmade by removing the waxand exposing the metal.The plate was thenplunged in an acid bath,which etched the exposedareas only, since the wax,but not the metal, wasresistant to the acid. Onother occasions a mixedengraving technique wasalso used, i.e. burinengraving plus chemicaletching. In order to makethe printing possible, theengraved cavities of theplate were filled with adense ink, taking care toremove any excess fromthe flat areas; the inkedplate was then fixed on apress plane and the papersheet pressed against theplate, so that the ink con-tained in the engravingadhered to it.

Apart from the repro-duction of works of artengraved directly by theauthor, the intaglio tech-nique was also used as avehicle for the diffusion ofpaintings or sculpturesthat were “copied” by theengraver on a plate andthen reproduced manytimes.

Intaglio printingCash activities and Technology


Intaglio printingCash activities and Technology

ance. Some laboratory tests havealso shown an improvement inbanknote resistance to wear andtear. Nevertheless certain consid-erations should be borne in mind:

� The relief effect of the first in-taglio carried out on the reverseside, is reduced by the secondintaglio step carried out on theobverse side.

� In the event of application of aholographic foil, this is affectedby the second intaglio printing.The holographic foil loses bright-ness because of the moleskinpressure of the intaglio printing.

� These factors, together with theincrease in production costs oc-casioned by a second intaglioprinting, mean that a decision on

and the development of more effi-cient printing machines.

Single or double intaglio

Concerning the debate on the ap-plication of intaglio printing to oneor both sides of the banknote, adouble side intaglio printed ban-knote is undoubtedly more pro-tected against counterfeiting. Inaddition, the graphic richness pro-vided by intaglio printing on the re-verse side gives the banknote as awhole a more agreeable appear-

this matter can be taken only af-ter a comprehensive cost / bene-fit analysis has been conducted.

� It should also be taken into ac-count that the new laser en-graving techniques can en-hance the banknote securityagainst counterfeiting offeredby intaglio printing on one side,without the drawbacks of dou-ble side intaglio printing.

to print thanks to the geometricshape of the engraving usedwhich facilitates detachment ofthe ink (see photograph). Therelief effect and the line sharp-ness, the most important in-taglio properties, are thus en-hanced; furthermore the micro-metric depth control allows theachievement of special effects(multilayered engravings) thatare not feasible with traditionaltechniques. The particular pro-file of the ink relief, created bythe geometric shape of the en-graving, can create parallax andlenticular diffraction effects incombination with especiallybrilliant inks;

� The possibility of intaglio print-ing up to the banknote edge,an option prevented by the tra-ditional pre-press process con-nected with the preparation ofthe multiple originals, which re-quires an unprinted band ofsome 4 mm from the edge ofthe banknote. This advantagehas particular benefits for visu-ally impaired people, as it en-ables tacti le elements to beprinted on banknote borders,the area most touched by thefingers;

� The significantly reduced timefor setting up the single and themultiple original, compared tothe traditional process. Thistechnique is less labour-inten-sive and allows rapid correctionof possible defects arising inthe proof-prints until an optimalplate is achieved. The proce-dure for adjusting the plate di-mensions, to compensate forpaper stretching during theprinting, can also be carried outmore promptly and efficiently.

In short, intaglio printing developsin line with technological progress,and it can therefore be expectedto maintain its primacy amongbanknote security features formany years to come. From thecurrent perspective, it appears thatfuture developments in this fieldwill involve the printing of more so-phisticated graphic elementsthanks to computerised laser en-graving technology, the introduc-tion of advanced special effect inks

Work station to control intaglio plate engraving by laser.

The engraving

The engraving depth andits geometrical shape areparameters of paramountimportance to obtain thebest results from the inta-glio technique, especiallyin terms of tactile relief.The deeper the engravingthe larger the height ofthe ink layer, which pro-duces the relief effect.However it is not certainthat during the printingall the ink in deep engra-vings will be transferredto the paper. This isbecause too tight or toosharp engraving can obs-truct the transfer, but cer-tain tricks in the geo-metry of the engravingcan facilitate ink detach-ment. The ability of theengraver to balance care-fully the engraving ingre-dients (width, depth,shape) is a decisive factorfor achieving successfulprinting results.

Magnified detail of a computer aided laser engraving. The pictureshows two engravings with different depth; the engravings aremade rough in order to facilitate ink detachment.


Operativa y tecnología 21The finishing stage of the banknote production process Cash activities and Technology

The finishing stage of thebanknote production process

Francisco LacuestaReal Casa de la Moneda-Fábrica Nacional de Moneda y Timbre. España.

This article presents the work doneby the Real Casa de la Moneda-Fábrica Nacional de Moneda yTimbre de España (RCM-FNMT),the Spanish National Mint andPrinting Works, to automate thefinishing stage of the banknoteproduction process. Once thebanknote sheets have been print-ed by the RCM-FNMT (a processoutside the scope of this article),an automated, integrated systemis used to avoid human handling inthe tasks involved in finishing thebanknotes for delivery.

Change in new finishing systems

In recent years the technologicaladvances incorporated in printingmachines and in the new systemsdeveloped for cutting, sorting and

packaging operations have repre-sented a qualitative leap in ban-knote production. The manualhandling tasks have been virtuallyeliminated. Nowadays, each ban-knote is the result of a complex in-dustrial system in which the au-tomation of tasks is pivotal withinthe production process. The mostcomplicated stage to automate ofall those involved in banknote pro-duction was that of finishing, whichincludes the cutting of sheets intobanknotes, the quality control ofthe final product and its packag-ing.

The incorporation of banknotesorting machines into finishingprocesses marks a major mile-stone. The introduction of theseadvanced machines for the quali-

tative and quantitative control ofbanknote obviate the need for aconsecutive sequence in the serialnumbering of the banknotes. Untilrecently, each banknote packetcontained 100 consecutively num-bered units. When a banknote wasfound to be defective during theproduction process, it was re-placed by another with the samenumber or by one from a specialreplacement series prepared forthe purpose. These operationsmeant the cutting machines oftenhad to be stopped to carry outphysical replacement. Also, a nu-merous team of people performingrigorous control of substitute bank-notes and of those replaced wasneeded.

In the production of euro bank-notes, the fact that their technicalspecifications do not require con-secutive banknote numbering inthe packets and the reliability ofthe sorting machines make it pos-sible to form groups of 100 bank-notes which, although not num-bered consecutively, are strictly

identified. The information on thecontent of each packet is includedin a computer file along with otherdata on the quality of each ban-knote. These data enable centralbanks to have reliable, secure in-formation on the banknotes re-ceived from printing works for put-ting into circulation.

In this way, the cutting operationhas been transformed into a con-tinuous activity not interrupted bystoppages to replace defectivebanknotes. Any banknote that nowhas a defect is destroyed on-lineat the very time it is detected bythe sorting machine and replacedby that banknote immediately fol-lowing it in the production se-quence that meets quality stan-dards. The process generates fulland detailed information which of-fers total assurance of the opera-tion.

Experience of the RCM-FNMT

On the basis of the above, afterthe first issue of euro banknotes,

Banknote packaging line. RCM-FNMT


The finishing stage of the banknote production process Cash activities and Technology

combine the finishing processes ina single production line. In 2004they started to install the firstequipments, which now, in 2007,are fully operational in four finish-ing lines and functioning to the fullsatisfaction of the Mint. Each newfinishing line consists of the fol-lowing:

• Sheet feed• Automatic cutting machine• Intermediate storage • BPS 2000 sorting machine• Packaging and labelling of thou-

sand-unit bundles• Dynamic scales for weighing

thousand-unit bundles• Control and reading of thou-

sand-unit bundles• Boxing/sealing machine• Dynamic scales for weighing

boxes• Box labelling• Transport to the palletisation

area

Each of the four finishing lines cur-rently making up the Cutting, Sort-ing and Packaging Unit gives ontothe palletisation area, which con-tains the following equipment:

• Box transport control• Palletisation robot• Pallet shrink-wrapping system• Pallet strapping system• Pallet labelling system

The completed process

At present, the RCM-FNMT canguarantee with pride that, from thetime the printing phase finishesand the reams of 100 sheets start

the RCM-FNMT undertook a proj-ect to gather together the variousmachines and processes involvedin banknote cutting, sorting andpackaging. The challenge was notonly to automate co-ordinatedly aseries of operations carried out bydifferent machines, but also to in-corporate those operations all intoa single production line. The ob-jective of the project pivoted onthe optimisation of two key fac-tors:

� Security: this is a vital factor inthe production process, particu-larly in the areas or operations inwhich completely finished bank-notes are handled. Here, wher-ever possible, all human contactwith the banknotes should beprevented and all manual opera-tions that cannot be avoidedshould be registered automati-cally.

� Productivity: another aim of au-tomating the finishing process isto reduce the human resourcesneeded for it. If the operatorsassigned to a production line didnot have to handle the product,they would be free to carry outthe essential operations of load-ing and replacing the input ma-terials and, basically, of super-vising and controlling the variousfactors and processes involvedin a production line.

During months of intense workalongside the personnel of an as-sociated private firm, the RCM-FNMT technical staff designedand implemented the project to

known as CP3, which was de-signed and implemented in-house.

Future projects

The RCM-FNMT continues towork on improvements to ban-knote production quality controland supervision systems. It is cur-rently conducting the studies re-quired to enable it to unify theprocesses of real-time monitoringand control of printing machineproduction, with a view to achiev-ing automatic control of the wholeproduction process, integratingmachines of different stages, qual-ity controls, raw material manage-ment, etc.

Apart from controlling each ban-knote sheet as it passes througheach of the machines, other aimsare to automatically generate theproduction-in-process reports be-tween one process and the next,manage all the information on anintegrated basis and transfer rap-idly that required at each point bythe operators who use it. This willenable the efficiency of proce-dures to be improved and thetraceability data to be collected asand where it is produced.

to be fed into the cutting machine,there is no manual interventionwhatsoever in producing thepackets, neither in quality andquantity control, nor in banding,packaging and subsequent pack-ing in special cardboard boxes of10,000 banknotes, nor in palleti-sation to form finished palletsready for transport.

Control of both active and passivesecurity in each production line issupervised by a computer pro-gram designed by the RCM-FNMT.The program was developed tak-ing into account, inter alia, the su-pervision of each of the elementsmaking up the production linesand as a priority, security-relateddetails of the product itself and ofoperating procedures. In this way,all the production line functionsare co-ordinated and supervisedvia the computer connection withthe programmable automatons ofthe machines. The final result hasbeen completely satisfactory, am-ply exceeding the most optimisticpredictions.

The configuration describedabove is computer-managed via aSCADA system, the computersbeing connected to a local areaserver operating under WindowsServer 2003. The local area serverhas another server associatedwith it in parallel to endow the sys-tem with the highest possible levelof security insofar as data pro-cessing is concerned. The infor-mation is included in Oracle data-bases in the banknote productiontraceability management system

Banknote sorting machine. RCM-FNMT Automatic palletisation with robot. RCM-FNMT


Operativa y tecnología 23Smart solutions for banknote processingCash activities and Technology

As seen from today’s perspective, the most relevant challenges for thenext generation banknote processing systems can be categorized bythe following four criteria:

� Applications: A modular and flexible construction kit for variablesystem configurations, such as the number of stackers and detector

functions, enables tailored solutions and protects the customer in-vestments by options for future upgrades and enhancements. Auto-mated reporting to the cash management system ensures smoothdata flow for accounting and monitoring purposes. Overall intrinsicsystem security, based on highest accounting accuracy with mini-mum risk of data corruption and data manipulation, is an indispen-sable prerequisite for on-line destruction, particularly in case ofhardware or software failures or exceptions.

� BPS performance: For reduced operating costs, the BPS must en-sure a high productivity and availability. Singling speed and nominalthroughput are part of this equation, but optimized machine inter-faces and automated support functions generally have a significantimpact on the overall efficiency of the entire process. For example,on-line reconciliation of rejects with optional rerun may be more effi-cient than off-line reconciliation, opening the risk of undetectedcounterfeits and requiring additional supervision. In addition, fre-quent jams with poor banknote or deposit quality and/or insufficientreliability of the system may corrupt any theoretical figure.

� Detector performance: Reliable and secure detection of authenticityfeatures is fundamental for central bank applications. However, theadaptation must also care for low reject rates in case of damaged orworn banknotes. For economic reasons, different decision parame-ters may be used for high and low denomination values. Top fitnessquality requires the detection of all defects with sufficient resolution.In addition, soiling and other degradations, such as graffiti, must bequantified in scaled measurements. For stable and repeatable re-sults the detectors must compensate for inevitable offsets or drifts.This is better achieved by embedded self-test and calibration fea-tures than by processing of questionable test decks subjected toaging and wear. The plausibility of fitness results matching with hu-man perception is still a major challenge as the human eyes and

Smart solutions forbanknote processing

Alfred Schmidt Giesecke und Devrient

Cash volumes are growing world-wide, often with growthrates beyond GDP and inflation. In addition, the speed ofbanknote circulation is increasing and central banks haveto cope with higher return frequencies of banknotes, i.e.they are deposited more often at the central bank. Al-though debit cards, credit cards and electronic pursesare strong competitors, cash will remain the most impor-tant means of payment. It is available under most condi-tions, it does not need electronics and data networks,and it supports hand-shake transactions with immediatevalue transition. Cash does not fail in case of natural ca-tastrophes or terror attacks. For large segments of thepopulation, cash is the only available means of payment:the unbanked, youth, illiterate or the visually impaired.However, there is a challenge, and a lot of potentials, forcost reduction in the cash cycle to be competitive and toprovide an economic and efficient basis for value transactions.

Giesecke und Devrient (G&D) offers flexible and modular solutions forautomated cash processing with seamless material and data flow.Next generation banknote processing systems will offer further oppor-tunities for smart and more efficient processes. This is basically drivenby higher degrees of automation, such as packing systems, and en-hanced functionality, such as the capability to process multi-denomina-tion and/or to eliminate sequential runs by integrated processes. Im-proved detector technology will use higher resolutions and providehigher performance and accuracy of evaluations. Scalable systems,based on standardized building blocks, will meet the diverse require-ments of large and small cash centers. Management Information Sys-tems (MIS) will provide information for strategic decisions to monitorand control the banknote circulation and quality. The technical evolu-tion will allow central banks to adjust their roles for enabling synergiesin the cash processing and alleviate cooperation with the commercialcash handlers.

General aspects for banknote processing by Central Banks

In 1970 G&D started the development of both machine readable au-thentication features and corresponding detectors. Additionally, full au-tomation requires machines specifically designed to single, transportand stack banknotes. This became the driving force for the ISS 300,the reference of first generation banknote processing systems. In1986, an on-line shredder was added as an option. The ISS 300proved to be a reliable workhorse with more than 2,200 units sold be-tween 1976 and 2000. Today, there are still more than 1,200 units inoperation. For central bank applications, this machine became the firstworld reference for reliability and accounting accuracy. The experience,and also the reputation and quality, of this machine established thefundamental basis for G&D to develop high and medium speed BPSsystems. Since 1996, the BPS 1000 took over the role of the mostsuccessful medium speed banknote processing system. On-going de-velopments will transform new technologies into the next generation ofbanknote processing systems and meet future requirements for theoptimization of the cash cycle.

ISS 300, 1st generation banknote processing, a reliable workhorse for central bank applications


Smart solutions for banknote processingCash activities and Technology

systems enable the most efficient operation (see next picture). The au-tomated shrink-wrapping of bundles with 500 or 1000 banknotes pro-vides highest security at lowest personnel interactions with minimumsurveillance. One NotaPack can be combined with up to four BPS1000. The system is dedicated for banknote packing and has a smallerfootprint and lower energy consumption than off-the-shelf products.

For smaller cash centers, the BPS 500 (see next page) provides a sim-ilar functionality, except automatic packing, with a compact footprint.Its detectors and applications are compliant with BPS 1000 technolo-gy to achieve consistent sorting results and security levels in a branchnetwork of different sizes. The modular concept of the BPS 500 allowsmany optional configurations, among them facing, automatic bandingand air-supported singling. The power consumption is very low so asingle-phase power supply is sufficient even with on-line shredding.

For very large cash centers, G&D offers the high-speed systems BPS

2000 and BPS 3000. The BPS 3000 supports automatic debandingfor verification of straps with off-line reconciliation. The BPS 2000 sup-ports continuous feeding for verification of bundles or larger depositsand runs at highest speed with up to 140,000 banknotes per hour.Due to the additional automation on the input side, these systemsachieve the highest performance with minimum staff requirements.

Future trends and challenges

Cash has been criticized as being “too expensive”, causing the centralbanks to rethink their traditional roles in the cash handling business.This challenge is reinforced by the increasing volumes and hence thelimitations of capacity and other resources. The future challenge is howan appropriate banknote quality with low counterfeit rates at minimumcosts for a society or an economy can be achieved. The central bankcan support this by offering services or modify the regulations, with thefollowing starting points for optimizations:

� Deposit verification: A standard procedure is to process and verifymono-denomination straps. In case of a discrepancy the differencecan be tracked back to the strap identifying the depositor and re-sponsible cashier. But strap verification (i.e. per 100 banknotes)

brains are mostly superior to technical solutions, though less objec-tive.

� Ease of use: The functionality of modern banknote processing sys-tems gets more and more complex. Nevertheless, less specializedstaff must be capable to operate the systems with minimum trainingefforts. This requires that the user menus are self-explaining to themost possible extent, reducing the risk of human errors. Ergonomicsmust be optimized, e.g. to avoid operator fatigue due to preppingthe banknotes or loading the singler.

One size doesn’t fit all

From a historical level, the central banks have developed their rulesand policies in different ways, depending on the existing structure ofthe banking industry and other country specific characteristics, suchas geographical conditions (distances and population density in metro-politan or rural areas, risk of robbery, etc.) and political constraints. In2002, G&D proposed the four generic models of controlled, involved,delegated (held-to-order) and privatized styles considering the main(but differing) objectives of control, management, cost and efficiencyof cash. Meanwhile, privatization is nolonger seen as an independent dimen-sion as it only addresses the legal own-ership of an operation without any addi-tional relevance. The diagram presentedbelow therefore suggests a “commercial-ized” position which can be combinedwith the three basic styles (delegated –involved – controlled). Depending on thereturn frequency and the level of processintegration, each central bank can be as-signed to a certain position within thismap.

The return frequency has a major impacton processing volumes and banknotequality in circulation. For example, with adelegated style the volumes are lowerbut at higher unfit rates. Depending on re-gional conditions, the central bank may have a distributed branch net-work or a centralized operation. In any case, the daily volume of a cashcenter is the most determining factor for the optimum combination ofprocesses and equipment. A large cash center, with a million or morebanknotes per day, some BPS 1000 systems with NotaPack packing

“How the CB implementsthe necessary services”

Increasing banknote return frecuency

Delegated Involved Controlled

Restriction to basic CB tasks

Full offering of commercial services

“How the CB defines thelevel of its involvement”

Partial consideration of commercial issues(cooperate style)

Commercialized

Increasing level of process integration

Central bank styles concerning the cash cycle

BPS 1040SB with NotaPack shrink-wrapping system – smart automation in banknote processing


Operativa y tecnología 25Smart solutions for banknote processingCash activities and Technology

slows down the productivity due to reconciliation constraints. As analternative, larger units, such as bundles or multi-strap deposits, canbe verified with higher throughput. However, the possibility to track adifference to a single strap is lost and some administration overheadis required for deposit identification (e.g. by machine readable bar-code labels). Thus deposit verification with mono-denomination hassome restrictions.

� Multi-orientation processing: Previously facing or orientating bank-notes was required for manual handling to count the values, checkfor authenticity or sort by fitness. With processing machines, evenlow-cost desktop counters, this is no longer necessary. In addition,in most cases ATMs will work more reliably with mixed orientations toavoid skewed banknote stacks due to asymmetrical intaglio printing

or foil applications. Therefore acceptance ofbanknotes in any orientation will reduce thenumber of processing steps in cash han-dling.

� Multi-denomination processing: The oc-currence of mixed denominations is stan-dard in daily cash handling. For example,the deposits of a bank cashier or a vendingmachine are larger volume, but multi-de-nomination type. In commercial cash han-dling significant costs are caused for sorting

and strapping by denomination and handlingthe remaining banknotes with incomplete straps.

This may raise the question for a central bankwhether it is more economical to process one larg-

er multi-denomination deposit or to verify severalmono-denomination straps which have to be separated

into batches per each denomination.

� Process integration: Productivity can be increased if several stepscan be combined into one processing run. Picture shows a maxi-mum integration based on a BPS 1000. Multi-denomination depositsare received in the cash center and put into processing trays, sepa-rated by header cards for each deposit. The BPS 1000 then process-es the banknotes at its maximum speed without interruptions, andperforms the steps of deposit verification, denomination sorting, fit-ness sorting and on-line destruction of unfit banknotes in the samerun. A NotaPack packing system seals the fit banknotes into tamper-proof bundles.

� Fitness for automation: Besides the sensitivity for processing costs,maintaining a good quality of banknotes in circulation is the most im-portant objective of cash processing activities. This is mainly be-cause poor banknote quality deteriorates counterfeit detection, bothon street level with acceptance of counterfeits and on machine levelwith higher reject rates. Of course, high-level authenticity features isa solid basis for reduced reject rates in central banks. But the lowerlevel machine readable features should also be checked as fitnesscriteria to leverage high acceptance rates in all applications, such asprocessing in cash centers or paying at vending machines or cash-inmachines. Recently also the retail business is investigating cash au-

Integrated process – cutting costs by combining the steps of banknote processing

BPS 514S with shredder, facer and bander modules – minimum footprint for smaller cash centers


Smart solutions for banknote processingCash activities and Technology

Machinereporting

Strategicdecisions

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Deploy configurations andsettings

Head-quarters

Site / RegionalManangement

Machine Operation

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Monitor and adjust on-site

tomation for cost reduction. Therefore the quality guideline of “fitnessfor automation” will become more and more important in addition tothe evaluation of defects and soiling as unfit reasons.

� Management Information System (MIS): The central bank needstools for the continuous monitoring of the cash cycle and the cashcenters. Figure shows how machine reporting supports strategic de-cisions by providing information on banknote quality, machine per-formance etc. The MIS of G&D is designed to collect and accumu-late this statistical information in a data warehouse for all processingsystems in a country. Modified control parameters, such as newsorting thresholds, can be evaluated and deployed to the banknoteprocessing systems. With this machine set-up the loop for control-ling the banknote quality will be closed and develop according to thestrategic decisions of the central bank. The MIS may also be used tomonitor the activities of commercial players, e.g. the implementationand fulfillment of recycling frameworks. This, in turn, will work only ifthe processing systems are adjusted by the same repeatable detec-tor standards and not based on volatile individual settings.

Conclusions

The central bank will continue to play the dominant role in the cash cyclewith a major responsibility for its structure and efficiency. It determines thegeneral standards for the quality of banknotes in circulation. By takingcommercial requirements into account the central bank has an opportuni-ty to optimize the interfaces for commercial depositors and thereby re-duce the total costs of cash handling in an economy.

Next generation banknote processing systems will offer further opportuni-ties for smart and more efficient processes. This is basically driven byhigher degrees of automation, such as packing systems, and enhancedfunctionality, such as the capability to process multi-denomination and/orto eliminate sequential runs by integrated processes. Dedicated IT sys-tems will provide management information on cash center performanceand the quality of banknotes in circulation. As a result, the central bank isable to control the integrity and efficiency of the cash cycle. In addition,this will increase banknote quality and support public trust in the currency,both required as a reliable basis for the success of the entire economy.

Closed loop for banknote quality – monitoring the banknote quality in circulation


Operativa y tecnología 27IV International Course on Cash ManagementCIGE

IV International Courseon Cash Management (CIGE)

Bernardo Calvo Reguero Banco de la República

J. Darío Negueruela Banco de España

The IV CIGE took place from10th-14th September 2007 in Bo-gota, D.C. (Colombia) with the at-tendance of 52 students from 18countries. The Course wasopened by the General Managerof the Banco de la República, Mr.José Darío Uribe, and closed bythe Industrial Deputy Manager ofthe Banco de la República, Mr.Néstor Plazas, and the Director ofthe Cash and Issue Departmentof the Banco de España, Mr. J.Darío Negueruela. As in previouseditions, the Course was impart-ed in Spanish and Portuguese,and a Diploma was awarded tothe students present, who workedin sessions from 8:00am until17:30pm. The Banco de laRepública, the National CentralBank of Colombia, hosted theCourse and was responsible fororganisational, logistical and op-erational aspects which, onceagain, were of a very high stan-dard and conducive to an atmos-phere of collaboration and teamspirit. This contributed decisivelyto the success of the meeting.The Director of the Treasury De-partment of the Banco de laRepública, Mr. Bernardo Calvo,and his team of collaboratorswere responsible for the exempla-ry organisational arrangements,which saw the faultless streamlin-

ing of academic, professional andpersonal topics. The technicalmanagement of the Course wasrun by the Banco de España.

The academic methodology ofthe Course followed that of theprevious year, dedicating the firstthree days to developing the ba-sic academic content, conveyedfrom a triple perspective:

� Theoretical lessons given byexperts from different countries.

� Working tables where discus-sion topics were debated, facil-itating the exchange of knowl-edge, experiences and techno-logical innovations in areas re-lated to cash handling by thedifferent central banks.

� Visits to working centres, facili-ties, labs, etc., where technicalapplication of the operationalmodel used by the host CentralBank was discussed.

Those imparting the lectures atthe IV CIGE were senior officialsfrom the Central Banks of Ar-gentina, Brazil, Colombia, Spain,Mexico and Portugal, and thethree working panels addressed“Models for forecasting monetaryspecies”, “Information Systems

for cash management” and“Models for analysing the qualityof banknotes in circulation”. In allsessions the students enjoyed anextensive and l ively debate inwhich the early contributionswere concluded and enriched bycomments and discussions thatprovided an opportunity to con-sider organisational, structuraland technological improvements,at the same time as proving in-structive for the central bank em-ployees attending the Course.In addition, the participants wereable to visit the new modern facil-

ities where the banknote printingworks has been set up. It boastsa new set of high-technology ma-chinery which has enabled thebanknote production capacity ofthe Banco de la República to beincreased. A new paper storagesystem is also being set in place,along with the new facilities of theTreasury Department of the Bank,which has a modern system tomove security items thanks to afully robotised vault with 2,976storage points and no fewer than4 automatically guided vehicles(robots). Visitors were able to ob-serve and discuss aspects relat-ed to the processes carried outon these premises with the help

models for the custody of cashoutside the vaults of a CentralBank”.

At the closing ceremony, the Di-rector of the Course officially an-nounced that the next Coursewould be in Lisbon, organisedunder the auspices of the CentralBank of Portugal. The details ofthis V Course would be distrib-uted in a few months. Any infor-mation about the CIGE coursescan be obtained through the fol-lowing e-mail address: [email protected]

of advanced machinery and thehighest security standards. Thestudents were also able to com-pare the machinery, equippedwith the latest technology, withthat in their own countries.

The Banco de la República askedseveral speakers to lecture on thefollowing topics: a talk about “Thecurrent challenges in cash man-agement”, another one on “Themanagement of the coin” and afurther one on “The fight againstcounterfeiting”. On top of thisthere was a work table about “the


International eventsMiscellaneous

Fourteenth Conference of theBPS International Users Groupof BPS

Delegates of central banks andofficial printing works from aroundthe world, who use BPS ban-knote sorting machines manufac-tured by Giesecke and Devrient(G&D), attended a conference inMadrid from 18th to 21st June2007. This fourteenth Conferencewas held under the auspices ofthe Banco de España, and theDirector of the Cash and IssueDepartment, J. Darío Negueruela,acted as Chairman. Eighty-sevendelegates attended, from 26countries (European Union, Unit-ed States, Canada, Australia,China, Hong Kong, Indonesia,Korea, Russia, South Africa, Su-dan, Singapore and Venezuela).Currency processing automationand the quality of banknotes incirculation were the main sub-jects addressed, in 12 presenta-tions and 2 panel discussion.Separate meetings were held forthe delegates of central banksand the delegates of printing

works, to give these two groupsthe opportunity to discuss mat-ters of interest to each of them ingreater depth. The delegates alsovisited the facilities of the Cashand Issue Department at theBanco de España’s Alcalá 522building. Along with the delegatesand accompanying persons, theclosing dinner was attended bythe Banco de España DirectorGeneral, Mr. Alonso Ruiz-Ojeda,and the Second Vice President ofthe Spanish Congress ofDeputies, Mr. Vilajoana, as wellas by Mr. Ottenberger, the Chair-man, and Mr. Schlebusch, mem-ber of the Board of G&D.

Regional symposium on Poly-mer Banknotes in Mexico

The Regional Symposium onPolymer Banknotes` was held inMexico in June 2007. Organisedjointly by Banco de México andthe company Securency Pty, Ltd.,it was attended by more than 100banknote experts representing 21central banks, independent print-ing works and suppliers of print-ing machines and inks. This sym-posium was a forum to exchangeinformation and experiences re-garding the use of polymer tech-nology in the production of bank-notes. There was also time to dis-cuss the printing and sorting ofbanknotes manufactured fromthis substrate.

The majority of representativeswere Latin American centralbanks staff. Nevertheless, therewere also delegates from the USFederal Reserve and Bureau ofEngraving and Printing, the Bankof Canada, the Banco de España,the Bank of England, the CentralBank of Vietnam, the Bank ofZambia and the Central Bank ofNigeria attending the symposium.Dr. José Sidaoui Dib, DeputyGovernor of the Banco de Méxi-co, opened the forum and wel-comed the delegates. His speechdealt with the success of theMexican experience in the use ofpolymer substrates in the pro-duction of banknotes and calledfor open and honest discussionby all those present of their ad-vantages and disadvantages.

Internationalevents

First Meeting of the Issue andTreasury Departments of theCentral Banks of the Communityof the Countries of PortugueseLanguage.

The heads of the Issue and Treas-ury Departments of the NationalCentral Banks of Angola, Brazil,

Guinea-Bissau, Mozambique, Por-tugal and São Tomé and Príncipeattended the 1st Meeting of the Is-sue and Treasury Departments ofthe Central Banks of the Commu-nity of the Countries of PortugueseLanguage held in Lisbon from 19to 22 June 2007. This Meetingwas hosted by the Banco de Por-


Operativa y tecnología 29International eventsMiscellaneous

tugal and chaired by Mr. Vitor Ro-drigues Pessoa, member of theBoard of Directors of the Banco dePortugal. The speakers includedMr. António Gustavo do Vale,member of the Board of Directorsof the Banco Central do Brasil, Ms.Esselina Macome, member of theBoard of Directors of the Banco deMoçambique, Mr. Manuel Castel-hano, Head of the Treasury and Is-sue Department of the Banco dePortugal and, as a special guest,Mr. Darío Negueruela from theBanco de España, who gave anoverview of the issue and treasuryfunctions in the Eurosystem con-text.

The main objectives of the Meetingwere the establishment andstrengthening of contacts betweenthe Issue and Treasury Depart-

ments of the participating centralbanks and the exchange of experi-ences and knowledge regardingthe different organisational struc-tures and contexts. In spite of thedifferent contexts, organisationaland functioning models andscales/dimensions of the partici-pating countries, it was possible toconclude that the mission andfunctions of the departments are,essentially, the same, that theyface identical problems and chal-lenges in putting the necessary le-gal tender into circulation in theirnational economies and guaran-teeing its quality and authenticity.Given the beneficial experience ofthis Meeting, it was recommendedthat in future it should be held on aregular basis, once every twoyears.

VIII Meeting of Central BankingLegal Advisors (CEMLA)

The VIII Meeting of Central BankLegal Advisors took place inMadrid on 27th-29th June 2007.The meeting is organised everytwo years by the Centre for LatinAmerican Monetary Studies(CEMLA) and promotes the ex-change of experiences amongcentral bank legal experts andothers associated with CEMLA.

The Meeting gathered togetherrepresentatives from many Cen-tral Banks and International Fi-nancial Organisations (EuropeanCentral Bank, International Mone-

tary Fund, Central AmericanMonetary Council, Bank for Inter-national Settlements). On this oc-casion, the meeting focused onthe study of various legal aspectsrelating to the issuance of bank-notes and, in particular, therewere reports and debates ad-dressing the following topics:

� Legal arrangements governingseigniorage

� The role of a Central Bank incombating counterfeiting

� Legal framework for banknotedistribution

International Seminar on the European BanknoteRecycling Framework

An International Seminar on the European BanknoteRecycling Framework was held on 1st and 2nd Octo-ber 2007 in Seville (Spain). The Seminar was organ-ised by the Cash and Issue Department of the Bancode España and attended by the cashiers from practi-cally every Central Bank of the Eurosystem and theEuropean Central Bank.

Mr. Javier Alonso, the Director General of Operations,Markets and Payment Systems at the Banco de Es-paña, participated in the opening session. During theSeminar the participants were given the opportunity todescribe their individual experiences regarding theirown countries’ position regarding the implementation ofthe European Banknote Recycling Framework. Thepresentations revealed the differing importance andscope of the common project for the different countries,depending on their respective starting points. And theyfurther highlighted the different organisational and oper-ational systems in place in respect of the cash cycle.

These differences also took the form of differentstrategies adopted by the central banks in facing thesame problem, and the various approaches chosen todeal with it. Some counties were seen to adopt a legalapproach (laws and decrees), while others opted forlesser ranked regulations. There were also cases ofcountries in which bilateral agreements were enteredinto between the central banks and the credit institu-tions or their banking associations.

On the second day, a comparative table of the differ-ent situations in the participants’ countries was circu-lated. An interesting debate arose, leading to the iden-tification of common and significant points of interestaround which future work would be carried out.

The Seminar highlighted the benefits of these theme-based international meetings in which a small numberof people discuss the different aspects of a commonproblem in depth, exchanging experiences and identi-fying potential problems.


Central banking newsMiscellaneous

Argentina:New materialsfor mintingcoinsIn 2007, the Banco Central de laRepública Argentina (BCRA) be-gan to put into circulation 5 and10-cent coins made from steelblanks coated with electrodeposit-ed tin. These new coins will circu-late in parallel with those previous-ly issued, which were minted inaluminium bronze (both denomina-tions) and in cupro-nickel (the 5-cent coin only). As to their appear-ance, the new coins have thesame design, diameter and thick-ness, but their edges are smoothrather than reeded. The smoothedge has been chosen becausecoins with reeded edges are moreprone to wear and tear, the top lay-er of the coin tending to thin at theedges of the grooves.

The change in materials is warrant-ed by the increase in the price ofthe metals traditionally used forminting, which is very high relativeto the face value of these coins.

Opacifying polymer plantin Mexico

The Central Bank of Mexico announced on 3rd July 2007 that it hasagreed to a joint venture with Securency PTY to build a plant producingopacified polymer substrate. That same day there was a modest cere-mony in the State of Querétaro, Mexico, to mark the start of the works.Among those attending were the Chairman of Securency PTY LTD, Mr.Graeme Thompson, and the Director General of Issuance of the CentralBank of Mexico, Dr. Manuel Galán Medina, along with several employ-ees from both institutions.

The new Company will be located in the “Querétaro Industrial Park” andis expected to commence operating in the first quarter of 2009. The in-vestment will total approximately 12 million dollars, with the Banco deMexico accounting for 20% and Securency the remaining 80%. Theplant’s target production capacity will be 100,000 reams per year.

Modification ofParaguay’sfamily of coinsIn late July 2007, the Banco Cen-tral del Paraguay issued a newfamily of coins consisting of fourdenominations: 50, 100, 500 and1,000 guaraníes. The new coinshave the same colour tones, butmay be distinguished by their dif-ferent sizes, which increase withface value. This design will facili-tate coin counting and sortingtasks.

The new coins are minted usingthe electroplating technique, whichincreases the durability of the coinand reduces the environmental im-pact of the production process.

The obverse sides of the coins de-pict notable Paraguayan buildings,while on the reverse sides appearthe effigies of soldiers who haveplayed an important role inParaguayan history.

Central banking news

Lincoln, and a column of threesmaller “5”s located to the left ofthe portrait. The substrate of thebanknote is paper and containsred and blue fibres. More informa-tion on the new design of $ 5 canbe found in the web site,www.moneyfactory.gov/newmoney


Operativa y tecnología 31Central banking newsMiscellaneous

Banco de México issues anew polymer 20-peso banknoteOn 20 August 2007 the Central Bank of Mexico issued a new polymer 20-peso banknote as part of its programme commenced in November 2006,when the new 50-peso banknote was released, printed also on polymer.The new 20-peso banknote is 66mm high and 120mm wide, making it7mm shorter than the recently issued 50-peso banknote. This 20-pesonote is the second of the new series to be issued.

As the previous 20-peso banknote in paper, the dominant colour of thenew one is blue, and its main motif on the front is the effigy of Don BenitoJuárez García. On the back is an engraving of the archaeological area ofMonte Albán, Oaxaca.

The main security features are a complex transparent secure window(WinTHRU), a dove in the top left-hand corner printed with a special inkthat changes colour when the banknote is tilted at different angles (G-switch), a watermark (shadow image) with the picture of Don BenitoJuárez, a microtext of decreasing height and a perfect see-through regis-ter with a map of the Republic of Mexico.

The security features of the new 20-peso banknote can be viewed on theBanco de México’s website www.banxico.org.mx.

The United States governmentcontinues to stay ahead of thecounterfeiters and to be proactiveand protect the integrity of the $currency introducing new currencywith enhanced designs and secu-rity features. A new design of the$ 5 banknote was unveiled in Sep-tember 2007. The new $ 5 ban-knote will enter in circulation in ear-ly 2008.

As with the redesigned $ 10, $ 20and $ 50 banknotes that precededit, the new $ 5 banknote featurescontain an American symbol offreedom printed on the back sideof the note and the Great Seal ofthe United States printed on thefront side. President Lincoln´s por-trait, printed in intaglio, is en-hanced and the oval border

around it is removed. The largeeasy to read number “5” on theback side has been enlarged andit is printed in high contrast purpleink. Another noticeable design dif-ference in the new $ 5 banknote isthe addition of light purple colourin the centre of the banknote,which blends into grey near theedges. The watermarks and secu-rity thread are the key security fea-tures of the public to check the au-thenticity of the banknote. Thereare two watermarks on the re-designed $ 5 banknote: a largernumber “5” watermark located tothe right of the portrait, replacingthe watermark portrait of President

New designof the $5 banknote


Publications devoted to cashMiscellaneous

How the euro became ourmoney. A short history of theeuro banknotes and coins

Publication issued by the Euro-pean Central Bank which brieflydescribes the design, production,storage, distribution and issuanceof euro banknotes and coins. Italso addresses the communica-tion campaign for the launching ofthe euro. The book is published inEnglish and is 92 pages long. TheEnglish version can be found atwww.ecb.int and the Spanishversion at www.bde.es

A path to the next generationof U.S. banknotes

This study was carried out by theUS Academy of Sciences and isused as a guide to identify newsecurity features for 21st centurybanknotes. The study was com-missioned by the US TreasuryDepartment through the printingworks “Bureau of Engraving andPrinting” (BEP). This 240-pagepublication is only available in elec-tronic format atwww.nap.edu/catalog/11874.htmll

Banknotes of the world – Newsbulletin

Monthly bulletin (32 pages) whichpresents the changes and newsrelating to every banknote issuedin 250 different countries. Themagazine is published by theRussian company Intercrim-press.Additional information can befound at www.icpress.ru

Publications devoted to cash

World Polymer Banknotes

Second version of this publication,released in 2007. It containsdetailed information about everypolymer banknote issued world-wide. It is over 200 pages long andcan be found atwww.eurekametro.com


Operativa y tecnología 33Banknote security featuresMiscellaneous

Banknotesecurity features

Fernando León Banco de España

BILLETARIA presents a new section: ‘Banknote se-curity features’. It consists of a brief catalogue with themain security features currently available and used inbanknotes worldwide. The document, produced bythe Cash and Issue Department of the Banco de Es-paña, presents an image with an attached text whichbriefly describes the referred feature. We have tried tooffer a broad and complete vision of these security el-ements along with a simple and understandable detailof each of them. In order to keep it simple, we haveonly picked those elements which are easily recognis-able by the people and retailers either with the nakedeye or by using simple devices.

The set of elements described is a group of possiblesecurity features that might be included in any ban-knote. In no way will we suggest or recommend anyparticular element. Each Central Bank must decide forits own issued banknotes which elements will suitthem the best taking into account a broad variety ofaspects such as the design, the quality, the resilienceagainst counterfeiting, the costs, the preferences ofthe people, etc. Furthermore, it must be highlightedthat, in order to decide which design should be ap-plied, a key factor is the adequate selection of the se-curity features. They must, at the same time, offer anefficient protection against counterfeiting at a reason-able cost.

The elements have been grouped by their commonfunctional properties for their detection by the publicand retailers. The different groups contain diverse tac-tile and visual properties which allow an easy identifi-cation of the banknotes. Among each different groupwe present several technical possibilities to producethe security elements. Therefore, there are differenttypes of watermarks, security threads, structures ofspecial lines, printing with a relief effect, colour shiftinginks, holographic structures, etc. We have also includ-ed those elements, ultraviolet (UV) and infrared (IR)properties, which need special devices to be checked.

The pictures presented are from both real banknotesand samples and have been captured using themeans owned by the Banco de España NationalAnalysis Centre. We must always consider this list as

an evolving group of elements as we are constantlyadding the latest technological innovations producedby the printing and security industries. Obviously, assome new elements are incorporated, others will bediscarded when they are no longer relevant for the in-dustry of banknotes.


Banknote security featuresMiscellaneous

1. Multitone watermarkImage incorporated into the paperwhich is visible when the banknote isheld against the light. It is createdduring the paper making process byvarying the thickness of the paper.The resulting variations in opacitygive rise to an image with bright anddark areas.

2. Electrotype watermarkIt is a filigree visible when held againstthe light. It is created during the pa-per making process using a filamentwhich takes the form of numbers ordifferent types of characters.

3. Embedded security threadA thin band of plastic inserted intothe paper. It is usually made of 1-2 mm wide and 30-40 micros ofthickness. It often bears microtextand fluorescence. It can also containelectric and magnetic propertiesreadable by banknote processingmachines.

4. Window thread with colourshiftingThis band is made of a thread widerthan the abovementioned, 3-4 mm,that weaves in and out of the paper.The uncovered sections are visibleand contain an optically variable inkthat changes colour when the ban-knote is tilted.

5. Thread with floating imagesA window thread inserted into thepaper using a standard window em-bedding technique. The floating im-age effect is produced by embeddingmicrolenses into the thread. Whenthe thread is tilted, the microlensesmove producing floating images.

6. Intaglio printingThe printing with relief is detectableby the sense of touch. It is a printingtechnique in which the ink is trans-ferred directly from the plate to thesubstrate under high pressure andtemperature conditions. The printingproduces a relief effect due to thethick layer of ink deposited and theembossing of the substrate. Themain motif of a banknote is usuallyprinted in intaglio.

7. Tactile marks for the visually im-pairedThese tactile marks are detectable bytouch. They are printed in intaglio andare usually located near the bordersof a banknote to facilitate its recogni-tion by the visually impaired

8. Colour gradation in intaglioGradual superimposition of coloursprinted in intaglio that very difficult toreproduce by copiers.

9. Latent imageA hidden image that becomes visiblewhen the banknote is viewed at acertain angle. It is made by intaglioprinting using a particular structure oflines.

10. Blind embossingAn embossed colourless image thatbecomes visible when the banknoteis viewed from an oblique angle. It iscreated by deforming the substrateby the high pressure of the intaglioprinting without ink.

11. Iridescent inkA brilliant ink that changes colourwhen the banknote is tilted. The inkcan be applied in a stripe and dis-playing an image.

12. OVI inkPrinting with optically variable ink(OVI), implies it will change colourwhen the banknote is tilted. Its effectis increased when the whole surfaceis covered by a layer of this ink ap-plied in silkscreen printing.

13. SPARK inkA particular type of OVI ink whichchanges colour, containing magneticparticles which can be oriented insuch way as to produce a dynamiccolour effect when the banknote istilted. The effect is increased whenthe whole surface is covered by a lay-er of this ink applied in silkscreenprinting.

WATERMARKS

SECURITY THREADS

OPTICALLY VARIABLE FEATURES

INTAGLIO FEATURESTactile

Visual


Operativa y tecnología 35Banknote security featuresMiscellaneous

14. Optically variable devices(OVDs)Images produced onto holographicelements which change form andcolour when the banknote is tilted.These are anti-copying devicesbased on the light diffraction princi-ple, such as kinegrams. OVDs canbe stamped onto the substrate in theform of a patch or stripe.

15. Moiré variable colourFeature that uses the latent imageprinciple. It produces a rainbow ef-fect which appears when the ban-knote is tilted. It is performed bymeans of an offset printing combinedwith an intaglio printing.

16. MicroprintingPrinting of small characters that arenot visible to the naked eye but canbe seen through a magnifying glass.When printed onto a banknote, itusually combines characters in posi-tive and negative.

17. Ultraviolet properties (UV)These properties are incorporatedinto the fluorescent pigments of theprinting inks which are not visible indaylight but are visible under UV light.Ultraviolet properties in banknoteprinting turn out really notorious asthe substrate used is non-fluorescentunder UV light.

18. Fluorescent fibresFibres made of synthetic material anddifferently coloured embedded intothe paper that are not visible in day-light but are visible under UV light.Their length is usually 3-6 mm. Thereare certain fluorescent fibres in whicheach fibre has several colours. The fi-bres are incorporated onto the ban-knote in a random way while elabo-rating the paper mass.

19. IR properties (IR)These are incorporated into the pig-ments of the inks. These are inks withdifferent infrared performance due todifferent absorptions in that spec-trum. The IR characteristics are usu-ally applied combining transparentinks with inks opaque to IR.

20. See-through registerSome elements of an image are print-ed in offset on the front side of thebanknote and the remaining ele-ments of the image are printed onthe back. The whole image with per-fect coincidence is visible when thebanknote is held against the light.This feature is also known as ‘perfectregister’ as it is printed simultaneous-ly on front and back sides in register.

21. Structure of fine lines (moiréeffect)Set of fine and narrowly printed lineswhich produce an optical confusion,named moiré effect, when repro-duced by copiers.

22. Rainbow printingOffset printing that creates in thebanknote an area with differentcolours that are gradually mixed to-gether to create a rainbow effect.

23. NumberingThe serial number on each banknote,which enables it to be identified. It isusually printed in letterpress, nakedeye readable and may also be ma-chine readable if mechanically read-able characters are used. The inkusually incorporates magnetic prop-erties.

24. Transparent windowTransparent area on a banknote onwhich optical effects are incorporatedby applying various elements, suchas a blind-embossed image or an op-tical device. It is used in polymerbanknotes and is beginning to beused in paper banknotes too. Inthese, the window is placed on aholographic band.

25. MicroperforationsAn image made up of a large numberof microholes in the paper, which be-comes visible when viewed againstthe light. The microholes are drilledby means of laser.

VISIBLE BY MEANS OF A MAGNIFYING GLASS

ULTRAVIOLET AND INFRARED PROPERTIES

OTHER FEATURES

BILLETARIAOctober 2007

PublisherBanco de España / Cash and Issue Departmentwww.bde.es

Editorial CommitteeManuel GalánJ. Darío NegueruelaGuillermo Zuccolo

Editorial StaffMaría Luisa LeyvaBernardo CalvoVíctor AndrésFernando LeónHelder RosalinoJosé MorenoGabriela Escudero

SecretariatCash and Issue DepartmentAlcalá, 52228027 MadridTel.: +34 91 338 6310Fax: +34 91 338 6887

The opinions expressed in the articles are those of theauthors and do not necessarily coincide with those oftheir employer or of the Banco de España, unless other-wise stated.

Total or partial reproduction of the contents ofBILLETARIA is permitted provided that the source isquoted.

For subscriptions and contacts:[email protected]

© Banco de EspañaDepósito legal: M-16477-2007Printed in Spain by Artes Gráficas Palermo, S. L.

Carte Universelle Hydrografique. Jean Guérard, 1634.

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Documents

INTERNATIONAL REVIEW ON CASH MANAGEMENT...Banco de España, following the path taken by the Russian publication “News bulletin. Banknotes of the World”, has prepared a brief cata-logue