Coins & Notes

Table of Contents

Pre-Modern Coins

The use of coinage in Ireland dates back at least 1000 years. The circulation of coins was centred on ports and other major towns. This existed side by side with bartering until the emergence of banking-like activities in the late 17^th century.

The coins issued in Dublin in the 10^th century were similar to those circulating in other Norse settlements. In the 13^th century, Irish and English silver coins circulated interchangeably at par and this situation prevailed for another 250 years. Although the sets of coins differed, the Irish having a triangle, they were similar in size and silver content.

In the middle of the 15^th century steps were taken to increase the supply of coinage by reducing the silver content of the existing coins. This involved withdrawal of existing coins, melting them down and restriking a larger number of new of coins with a lower silver content. The Irish currency was independently recognised in trade and commerce.

The devaluation of the mid-15^th century separated the value of the Irish and English coins. By the end of the 15^th century, the rate had fallen two to one relative to the English.

Early Modern Era

The condition of coinage in Ireland in the 16^th century was unsatisfactory. Irish minted coins tended to percolate abroad for trade, troops movements and payment of levies. Irish minted coins tended to be replaced by inferior coins from England to pay for Irish raw materials and financing of Crown activities, including garrisons.

An appreciable number of continental coins, particularly Spanish coins circulated in the 16^th century. The Spanish dollar circulated widely internationally.

Coinage was a substitute for collecting tax on the part of the Crown in its many wars in Ireland in the 16th century. Henry VIII recognized the Irish pound as unit for account and introduced the harp coinage into circulation in 1536.

Elizabeth, I introduced copper coinage. The minting of coins was the prerogative of the monarchy and was undertaken principally in England.

After depreciation in the middle of the 16th century, the rate rose by 1561 to one-and-a-third Irish to one English. It remained at this level until the end of the 16th century, where after chaos and depreciation, the rates fell from to four to one.

The rate appreciated in the 17th century and reached parity in the middle of that century.

Famously James II struck gun money from bronze and copper partly extracted from melting down cannon. This currency was ultimately rendered a value despite the Jacobite defeat at the battle of the Boyne in 1690.

Gold Coins

Gold coins played a greater role than silver coins from the early 18^th century. Sir Isaac Newton, master of the mint mistakenly overvalued gold relative to silver by setting the official price of gold in terms of silver at twenty one shillings. The value of coin in circulation rose to £1 million by the end of the 18th century.

The gold sovereign was established by the Coinage Act 1816. It had replaced the guinea which had been the principal gold coin since 1663. Newly designed silver coins were also put into circulation.

The British and Irish currencies were merged in 1826 which paved the way for the new English currency recently redesigned and reformed into Ireland. From that time forward, the quality of coinage was of a high standard.

The sovereign was the only form of legal tender in the 19th century. The amount in circulation did not keep pace with bank deposits. They ceased to be issued at the start of the First World War and were replaced by Irish bank notes.

Independence

By the early 1920s, the coinage in circulation consisted of British silver and copper coins. This position continued until the Irish government launched its own silver and copper coinage following the recommendation of the Currency Commission.

The Currency Commission reported in 1926. It recommended a reinstatement of the Irish pound and the circulation of distinctive Irish notes and coins. Newly designed coinage was introduced.

Early Notes

Currency notes were introduced in Ireland alongside coins in the 1680s. They took the form of receipts by goldsmiths coin exchanges and merchants in Dublin and other ports. They acted as managers and custodians of coins.

The practice of making payment by exchange of goldsmith’s receipts developed. This conferred on them the status of money as a medium of exchange thereby making them currency notes.

The value of currency notes in circulation reached one million in the mid-18th century. It was recognized in the 18th century that custodians of gold coins and valuables could engage in lending.

They could lend coins out provided they retained the confidence of those who deposited gold coins with them. Provided the receipts were not presented for conversion into gold, they could circulate as money in themselves.

Over time, the lending of goldsmiths exceeding the holding point so that they effectively created credit and added to the overall means of payment or money in circulation. These factors helped to maintain investment and increase economic activities. However, it expose the risk that a bank could easily collapse by reason of being unable to redeem its currency notes in gold. Imprudent lending could destroy the capital of the bank.

Note Issuing Banks

Irish joint stock banking began to flourish in the early 18th century. There were banks in existence throughout the Ireland which provided a range of monetary and financial type services including provision of credit by issuing currency notes.

At the beginning of the 19th century, there was a five-fold increase in the amount of Bank of Ireland notes and circulation increasing to some 2.5 million by 1804. This reflected financing of the military expenditure associated with the Napoleonic wars.

Over 40 private banks existed outside Dublin and many were engaged in the excessive issue of currency notes during the period concerned. Their notes reached 1.3 million in 1803.

19th Century

The increase in currency led to the appointment of the Irish Currency Commission. A severe economic contraction followed at the end of the Napoleonic wars and an economic depressed ensued. Ultimately, the Irish and British currencies were amalgamated in 1826.

Major Irish borrowers could resort to the British banks. In the early 19th century, Irish banks increased their holding of external liquid assets in London. A system was established for arrangements between banks for clearing and exchanging each other notes. A bank note exchange was established in 1825 under the auspices of Bank of Ireland.

Bank’s current account liabilities cheques could be drawn against bank’s current account liabilities. The clearing of cheques was established in 1845.

Throughout the rest of the 19th century, there was a marginal increase only in the amount of currency notes issued by the Irish banks. The amount of British currency including sovereigns in circulation increased. Cheques gained popularity for payment.

Early 20th Century

Deposits in banks consisting mainly of savings as well as the balances of payments increased from £8 million in 1850 to some £43 million in 1900. The saving banks balances increased to £10 million.

Gold coinage was withdrawn during the early years of World War I. By that stage the amount of gold coinage and bank notes were roughly equal in value in circulation. The number of British notes in circulation in Ireland was approximately the same amount again, one-and-a-half time number of Irish notes.

The overdraft developed in the 19th century becoming popular towards the end of the century. Secured overdrafts were commonly granted.

Currency Commission

The most significant change in banking on the establishment of the Irish Free State was the establishment of the Currency Commission and ultimately the Central Bank of Ireland by the Irish Free State and later the Republic of Ireland.

The Currency Commission reported in 1926. It recommended a reinstatement of the Irish pound and the circulation of distinctive Irish notes and coins. It was premised on the basis that there will be no exchange controls and that the Free State (Saorstat) pound would be exchanged one for one with no margins for a pound sterling. In practice, the new notes were rapidly accepted.

Irish Pounds

The Currency Act 1927 provided that the standard unit was the Saorstat pound, later the Irish pound was prescribed as legal tender unless the contract otherwise provided. The notes and coinage came into the circulation in 1928. Sterling continued to circulate and was accepted as legal tender until 1979 without any legal basis.

In effect, the use of British currency and monies had equated to an interest free loan to the UK treasury. The use of Saorstat currency accordingly made sense to displace this element.

The capital of the Currency Commission was subscribed by the clearing banks. The Currency Commission provided 100 percent backing for currency by acquiring sterling assets on which interest was earned.

Bank Issued Notes Withdrawn

By 1929, IR£6.5 million of currency was circulating. Over time, the amount of sterling in circulation decreased. The Commission continued to accumulate sterling assets to back the currency.

Clearing banks were no longer permitted to issue their own currency. There was about IR£6.5 million in such notes in circulation at the end of 1920.

Banks were obliged to pay interest to the Currency Commission on their own notes that remained in circulation thereby giving them an incentive to withdraw them.

As currency notes were withdrawn, each clearing bank was permitted to put in place private currency with its own name. These consolidated bank notes were provided by the Currency Commission before not legal tender.

An upward limit of IR£6 million was placed on total circulation. By 1931, some two-thirds of the old notes had been replaced.

The banks paid interest to the Currency Commission on consolidated bank notes in circulation. The circulation of consolidated bank notes never reached the maximum of six million euro and the transitional arrangement was terminated in 1953.