In May 2016, the European Central Bank announced that it would no longer issue €500 banknotes. The issuance will be stopped around the end of 2018, after the new €200 and €100 notes are introduced. However, the €500 remains legal tenderMoney that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More.
Six months after the announcement, how has demand for the euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More and for the € 500 evolved ?
- Demand for euro banknotes has continued to grow in 2016, but at a slower pace. In value, cash in circulationThe value (or number of units) of the banknotes and coins in circulation within an economy. Cash in circulation is included in the M1 monetary aggregate and comprises only the banknotes and coins in circulation outside the Monetary Financial Institutions (MFI), as stated in the consolidated balance sheet of the MFIs, which means that the cash issued and held by the MFIs has been subtracted (“cash reserves”). Cash in circulation does not include the balance of the central bank’s own banknot... More grew by 6.58% in 2015. In July 2016, the growth rate had slowed to 3.79%
- Demand for €500, which had been relatively flat since 2012, peaked in December 2015 at €306.8 million and has declined by 9% or €27 million since.
- The three denominations which have benefitted from the decision to stop issuing the €500, are the €100, the €50 and the €200 which have seen an increase of respectively €21 million, €16 million and €3 million.
- Demand for transactional denominations – €5; €10 and €20 – is still strong. In July 2016, the annual growth rates were respectively of 2.7%; 3.2% and 4.6%.
- In volume terms, annual growth reached 6.74% in July, significantly higher that growth in value.
- The number of €500 notes, dropped by 8.7% between July 2015 and July 2016. On the other hand, the number of €50; €100 and €200 grew by respectively 9.94%; 9.51% and 6.94%.
It is of course still early to assess the full impact of the ECB decision. Moreover, numerous factors also impact demand for banknotes. However, at this stage it appears that the €500 are being returned at a pace of about 9% per year and that they are being replaced by €50, €100 and to a lesser extent, €200 notes.