Holders of banknotes and coins from the euro zone should be aware that they will be replaced by new euro notes and coins in the very near future.
Members of the public may be aware of the plan for euro currency notes and coins to be formally introduced on 1 January 2002. Replacing currency notes and coins is a very complex matter that needs careful planning if the exercise is to go well and not be disruptive to users. We in the HKMA know this very well from experience. You may not have noticed - and indeed if you have not, then we can take some credit for the smoothness of the exercise - but virtually all our currency notes and coins of the colonial days have now been replaced. We started early and we took our time. We started to introduce notes and coins of politically neutral designs in 1993, ahead of the resumption of sovereignty in 1997, and we allowed dual circulation of notes and coins of both designs without a specific deadline for taking those with colonial designs out of circulation.
The replacement of twelve national currency notes and coins by an entirely new set of currency notes and coins with different values is, of course, a much more complex exercise. Although the European Central Bank and the national central banks have been planning the event for some years, they are deliberately not allowing much time for the transition itself. The euro in the form of currency notes and coins will be available in all denominations from day one of their introduction on 1 January 2002. And different national central banks are left on their own to handle the transition. They are adopting different durations for dual circulation of their currencies along with the euro, but at most only two months. However, even though general circulation will cease quite quickly, commercial banks in the various countries have made commitments to exchange old notes for new ones over a longer period, and central banks will honour their national banknotes for very much longer - at least ten years and in many cases indefinitely. The arrangements for coins, however, may be more restrictive.
I can appreciate that for a change of this nature and dimension, a good strategy may be to get on with it and get it over with in a short period of time. Forcing the pace will mean shortening the period during which there will be inconvenience and enhancing quickly the general acceptance of the new currency. The downside risk may be some confusion and resentment among users, but this risk can be managed by good, extensive and advanced publicity.
We have already been in touch with the European Central Bank and some of the national central banks on this matter. The aim is to see if there is anything that we, as a monetary authority in an international financial centre, could do to help, noting of course that this is very much a private sector matter for the commercial banks providing foreign exchange services to customers. We will also be discussing the matter with the Hong Kong Association of Banks to see if there is a need for a co-ordinated approach to deal with the expected, yet sudden, demand for euro currency notes and coins, and for the exchange of the national currency notes and coins. We understand that the commercial banks will be able to stock up euro currency notes and coin in December 2001.
We are aware of the fact that Hong Kong people do travel to the euro zone quite frequently and have the habit of keeping foreign currency notes and coins in their drawers for convenience. We are sure that, under a competitive environment, the commercial banks will in due course offer their services for changing these national currencies into euro notes or into whatever other currencies may be required by their customers. On our part, we shall keep closely in touch with the European Central Bank and the national central banks, and channel and publicise relevant information for the convenience of the public having an interest in the subject. Meanwhile, it is advisable for those holding national currency notes and coins from the euro zone to take stock of them and plan ahead. One sensible course of action might be simply to deposit them now into foreign currency saving deposit accounts offered by most of the large retail banks in Hong Kong. They will then be able, on or before 1 January 2002, and on a day of their own choice, to get the euro equivalent.
Joseph Yam
13 September 2001
More information on the euro can be found here.
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