Follow the links below to see our most frequently asked questions on the following topics.
Questions about polymer banknotes and the new £5 note
Which banknotes are changing?
The Bank of England will issue a new polymer £5 note on 13 September 2016, a new polymer £10 note in summer 2017, and a new polymer £20 note by 2020. The current £50 note was issued in 2011 and there are no plans to replace it in the near future.
When can I expect to first see a new polymer £5 note?
The new polymer £5 notes will start to be distributed from 13 September 2016. Most people are likely to see a new £5 note within a few weeks of the issue date, for example as change from a retailer or from an ATM that dispenses £5 notes.
How quickly will the paper £5 note be replaced by the polymer £5 note?
The paper £5 notes will start to be withdrawn from circulation as the polymer £5 notes are introduced. We expect that by January 2017 around half of the paper £5 notes will have been replaced with polymer notes.
How long can I continue to use paper £5 notes?
You can continue to use the paper £5 note until its legal tender status is withdrawn in May 2017.
What happens if I still have paper £5 notes after May 2017?
All Bank of England notes retain their face value for all time. If your bank, building society or Post Office is not willing to accept these notes they can be exchanged with the Bank of England in London by post or in person.
What is polymer?
Polymer is made from polypropylene and is a durable yet thin and flexible plastic film. It can be coated with layers of special ink that enables it to carry the printed design features of banknotes. The material allows the inclusion of ‘windows’ or clear portions in the design, which enhance protection against counterfeiters. Polymer is also better able to repel dirt so notes stay cleaner for longer.
Why did the Bank decide to move to polymer?
The Bank of England is responsible for maintaining confidence in the currency, by meeting demand with good quality genuine banknotes that the public can use with confidence.
Designing new notes which take advantage of developments in security features is crucial to delivering this remit. The Bank conducted a 3 year research project looking at the materials that banknotes are printed on. In particular, the Bank reviewed the relative merits of printing banknotes on polymer rather than the current cotton paper.
The Bank’s research programme, together with evidence from other countries, provided a strong case for a move to polymer banknotes because they are cleaner, safer and stronger than paper notes. Polymer notes provide enhanced counterfeit resilience and increase the quality of notes in circulation. And, because they are expected to last at least 2.5 times longer than paper notes, polymer notes are also more environmentally friendly.
In addition, 87% of respondents to the public consultation programme were in favour of a move to polymer.
What was the purpose of the public consultation programme?
Given that banknotes play a role in everyone’s day to day lives, the Bank undertook a public consultation programme before deciding whether or not to print its banknotes on polymer. As part of this programme we attended nearly 50 events across the United Kingdom, in order to give the public an opportunity to learn more about polymer banknotes and provide feedback before we made our final decision. Public acceptability was important and we needed to factor this into our decision.
Have you discussed the move to polymer with the cash industry?
The Bank of England hosts bi-annual industry-wide forums that are attended by over 90 key organisations, including financial institutions, ATM operators, cash-in-transit companies, banknote equipment manufacturers, retailers, and trade associations.
The Bank also supports five industry working groups that focus on: the readiness of the wholesale cash sector; upgrades for ATMs; upgrades for other cash handling machines; theft deterrent solutions; and awareness and training for staff who handle cash. A steering group brings together the Chairs of each working group to review progress, and ensure that key developments are effectively communicated.
Which other countries use polymer banknotes?
Over 30 countries currently issue polymer notes. These include Australia (who introduced them in 1988), New Zealand, Mexico, Singapore, Canada and Fiji. In March 2015, Clydesdale Bank issued a commemorative £5 note printed on polymer.
What have you found out about other countries’ experiences of polymer notes?
As part of our analysis we consulted with a number of countries – covering the spectrum of those who have moved to polymer, those who ceased to issue on polymer and those who have decided not to use polymer at this stage. The message from other polymer issuers is favourable in terms of counterfeit resilience. They have also reported improved note life and quality compared with paper.
When will polymer banknotes be introduced?
The New Fiver (featuring Sir Winston Churchill) was unveiled by the Governor, Mark Carney on 2 June 2016 and will be issued on 13 September 2016. The full details of the design and security features can be found at www.thenewfiver.co.uk and a range of training materials for retailers and businesses are available from our Educational Materials webpage free of charge.
The £10 note (featuring Jane Austen) will be issued in summer 2017 and the £20 note by 2020. The old paper £5 and £10 notes will start to be withdrawn from circulation as the polymer notes are introduced.
Where will polymer banknotes be printed?
The polymer for the New Fiver is made by Innovia who have a plant in Wigton, Cumbria. In line with the Bank’s current note printing and production, they will be printed by De La Rue at the Bank’s print works in Essex.
Will polymer Bank of England banknotes retain the traditional look?
Yes. They will retain the traditional design of our existing notes. This will include a portrait of Her Majesty the Queen on the front and historic characters on the back.
Why are you changing the size of banknotes?
Bank of England banknotes are large by international standards. Smaller notes mean less material will be used in production. This will reduce manufacturing costs and deliver environmental benefits. There are also some savings to the costs of storing and transporting banknotes. The Bank of England has changed the size of its notes a number of times, most recently between 1990 and 1994.
Will I be able to use polymer banknotes in the same way as paper banknotes?
Yes, polymer notes can be used in the same way as paper notes. For example, polymer notes will be available from ATMs, accepted by retailers and businesses and can be folded into wallets.
Will there be a smooth transition to the introduction of polymer banknotes?
Yes. The Bank will carry out a full education and publicity programme to help ensure that retailers, businesses and the general public are fully aware of what the new notes look like and how to authenticate them. The Bank will also work closely with the manufacturers of machines that accept and dispense notes to ensure that there is a smooth transition to polymer.
Are polymer notes counterfeit proof?
No banknote is counterfeit proof. The question is how difficult it is to counterfeit effectively. The techniques required to produce high quality counterfeit polymer banknotes are slow, expensive and require a high level of effort and technical expertise. This presents a significant barrier to counterfeiters.
Can polymer banknotes be folded?
Yes. Polymer notes are made of a thin and flexible plastic film which can be easily folded, to fit into wallets and purses.
Are polymer banknotes slippery?
Polymer notes feel different from paper and can feel slippery when new; although this tends to decline over time once the notes are in circulation. Polymer notes will also have areas of raised print which will give them a tactile quality and reduce the slippery feel.
Do polymer notes stick together?
Brand new polymer notes, like paper notes can sometimes stick together but this effect is short-lived once in use. New notes can be fanned or tapped on a desktop surface to make them easier to count by hand or machine.
Do polymer notes melt at high temperatures?
No banknote substrate (material) is indestructible. Polymer banknotes begin to shrink and melt at temperatures above 120°, so they can be damaged by an iron for example.
Do polymer banknotes carry germs?
Banknotes, like any other surface that large numbers of people come into contact with, can carry bacteria. However, the risks posed by handling a polymer banknote are no greater than those posed by touching any other common surface, like handrails, doorknobs or credit cards.
What will be on the new polymer banknotes to help blind and partially sighted people identify the different denominations?
To help vision impaired people distinguish between denominations, the new polymer notes will retain tiered sizing and include bold numerals and similar colour palettes to the current notes. Blind and partially sighted people should be aware that the new polymer notes will be smaller than their paper counterparts. In addition, polymer £10 and £20 notes will each include a tactile feature (created by a series of raised dots), and the £5 note will be distinguishable by the absence of the feature. No decision has yet been made on whether the next £50 note will be printed on polymer, but if is then it too would include this feature.
What is the environmental impact of polymer notes?
The Bank commissioned an independent study from PE International to assess the environmental impact of the Bank’s current paper banknotes and polymer banknotes.
This looked at all the stages that a banknote encounters through its life: from first production of raw materials, manufacturing of the banknote materials, printing, distribution into circulation, recirculation (dispensing by ATMs, sorting at regional cash centres) and final return to the Bank of England for destruction and treatment of the waste. For the purposes of the independent study, we assumed that at the end of their life, polymer banknotes would be used to create energy directly from waste in a specially designed plant. This would involve incinerating the banknotes and creating usable energy from that process. The study considered the impact of each stage of the banknote life cycle on 7 environmental indicators, including global warming potential, water and energy usage, ozone creation and environmental toxicity.
Polymer showed benefits over cotton paper for all the main phases of the life cycle. For the majority (6 from 7) of the indicators covered by the study it has been shown that polymer banknotes have a lower environmental impact than paper banknotes. Polymer banknotes last at least 2.5 times longer than paper banknotes and this is the main factor leading to their stronger environmental performance. This is mainly due to the reduced environmental burdens associated with raw material production and processing of new banknotes to replace unfit ones.
How will old polymer notes be destroyed?
The Bank is committed to recylcing these notes when they come out of circulation. While their final use has yet to be decided, the Bank is in advanced talks with a UK based company that would turn the used banknotes into polymer pellets that would then be used in the production of general household items - such as plant pots and trays. The Bank expects to have a confirmed solution in place by the time the £5 note is issued in September.
Questions about the Banknote Character Selection for the next £20
Who will be on the next £20 note?
Artist J.M.W Turner has been selected to be on the next £20 note.
How was this decided?
Between 19 May and 19 July 2015 the public nominated characters from the field of the visual arts they would like to appear on the next £20 note. The Bank of England received 29,701 nominations covering 590 eligible visual artists. The nominated characters were considered by the Banknote Character Advisory Committee with input from a number of public focus groups. The Committee then provided a shortlist to the Governor of the Bank of England to make the final decision. It was announced on 22 April 2016 that J.M.W Turner would be on the next £20 note, to be introduced into circulation by 2020.
Questions about the Houblon £50 Note Withdrawal
Which £50 note was withdrawn on 30 April 2014?
The Bank of England £50 notes that show a portrait of Sir John Houblon on the reverse. These notes are sometimes referred to as the £50E series note. The £50 note featuring Matthew Boulton and James Watt on the reverse, first issued in to circulation in November 2011, still has legal tender status and can be used normally.
Where can I exchange Houblon £50 notes?
The Bank of England will always exchange its old-series notes. Notes may be presented for payment either in person or sent by post (at the sender’s risk) to: Dept NEX, Bank of England, Threadneedle Street, London EC2R 8AH.
How much notice is given before a banknote is to be withdrawn?
Legally the Bank is required to give one month’s notice of an intention to withdraw legal tender status. For the most recent note withdrawals (the Elgar £20 note in 2010 and the Houblon £50 note in 2014) the Bank publicised the withdrawal date three months in advance.
How many Houblon £50 banknotes are still in circulation?
As at end-October 2014, there were approximately 38 million Houblon £50 banknotes still in circulation, worth around £1.9bn. [In comparison, there were approximately 192 million Boulton & Watt £50 banknotes in circulation, worth around £9.6bn.]
The number still in circulation is high because the £50 denomination is not typically used for day-to-day transactions, and is more generally used as a store of value (hoarded) and to satisfy tourist foreign exchange demand.
For those holding these notes, the Bank of England will always exchange its old-series notes. Notes may be presented for payment either in person or sent by post (at the sender’s risk) to: Dept NEX, Bank of England, Threadneedle Street, London EC2R 8AH.
General questions about banknotes
Are old Bank of England notes worthless?
No; all Bank of England notes retain their face value for all time. If your local bank, building society or Post Office is not willing to accept these notes then they can be exchanged with the Bank of England in London. For more information on how to exchange Bank of England banknotes that have been withdrawn from circulation see the exchanging banknotes page.
What is the Bank’s “Promise to Pay”?
The words "I promise to pay the bearer on demand the sum of five [ten/twenty/fifty] pounds" date from long ago when our notes represented deposits of gold. At that time, a member of the public could exchange one of our banknotes for gold to the same value. For example, a £5 note could be exchanged for five gold coins, called sovereigns. But the value of the pound has not been linked to gold for many years, so the meaning of the promise to pay has changed. Exchange into gold is no longer possible and Bank of England notes can only be exchanged for other Bank of England notes of the same face value. Public trust in the pound is now maintained by the operation of monetary policy, the objective of which is price stability.
What type of UV lamp should I use to check that a banknote is genuine?
A good quality ultra violet (UV) lamp that emits light at around 365 nanometres is best for checking the ultra-violet features on all notes. The use of LED (Light Emitting Diode) devices (such as key fob type detectors) is not recommended as the majority of these emit light at greater than 365 nanometres.
Retailers are reminded not to just check one security feature but to check a few such as the feel of the paper and the raised print, the watermark and metallic thread. Details on the checks to make can be found in the leaflet “Take a Closer Look” which is available free from the Bank of England.
"Take a Closer Look" booklet
Can I use a “detector pen” to check that banknotes are genuine?
The pens work by reacting with the starch that is present in 'normal' paper. So, whilst they can detect some (but not all) counterfeits printed on paper, they won't detect counterfeits that are printed on polymer. Be careful as old or dirty pens can be unreliable.
How do I check whether a note is genuine or not?
Take your time to check your notes, particularly if light conditions are poor or you are handling a large number of notes.
Never rely on just one security feature; no counterfeit notes successfully copy all of the security features included in Bank of England notes. To read about how to check your banknotes see our counterfeit prevention pages. Alternatively you can download our Banknote App (free to download for both Apple and Android devices).
What should I do if I think I have been given a counterfeit note?
If you think a note that you have is a counterfeit you must take it to the police as soon as you can. They will provide you with a receipt and send the counterfeit to the Bank of England for analysis. If the note is genuine reimbursement will be made in full.
A counterfeit note is completely worthless and it is a criminal offence to hold or to pass on a note which you know to be counterfeit.
Don’t get caught out by the counterfeiter; always check your banknotes.
What can I do if I have a note that has been damaged in some way?
Banknotes get damaged or contaminated in a number of different ways; this doesn’t render the note worthless and the Bank has a small dedicated team based at its cash centre in Leeds that deals with all manner of mutilated notes. Full details of how claims can be made are contained in the Damaged and Mutilated Notes section of this site.
If you require further information or advice please contact the Bank’s cash centre in Leeds on 0113 236 6826.
Is it illegal to deface a Bank of England banknote?
Under the Currency & Banknotes Act 1928 it is illegal to deface our banknotes (by printing, writing or impressing upon them words, letters or figures, etc.), although the question of whether or not to prosecute in individual cases is up to the police and the courts.
What is on a banknote to help blind and partially sighted people identify the different denominations?
Each denomination is a different size; the greater the value the larger the note. So a £10 note is larger than a £5 note and so on. There is also a densely coloured recognition symbol on the front of the paper £5 and £10 notes that are unique to each denomination - a turquoise circle on the £5, and an orange diamond on the £10. The £5, and £10 notes also have large denomination numerals on the front of the note. The £20 and £50 notes do not require a unique recognition symbol because the denomination numerals are prominently displayed in the clear white area of the notes.
Has the Bank considered using Braille on banknotes to help blind people identify the different denominations?
The Bank is always considering ways to improve our notes for all users. We have investigated Braille but understand from the Royal National Institute for Blind People that very few blind people now read Braille. We do not therefore plan to incorporate Braille. However, the Bank has decided to include a tactile feature (created by a series of raised dots) on the new polymer £10 and £20 notes, and the £5 note will be distinguishable by the absence of the feature.
What happens to the old style notes when a new design is introduced?
Both old and new notes usually circulate together for a while. The old style notes are then withdrawn from circulation as they became unfit to be re-issued. At a point in time – dependent on the life of the denomination in question – the decision is made to withdraw all of the old design and at this point legal tender status is withdrawn.
What information is there available about banknotes and in particular the dates when certain notes were first issued?
In addition to the information about the key recognition and secuity features on the Banknote pages you can also find a list of other sources of information under the ‘more information’ main menu heading. A reference guide about banknotes is available from the Bank and this includes the dates certain notes were issued.
I need to reproduce a banknote for a legitimate reason but how do I do this?
It is possible to reproduce images of banknotes but there are specific guidelines under which this can be done. It is best to refer directly to the Reproduction guidelines that explains the procedure in more detail.
When did the Bank change the Chief Cashiers signature on some of its banknotes?
Victoria Cleland replaced Chris Salmon as Chief Cashier on 1 June 2014. Banknotes bearing Victoria Cleland's signature were released into circulation on 3 March 2015.
What is different about Cleland signed banknotes?
The Bank has released into circulation £10, £20 and £50 banknotes of current circulating designs, updated to include the signature of the current Chief Cashier - Victoria Cleland. Other than the signature change the banknotes and their security features look identical to the existing notes.
The Bank released these notes into circulation on 3 March 2015, where they will co-circulate with existing notes bearing the signature of Chris Salmon, the former Chief Cashier. There are no plans to actively remove ‘Chris Salmon’ notes from circulation, these can continue to be used normally and retain their legal tender status but are expected to reduce in number naturally with time as they become unfit for re-circulation.
Do Cleland signed notes look different?
No, the notes look identical to the existing circulating notes, except for the replacement of Chris Salmon’s signature with that of Victoria Cleland.
Why has the Bank changed the Chief Cashiers signature on its banknotes?
Victoria Cleland replaced Chris Salmon as the Chief Cashier in June 2014, and banknotes are being printed to reflect this as part of the Promissory Clause on each banknote. Many other issuing banks also make these changes when the signatory to the banknotes changes over time.
Are Cleland signed notes accepted by automatic cash handling machines?
The Bank was proactive in engaging with manufacturers early and has undertaken an exemplar exercise to ensure that machines are tested and, if necessary, updated in readiness for the change. Testing showed that the vast majority of machines required minimal or no updates. More information is available on our website (see below).
Are Chris Salmon signed notes still legal tender?
Yes, if they are of the currently circulating designs of the £5 (Fry), £10 (Darwin), £20 (Smith) and £50 (Boulton and Watt). There are also still a number of notes in circulation which bear the signatures of Andrew Bailey and Merlyn Lowther which also still have legal tender status. More information on current banknotes can be found at:
Do bank branches have new Cleland signature notes? If so, can I change my old notes there?
The new notes were made available to the cash industry from 3 March 2015 and started to appear in ATMs and at branch counters shortly thereafter. There is no need to change any ‘Salmon notes’ that you hold as these will remain legal tender.
Questions relating to the Scottish & Northern Ireland regime
What is the Scottish and Northern Ireland banknote legislation designed to achieve?
The legislation is designed to ensure that holders of genuine banknotes issued by the authorised banks receive a level of protection similar to that provided to holders of Bank of England banknotes. Under the Regulations the authorised banks are required to hold backing assets for their banknotes at all times. In the event of an authorised bank entering an insolvency process as defined in the Regulations, those assets will be ring-fenced for one year or any longer period that HM Treasury may decide, for the sole purpose of reimbursing noteholders through a Note Exchange Programme.
What are backing assets?
To back their banknote issue, authorised banks may use a combination of Bank of England banknotes, UK coin and funds in an interest bearing bank account at the Bank of England. Bank of England banknotes held as backing assets may be held at an authorised location or at the Bank of England. Banknotes held at the Bank may include £1 million notes (Giants) and £100 million notes (Titans), which in physical terms are permanently held at the Bank. These backing assets would be used in the event that the Bank had to implement a Note Exchange Programme.
Are Scottish & Northern Ireland banknotes "legal tender"?
In short ‘No’ these banknotes are not "legal tender"; furthermore, Bank of England banknotes are only legal tender in England and Wales. Legal tender has, however, a very narrow technical meaning in relation to the settlement of debt. If a debtor pays in legal tender the exact amount he/she owes under the terms of a contract (and in accordance with its terms), or pays this amount into court, he/she has good defence in law if he/she is sued for non-payment of the debt.
In ordinary everyday transactions, the term "legal tender" in its purest sense need not govern a banknote's acceptability in transactions. The acceptability of a Scottish or Northern Ireland banknote as a means of payment is essentially a matter for agreement between the parties involved. If both parties are in agreement, Scottish and Northern Ireland banknotes can be used in England and Wales. Holders of genuine Scottish and Northern Ireland banknotes are provided with a level of protection similar to that provided to holders of Bank of England banknotes. This is because the issuing banks must back their banknote issue using a combination of Bank of England banknotes, UK coin and funds in an interest bearing bank account at the Bank of England.
What would happen to any banknotes I hold if an issuing bank stops issuing banknotes?
If an authorised bank decides to stop issuing its own banknotes then it will make arrangements for their withdrawal from circulation. This is called voluntary cessation. The S&NI banknote Rules (specifically Rule 10) give more detail on this, including the minimum amount of public notice (two months) that needs to be given regarding cessation and the arrangements the authorised bank will put in place to enable noteholders to exchange their banknotes. Rule 10 does not apply if the bank becomes insolvent.
What is a Note Exchange Programme?
If an authorised bank becomes insolvent it can no longer issue banknotes (unless a temporary continuation is granted). In these circumstances, the Scottish and Northern Ireland Banknote Regulations 2009 require the Bank of England to make arrangements to exchange the banknotes of the insolvent issuer for an equal value of other issuers’ banknotes, coin or other funds as the Bank of England specifies. This exchange is called a Note Exchange Programme (NEP). The existence of backing assets, which are under the control of the Bank of England during the NEP, mean that holders of genuine banknotes can be assured that these banknotes retain their full value and can continue to be used immediately following an authorised bank becoming insolvent, An NEP has the effect of withdrawing that bank’s banknotes from circulation over time and ensures that all holders of that bank’s banknotes presented whilst the NEP is operating, can receive full value for their banknotes.
In practice an NEP is likely to see the public (including individuals, retailers, businesses etc) continuing to use the banknotes of the insolvent issuer in the normal way, spending them and/or paying them into their bank account and getting full value for them in the normal way. But instead of re-circulating the banknotes as would normally happen, banks will return the banknotes paid in to them to the Bank of England and receive full value for them from the Bank. These banknotes will then be permanently removed from circulation.
At the same time, when making cash withdrawals (e.g. from either an ATM or bank branch counter) members of the public will not receive banknotes of the insolvent issuer (unless a temporary continuation has been granted), but will instead receive the banknotes of another issuing bank.
An NEP would not begin immediately upon a bank becoming insolvent. The Bank would determine the start date and it would last for at least a year. There would be widespread publicity about this, giving holders of the insolvent bank’s banknotes ample time to exchange them. And because the backing assets which fully cover the value of the banknotes would be under the control of the Bank, holders of genuine banknotes exchanged before the end of the NEP would receive full value for them.
Frequently asked questions about the Note Circulation Scheme (NCS)
How does the Bank decide how many new banknotes to issue?
The Bank issues new notes to replace notes which are no longer fit for circulation. These include notes which have been torn, stained or have holes in. In addition the Bank issues new notes to meet the general growth in use of notes.
Why doesn’t the Bank distribute banknotes itself?
The Bank has not distributed banknotes for many years as it is more efficient for commercial banks or wholesale cash operators to do this. Outsourcing distribution is cost-effective for the Bank and the off-balance sheet treatment permitted in the NCS helps finance the storage and sorting by NCS members. The risks and costs are reduced.
What happens if one Note Circulation Scheme (NCS) member runs out of notes?
At times, some NCS members may have more notes than they need to meet their customer demand (‘surplus’ members) while some do not have enough (‘deficit’ members). This situation can arise because of different customer bases, for example an NCS member with more financial institutions than retailers among its customers is likely to send out more notes than they receive back.
The NCS includes mechanisms to encourage NCS members to share excess notes between themselves, including limits on the amount of notes that NCS members can store in Bond. If an NCS member has more notes than they can distribute to customers or store in Bond, they must offer these to another NCS member. The four NCS members also meet regularly, along with the Bank and Cash Services, to identify potential problems before they arise.
How often does the Bank inspect NCS operations?
The Bank inspects each NCS member’s depot a number of times each year. All inspections are unannounced. The main purpose of these inspections is to check the notes in Bond, which the Bank owns but NCS members store. We check that the correct number of notes has been declared and that they are being stored in accordance with our rules. We also check that the NCS member is running the test pack of counterfeit notes through their high-speed note sorters at least once a week. On top of these inspections, we inspect all security arrangements once a year.
How does the Bank make sure that only unfit notes are destroyed?
The Bank wants NCS members to distribute fit notes to their customers and return unfit notes for destruction by the Bank. These unfit notes are replaced with new notes. But we don’t want to replace notes which are fit to be redistributed, as this would be a cost to the public purse.
In order to make sure that we only pay to replace unfit notes, we take a random sample from each NCS member’s returns every month and check for fit notes, using our high-speed note sorters. The amount of fit notes we find is scaled up to the total number of notes sent back and NCS Members are charged accordingly. More details can be found on the link below.
How are the costs of printing banknotes met?
NCS members purchase new banknotes from the Bank at face value. The Bank invests this money in interest bearing assets, such as UK government bonds. The Bank deducts the costs of printing banknotes from the income on these assets, and the balance is returned to HM Treasury. This income is known as seigniorage. Total seigniorage in 2014-15 was £576 million, of which £70 million was spent on printing and issuing banknotes, with the remaining £506 million paid to HM Treasury.
When NCS members return banknotes to the Bank they are sampled and destroyed. The NCS rules allow NCS members to return unfit notes to be replaced at no cost. The replacement cost is deducted from seigniorage. However, if NCS members return fit notes, they must pay a charge equivalent to the remaining note life. This charge offsets part of the replacement cost, ensures that seigniorage is protected, and means that the taxpayer does not bear the costs of errors made by the commercial sector.