Death of the 500 euro bill getting closer

By user
In February 18, 2016

Source:  CNN February 15, 2016;   Reuters

European Central Bank president Mario Draghi made strong statements Monday indicating he is seriously considering phasing out the 500 euro banknote because it’s become so intertwined with criminal activity.

“There is a pervasive and increasing conviction in the world of public opinion that high denomination banknotes are used for criminal purposes … It’s in this context that we are considering action”.

The ECB is responsible for issuing euro banknotes that are used by all 19 nations in the eurozone.

Europe’s top law enforcement officials maintain that the 500 euro banknote makes it easy for criminals to launder money since it’s so easy to move around undetected.

In a report last year, Europol said cash was still the “instrument of choice” for terrorists and 500 euro notes were in high demand, though they’re not popular for everyday transactions. Draghi said top-level ECB officials are “reflecting” on what to do with the banknote, but any actions would be carefully executed.

When euro notes and coins began to circulate in 2002, Germany was among the main supporters of having a 500 euro banknote to match the value of its 1,000-mark note, and cater to Germans’ traditional preference for cash over electronic money.

Some other states, notably The Netherlands, had also issued such large denominations while France, where the biggest franc note was worth just 76 euros, argued against the 500-euro bill.

Britain, outside the euro zone, has prohibited exchange offices from selling 500 euro notes since 2010 over crime fears. The biggest sterling note is 50 pounds, or 66 euros.

Should the 500-euro note ever be abandoned, however, those seeking an alternative may not need to look far — the Swiss offer a 1,000-franc bill worth 910 euros, or $986.

The 500-euro bills account for just three percent of the total number of banknotes in circulation, but 28 percent of the total value, according to ECB statistics. Like the $100 bill, many of the big euro notes are believed to be held outside their home economy in regions where many prefer cash to bank accounts.

Any decision regarding their possible withdrawal would be taken by the ECB’s governing council, the 25-member board comprising six executive board members and the 19 central bank governors of the member states.