Scottish and Northern Irish banknotes needed £7.89bn of backing in February; BoE logs six notable failures
Victoria Shinder2 min readThe Bank of England published its annual report on the regulation of Scottish and Northern Irish banknotes on 1 October, covering 1 March 2025 to 28 February 2026. It is the seventeenth report under the Scottish and Northern Ireland Banknote Regulations 2009.
Who issues them. Six commercial banks in the UK are authorised to issue their own sterling banknotes, three in Scotland and three in Northern Ireland. They must hold ring-fenced assets that back their note issuance at all times, so that holders of their notes get protection similar to holders of Bank of England notes. The Bank took over regulation of this issuance on 23 November 2009 under the Banking Act 2009; the banks or their predecessors have been regulated on note backing since 1845.
How much is backed. The aggregate backing requirement at the end of February 2026 was £7.89 billion, down from £7.97 billion a year earlier:
- Scotland: £5.04 billion, comprising £4.84 billion of notes in circulation and £0.21 billion of notes with the potential to enter circulation;
- Northern Ireland: £2.84 billion, comprising £2.72 billion in circulation and £0.12 billion with the potential to enter it.
Compliance. The Bank describes compliance during the year as satisfactory. It assessed six "notable" compliance failures, and no "serious" or "under-backing" failures, using the categories in its Statement of Penalty Policy. Where requirements were not met, the Bank says it investigated and agreed remedial actions with the banks. It monitors the banks through supervisory and compliance work and analysis of daily regulatory reporting.
What it does not cover. The Bank is not responsible for the design of the commercial banks' notes or their robustness against counterfeiting. The conditions setting out how backing assets must be held, including security standards for the sites holding them, are not published because they contain sensitive material.
What it means
Commercial banknotes are a small but distinctive part of the sterling money supply, and the backing regime is what makes a Danske Bank or Ulster Bank note in Northern Ireland as safe as a Bank of England note. A slightly lower backing requirement and a year without serious failures is the outcome the regime is designed to produce; the six notable failures are the detail to watch if the count rises.