Northern Ireland Banknote (Designation of Authorised Bank) Regulations 2020

Lord Wood of Anfield Excerpts

Tuesday 2nd June 2020 Lords Chamber

[Lord Wood of Anfield (Lab)]

My Lords, I thank the Minister for setting out this regulatory change, which I support. Some of the points that I wanted to make have already been made, but I have a couple of questions about the technical change being suggested and the operation of the unusual system of private banknote issuance in Northern Ireland.

First—excuse me if this is pedantic—I want to double- check that existing Ulster Bank notes in circulation will continue to be valid and that no problems with their acceptability are anticipated, now that Ulster Bank Ltd will surrender its trading licence. I ask for two reasons: technically, the note states that

“Ulster Bank Limited promises to pay the bearer”


and reference is made to “Head Office Belfast”, neither of which will continue to be the case, strictly speaking; secondly, in case noble Lords think that I am guilty of excessive pedantry, I ask because Northern Irish privately issued banknotes are not legal tender and therefore, as we have seen in the past with some £1 notes issued by another private bank, there are occasionally issues around the acceptability of these notes.

Secondly, as the Northern Irish £5 note is issued by only two of the four private banks certified to issue banknotes—namely, the Bank of Ireland and the Ulster Bank—can the Minister assure us that NatWest Bank plc in Northern Ireland will continue to do so? Can she also set out by what mechanism it is decided which of the four banks decides which notes to print? Is it a decision of the bank, a decision of the group of banks or a decision of the banks in collaboration with the Bank of England and/or the UK Government?

More generally, I am interested in the regulatory regime surrounding what is, in anyone’s view, an unusual and distinctive system of private banknote issuance. First, I would be interested to know what process is in place for eventualities such as this, in which a private bank decides on restructuring and that has a material bearing on the currency used in Northern Ireland. Today’s proposal is a more modest restructuring, but what process is in place for a situation in which a private bank goes out of business or withdraws its activities from Northern Ireland altogether? What obligations do issuing banks have in those circumstances and what options do the Government have?

Secondly, it is striking that within this unusual system of private banknote issuance, Northern Ireland is an island of even greater unusualness. England has a population of 56 million and one sole issuing bank, the Bank of England. Scotland has a population of 5.5 million but three private issuing banks. Northern Ireland, with a population of 1.8 million, has four private issuing banks—at least until this month, when it goes down by one. I have no agenda on this and know there is a strong attachment to the history behind this system, but—purely as a matter of information—I wonder if the Government have any plans to review the Northern Irish banknote issuance system in any way.

Lastly, can I confirm a detail? Are there any plans to revisit the deal brokered with private issuance banks in Northern Ireland and Scotland as part of the Banking Act 2009, which agreed to allow funds lodged with the Bank of England to cover note issuance to accrue interest? I remember that at the time, when I was working as an adviser in the Government, this negotiation was considered crucial to the viability of the private note issuance system. I would just like to check that it will remain in operation for the foreseeable future and that there are no plans to change it.