Note Circulation Scheme

The Note Circulation Scheme (NCS) governs the distribution, processing and storage of our banknotes.

What is the Note Circulation Scheme (NCS)?

The Note Circulation Scheme (NCS) governs the distribution, processing and storage of our banknotes. It provides a framework for the wholesale commercial cash industry which helps encourage efficiencies in their banknote operations. Legal agreements and rules underpin how the NCS operates.

Who are the NCS members?

The following companies are members of the NCS:

  • G4S Cash Solutions
  • Post Office
  • National Westminster Bank
  • Vaultex UK.

We do not distribute banknotes. Our direct involvement in wholesale cash distribution is limited to:

  • issuing new banknotes
  • withdrawing banknotes when a new series is launched
  • destroying banknotes that are no longer fit for circulation. 

What do NCS members do?

NCS members supply banknotes to their customers from a number of cash centers located around the UK. Banknotes enter circulation when they have been distributed by the NCS members to banks, building societies, automated teller machine (ATM) operators and large retailers. 

Public demand for banknotes varies throughout the year and increases significantly around Christmas, Easter, other bank holidays and major public events.

How does the Note Circulation Scheme (NCS) work?

1. The Bank of England issues new banknotes:

Members of the NCS buy new banknotes from us at face value. We invest this money in assets such as government bonds. We deduct the cost of printing and issuing banknotes from the income on these assets, and return the balance to HM Treasury. This income is called seigniorage.

2. Banknotes are returned to the Note Circulation Scheme

The banknotes that businesses and banks receive in payment may be returned to one of the NCS members, either directly or through a bank. Reasons for returning banknotes include:

  • banknotes need to be stored securely
  • banknotes don’t earn interest so retailers pay them into a bank, where they can earn interest
  • NCS members are able to count and reconcile deposits more quickly and efficiently, often using large, high-speed note processing machines.

Sometimes, retailers and businesses use banknotes received from customers to fill their own note-dispensing machines, like ATMs and self-service tills. This is known as local recycling. In these situations, notes are not returned to the NCS and authenticated. The Bank of England and the cash industry sponsor a local recycling code, to encourage retailers and business to authenticate banknotes when they are locally recycled.

3. Sorting banknotes

NCS members sort the banknotes returned by their customers. They do this to check that they are current design, genuine and in good condition.

Banknotes are sorted by high-speed machines which can process up to 2,000 banknotes per minute. We set quality standards that NCS members use to determine whether a note is in good enough condition to be redistributed. Banknotes with defects, like holes and tears, or those that are dirty are removed. 

We also provide NCS members with examples of counterfeit banknotes. These are used to calibrate the sorting machines to make sure they are detecting all counterfeit banknotes. Banknotes that are not fit to be recirculated are returned to us to be destroyed. 

4. Recycling banknotes

Hundreds of millions of banknotes are returned each year because they are old, worn or dirty.

NCS members are responsible for sorting banknotes and returning any that are unsuitable for circulation to us. We destroy all of these banknotes. 

Paper banknotes are either recycled using a composting treatment to create a soil improver or processed at a local energy recovery facility to generate electricity. Polymer banknotes are turned into pellets before being transformed into new plastic items, such as plant pots and storage boxes.

Whistleblowing and the Note Circulation Scheme (NCS)

Whistleblowing is when an employee reports suspected wrongdoing at work. The Bank of England is a ‘prescribed person’, which means that you can make a whistleblowing disclosure about the Note Circulation Scheme to us instead of your employer. This is generally referred to as ‘making a disclosure in the public interest’. An employee can report things that are not right, are illegal or if anyone at work is neglecting their duties, including:

  • someone’s health and safety is in danger
  • damage to the environment
  • a criminal offence
  • the company is not obeying the law
  • covering up wrongdoing.

We encourage employees of Note Circulation Scheme members and the financial institutions that back them to first use the whistleblowing procedures available in their workplace. If there are not any, or if you do not feel able to do so, you can contact us on +44 (0)20 3461 8703 during office hours. Alternatively, you can email us at or write to: IAWB Team, Legal Directorate, Bank of England, Threadneedle Street, London EC2R 8AH.

Disclosures made to us will be dealt with by a dedicated whistleblowing function.

This page was last updated 31 January 2023