Bank of issue

A bank of issue, also referred to as a note-issuing bank or issuing authority, is a financial institution that issues banknotes.

The short-lived Stockholms Banco (1657–1667) printed notes from 1661 onwards and is generally viewed as the first-ever bank of issue. Banks of issue are thus a more recent creation than transfer or giro banks, which create money in accounts on a ledger, the oldest recorded being the Taula de canvi de Barcelona established in 1401.

In many countries and particularly during the 19th century, several banks were authorized to issue notes that had simultaneous status as legal tender. The authorization, often referred to as the issuance privilege, was generally granted by the government on a bank-specific basis and for a limited period of time. During the 20th century, the role of bank of issue has been increasingly assumed by central banks in their respective territorial jurisdictions. In the 21st century, "bank of issue" and "central bank" have become essentially synonymous except in a few special cases such as Hong Kong, Northern Ireland, and Scotland.

19th century

Several European countries went through periods during which multiple banks of issue coexisted and had their banknotes simultaneously recognized as legal tender. Such experiences do not count as free banking, however, because banks typically needed to receive a specific issuance privilege from the government to be able to issue notes. Some banks incorporated that privilege into their name and brand identity, for example the Privileged Austrian National Bank (est.