A banknote (often known as
a bill, paper money or simply a note) is a type of negotiable
instrument known as a promissory note, made by a bank, payable
to the bearer on demand.
When banknotes were first
introduced, they were, in effect, a promise to pay the bearer in coins,
but gradually became a substitute for the coins and a form
of money in their own right.
The term comes from the notes of the bank
("nota di banco") and dates from the 14th century; it originally
recognized the right of the holder of the note to collect the precious metal
(usually gold or silver) deposited with a banker (via a currency account).
In the 14th century, it was used in every
part of Europe and in Italian city-state merchants colonies outside of
Europe.
The first European banknotes were issued
by Stockholms Banco, a predecessor of the Bank of Sweden, in 1661.
These replaced the copper-plates being used
instead as a means of payment, although in 1664 the bank ran out of coins
to redeem notes and ceased operating in the same year.
In 1694 the Bank of England was
established to allow William III to raise money cheaply to pay for
his war against France.
Very soon afterwards, the Bank began to
issue notes in return for deposits.
The crucial feature that made Bank of
England notes a means of exchange was that they carried the explicit
promise to the bearer that he would be paid the sum of the note on demand. This
meant that anyone presenting the note could expect it to be redeemed at the
Bank for its equivalent value in gold or coinage.
Initially, the notes were individually
handwritten on Bank paper and signed by an authorised cashier at the
Bank.
They were also tailor made to suit the
precise sum that the customer's deposit consisted of in
pounds, shillings and pence.
After the recoinage of 1696 reduced the
need for small denomination notes, however, the Bank stopped issuing any notes
under the sum of £50.
The use of banknotes would have been
restricted to the very wealthy as the average income during the period would
have been less than £20 a year.
As the 18th century progressed there was a
gradual move toward the issue of fixed denomination notes.
In 1725 the Bank was printing fixed
templates for issue that would be completed in manuscript.
The £ sign and the first digit were printed
but the payee's name, the cashier's signature and the date and issue number
were added by hand.
By 1745 notes for fixed denominations began
to be printed with the range of denomination between £20 to £1,000.
Until Louis XIV, French banknotes were
issued by small creditors, had limited circulation, and were not backed by the
authority of the state.
The Scottish economist John
Law helped establish banknotes as formal currency, backed by capital
consisting of French government bills and government-accepted notes.
We also deal in British and World
Banknotes. Please visit our Central London shop where we have a good selection
of UK and World notes.
For valuations please visit our Central London shop or telephone us on:
020 7836 0631 or 020 7240 0479.
