All about our money

It may be just a piece of metal, a scrap of paper or a number on a screen, but money is also a lot more than this, as so much in our economy and everyday lives revolves around it. Here, the SNB explains why money matters to all of us.

A time-lapse history of money

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    Once upon a time

    It all begins with bartering: if you have too much of one thing, you exchange it for something else that you need.

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    Thousands of years ago

    But barter has one big disadvantage: the needs of the parties to the exchange have to match precisely. If this isn’t the case, then trading is difficult or doesn’t take place.

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    Thousands of years ago

    To solve this problem, humans begin to trade using special mediums of exchange. These often take the form of widely accepted and desirable goods, such as shells.

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    About 3,000 years ago

    A gradual harmonisation of these special mediums of exchange takes place; the earliest coins have their origins in different parts of the world, including ancient Greece and China.

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    About 1,000 years ago

    Paper money, which is more suitable for larger transactions than heavy coins, is first developed in China.

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    17th century

    In Europe, the first banknotes are issued by the central banks of Sweden and England.

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    The Swiss franc is introduced as the national currency, supplanting the various currencies in circulation.

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    While the use of credit cards as well as online and mobile banking is increasingly widespread, cash remains an important means of payment.

What exactly is money?

Not only is money critically important for an economy, but it also plays a central role in each of our daily lives. Accommodation, food, telephony, riding the train – all these activities that we take for granted couldn’t happen without money. But while we all know that money is a means of payment, it has other functions too. Money can be saved, and thereby used as a store of value. Money also serves as a measure of value and unit of account. For money to perform these functions, two criteria must essentially be met: it must be generally accepted, and people must trust that it will retain its value.

Grüezi, I’d like to place a cow on deposit

How the SNB puts cash into circulation

Supplying money is a cyclical process. It starts with the cash needs of the population and the economy. The SNB handles these needs via its network of cash distribution services, banks and other clients. Thus every banknote withdrawn at a bank counter or ATM was at some stage put into circulation by the SNB. The coins, too. The SNB puts both freshly printed and used banknotes and coins into circulation. Cash returned to the SNB is counted, authenticated, and proofed for recirculation. Genuine notes and coins in good condition are put back into circulation.

The current banknote series

In April 2016, the SNB released the new 50-franc note. Further denominations will follow in subsequent years. The eighth banknote series will also be valid, until further notice.

There are currently two banknote series in circulation – the eighth and ninth. The first banknote of the new, ninth series – the 50-franc note – entered into circulation in April 2016 and is now officially legal tender. Further denominations are to follow until 2019. The new banknote series is designed by Manuela Pfrunder.

Still valid: the eighth banknote series

Designed by Jörg Zintzmeyer, the eighth banknote series entered circulation between 1995 and 1998, and is still legal tender today. Prior to the current banknote series, the sixth series was in circulation. It was recalled on 1 May 2000, as of which date these banknotes have no longer qualified as legal tender. However, until 30 April 2020, they can still be exchanged at full nominal value at the SNB.

Security first

Since the 1950s, Switzerland has issued a new banknote series approximately every twenty years – consistently upholding high standards of security, functionality and design. Security has top priority. The banknotes contain security features that enable the public to distinguish authentic banknotes from counterfeits. Nevertheless, rapid advances in reproduction technology mean that, in collaboration with its partners in industry, the SNB must continuously seek to develop new security features. These security features are clearly visible on all notes and can easily be checked.

What is half a 100-franc note worth?

Despite being extremely robust, Swiss banknotes inevitably get damaged. However, in many cases the SNB will redeem such notes – even if they are burned, torn in half or chewed.

Only banknotes that are returned to the SNB intact and in reasonably good condition can be automatically sorted and authenticated. The sorting machines used by the SNB for processing banknotes have an integrated shredder, which – in one and the same process – destroys banknotes that have been authenticated but are no longer usable. The shredded notes are compacted and taken to a waste incineration plant.

Clarification in the case of damaged banknotes

Banknotes that are fragmented, burnt, decayed or otherwise badly damaged cannot be sorted automatically, and are handed over to the SNB headquarters in Berne for inspection. If more than half of a genuine banknote is intact, and its serial number is identifiable, the SNB will redeem it at nominal value. If exactly half the banknote is intact, half of the nominal value is redeemed. Notes that are less than 50% intact cannot be redeemed.

Survival of the largest

The lifespan of a banknote depends on its denomination. Large denominations, like the 1000-franc note, are, aside from their use as a means of payment, more frequently used as a store of value and thus have a longer lifespan than small denomination notes, which are primarily used for payments and are thus exposed to more wear and tear. The 200-franc and 100-franc notes circulate for about five years, whereas the 50-franc, 20-franc and 10-franc notes have to be replaced after around three years. On average, a 1000-franc note lasts roughly 20 years.

What to do with a torn 100-franc note?

Old, damaged or soiled banknotes and coins may be exchanged at the public counters in the SNB headquarters in Berne and Zurich, or at one of the agencies operated by the cantonal banks on the SNB’s behalf. Recalled banknotes (sixth series) as well as damaged notes and coins may be replaced with new ones.

Brand new notes and freshly minted coins may also be obtained at the SNB – albeit only in Swiss francs: the SNB does not exchange foreign currencies. The staff at the SNB’s public counters would be happy to answer any cash-related questions you may have.

Picture: Gabriela Gerber and Lukas Bardill, SNB

Banknote monopoly

The SNB has been Switzerland’s central bank since 1907, and is entrusted with the banknote monopoly. This means that the SNB alone is authorised to manufacture and distribute Swiss banknotes.
Expedition zum Notenmonopol

The SNB commenced operations in 1907. The Confederation granted it the exclusive right to issue Swiss banknotes, and the SNB has held the monopoly ever since. Banknotes are printed by Orell Füssli Security Printing Ltd under contract to the SNB. The right of coinage (i.e. the right to mint coins), on the other hand, lies with the Confederation; coins are minted by Swissmint and then put into circulation by the SNB.

And what about book money?

Today, the majority of Swiss francs (almost 90%) exist in the form of book money, a large proportion of which is created by the banks when they grant loans to companies and households. Book money is extremely practical when it comes to paying salaries and invoices or settling restaurant bills, for instance. But how exactly does this work? Commercial banks keep so-called sight deposit accounts at the SNB, on which they hold legally mandated minimum reserves. Banks use these sight deposit accounts to settle cashless payments for their clients, and to process their own transactions. The shared payment system used for this purpose is called Swiss Interbank Clearing (SIC).

Legal tender

Swiss francs in the form of banknotes, coins and book money held on sight deposit accounts at the SNB are deemed legal tender. In general, this legal tender must be unconditionally accepted as payment everywhere, unless other contractual arrangements have been made. Of course, payment can also be made in Switzerland by credit card, bank transfer or in a currency other than the Swiss franc, provided the seller agrees.

Here to stay

In Switzerland, the ratio of cash to gross domestic product (GDP) has fallen steadily throughout the second half of the 20th century as a result of easier access to banking services and advances in cashless payment technologies. Nonetheless, cash continues to play an important role both as a means of payment and as a store of value. This is evidenced by the fact that the ratio of banknotes in circulation to GDP has remained largely stable since the 1990s – indeed, it has even increased again slightly since the outbreak of the financial crisis in 2007.

Once worth its weight in gold

In the past, money was backed by gold. Today, however, the responsibility for maintaining its value lies with the SNB. It is entrusted with managing monetary policy in such a way that the amount of money in circulation is calibrated to the economy’s needs.

Video: Gabriela Gerber and Lukas Bardill, SNB

We all want cash in a crisis

Since the outbreak of the financial crisis in 2007, there has been a sharp rise in the amount of cash in circulation. Why does demand for cash rise in times like these? First, financial and economic crises make people insecure. As their confidence in banks and book money tends to dwindle, they withdraw money from their accounts, thereby increasing the amount of cash in circulation. Second, interest rates are low, which means less income on bank accounts. Depositing money at a bank is less attractive when interest rates are low than when they are high.