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Introduction

  Much discussion has occurred over the past few months concerning recent notes that some people are calling "Replacement Notes". I felt it was worth it to record here, just exactly what is going on, with a number of opinions.

What is a Replacement Note?

 

Prior to 1954, identical notes were made up to replace notes which were spoiled by the bank note companies during printing or by Bank of Canada employees during signing (signatures being applied by the Bank of Canada at the time). Because this caused delays, a scheme was devised in 1953 whereby independently numbered sheets were printed specifically for use as replacements. They no longer had to match serial numbers and the replacements were sometimes "blocked numbered", or were not contiguously numbered, with gaps that seem to have been randomly chosen.

 

Initially, an asterisk or "star" (*) preceding the prefix was used to indicate a replacement note.  When the switch was made to three letter prefixes, an "X" in the 3rd position of the prefix was used. (Remember though, that an "X" in the 2nd position of a 3 letter prefix was used to indicate a test note.). See the Identification Table for more details.

When did the Bank of Canada stop producing Replacement Notes?

  The Bank of Canada announced that they would not produce any more replacements notes in 1996.

Why did the Bank of Canada stop producing Replacement Notes?

 

Replacement notes where discontinued to cut costs (as they were expensive to make and track) and to bring the operations of the Bank of Canada more in line with the general practices of most other foreign banks.

So what's this "New Replacement Note" thing all about?

 

Well, defective notes still occur, so what do the printers do about that?

 

Some notes numbered over 9,000,000 have been discovered among consecutively numbered notes, often with distinctly different prefixes, indicating their usage to "fill in" damaged notes; however, it is not yet certain whether notes numbered over 9,000,000 may also be issued as regular notes as well.

 

While these "inserted" notes currently tend to end with the letter "Z", for example FDZ on the new Journey $10 notes and GPZ on the Bird Series $5, Knight / Dodge notes, it should be noted that some FDU and FDT 9 million notes are also believed to be used as "inserted" notes too.

 

For some time, it also appeared that FDZ and GPZ notes under 9 million would not be released, but that is no longer the case. Full bundles of both, under 9 million, have now appeared.

 

Other than the discovery of Z9 Million notes in bundles of other prefixed notes, the discovery of FDZ 9 million notes with the Knight - Dodge signatures also tends to indicate that the Bank of Canada did not produce a full run of the FDZ notes the first time. It has now been confirmed by the Bank of Canada, the changeover to K/D's happened at FDZ 9,600,000.

 

In theory, assuming that the FDZ 9 millions were intended solely for "inserts", the large number of errors and production problems we seem to be having with the new Journey Series $10 notes may have used up all of the reserve and therefore required an additional run, this time with the new signatures. The delay of the new $5 note does tend to support this theory; however, it may just be where the changeover occurred. Keep in mind that the 1989 $10 note changed over to K/T's at the same number, BEF 9,600,000.
 

What does the Bank of Canada have to say?

 

 

 

 

 

 

 

 

 

 

 

 

 

Shameless,
self-serving
plug for the

Canadian Paper Money Society

 

Mr. Wallis,

Following our telephone conversation and as discussed, this is the information you requested regarding the GPZ $5's and FDZ $10's that some collectors have noticed amongst bundles of notes received from financial institutions.

It seems highly likely that these notes were used to take the place of notes that did not meet quality standards set by the Bank. In a specific note order, there is normally a series of letters that are set aside by the printer for this purpose.

It is, however, entirely coincidental that these notes have the letter Z in their prefix and are in the 9 million range. In this particular note order, there will be other notes with the letter Z and the 9 million range, which were not necessarily used to take the place of notes that did not meet the quality standards during the production process.

I hope this information is helpful.

Sincerely,

Linda Setlakwe
Currency Education
Bank of Canada
 

I'd like to point out that Linda has been very helpful over past few months, as many of you likely know. She does point out, though, that it is not within the scope of the Bank of Canada to be answering questions about every prefix of every note. Clearly, this type of information is within the domain of the Canadian Paper Money Society and really has little to do with managing the countries money supply, especially during a time of "external conflict somewhat resembling a war, but not directed against a nation or nation-state, but rather a concept call terrorism". Maybe we should give them a rest.

My Conclusion

  As a "purist", it is my opinion that a "replacement" note is one that is specially created, through a specific process, to be used as a replacement note. These new notes do not seem to be special in any way from a regular note. They are simply held back and inserted onto piles where needed.

I do not think there can be any argument that notes in the 9 million range are currently being inserted for defective notes, but with no reliable way to identify them. Collectors are very much at the mercy of sellers who claim that the note was used this way and not a note that was released in a full bundle of notes.

While collectors could (and most likely will), try to track and list these, blocks of notes, will be difficult to substantiate. Even if the Bank of Canada can and will confirm them, (as with the 1986 $2 BRX notes), the process of tracking multitudes of "blocks" of a note that count and don't count is tiresome to collectors and will likely lead to mis-representation by sellers with less than honest intent (or sufficient knowledge).

As much as I acknowledge the desire of "replacement" collectors to propagate their specialty, I think we should proceed carefully with what we call a replacement, and determine some verifiable way of determining what was an "insert" note.

I do find it a bit telling though, that FDZ 9 million notes, GPZ 9 million notes, and now FEA 9 million notes have all been used for "Insert" notes. For that matter, so were FDU 9 millions, and FDT 9 millions. The difficulty is determining where the "inserting" stopped and the "dumping" started.

Paul Wallis

So I asked Harold Brown

  I have very mixed feelings about the "new replacement note". I maintain that these are inserted notes. In the past, specific replacements were produced for no other purpose than to replace defective notes. The printers delivered 10 million notes per prefix, and some happened to have an X. Now, some notes are inserted and the full 10 million notes of any given prefix are not issued. The Bank pays for the actual issued number of notes. No notes are replaced!

Harold

[PBW: I think Harold has another key difference between the two methods of dealing with defective notes]

And then a prominent Dealer

  It has been noted recently that some notes with serial numbers of 9,000,000 and higher have been mysteriously inserted into bundles of 2001 $10.00 Notes, and 1986 $5.00 Notes. These 9,000,000-numbered notes seem to have been inserted in the bundle in exchange for another note that was presumably damaged or defective. In essence, these “inserted notes” are similar in origin and purpose to Replacement Notes. The Replacement Notes issued until 1996 were marked with an Asterisk or an “X” within the serial number, to denote their special issue. In the case of these newly discovered “inserted notes”, there are no special numberings used to mark them. These are, therefore, no more than regular issued notes that just happen to have been selected to replace a handful of defective notes in a bundle.

As for the marketability of these newly discovered notes, I do not feel that they will sell for the same kind of premiums as seen on the Asterisk and “X” Replacement Notes. In fact, I doubt that there will be much of a premium for these notes at all. The Bank of Canada seems to deliberately release the remainder of the 9,000,000 numbered notes into circulation after they have inserted all notes into a bundle that need to be exchanged. Our firm has handled multiple bundles of 2001 $10.00 Notes, all of which had 9,000,000 or higher serial numbers. Because of this “dumping” by the Bank of Canada, collectors should be very careful about paying a large premium for these “inserted notes”. In a year or two, only the original finder of the “inserted note” will be able to attest to this fact. Apart from the finder’s claim, there will be no other way of distinguishing this note from any other note within the 9,000,00 group. There have been reports that the Bank of Canada has been recording the serial numbers of the notes being inserted into bundles. I highly doubt this claim. The reason that the “X” Replacement Notes were discontinued was because of the extra paperwork and wasted time needed to account for (and store) a segregated group of “special” notes. By recording the serial numbers of these “inserted notes”, the Bank will have completely undermined the purpose of discontinuing the “X” notes in 1996.

Collectors should be very careful when considering the purchase of one of these “inserted notes” at a big premium over face value. Remember, there are possibly one million of these “inserted notes” out there for any given prefix. While I agree that some notes over 9,000,000 are indeed used to insert into bundles to replace damaged notes, the reality is that these notes are indistinguishable from other notes in the 9,000,000 group that may have entered circulation as ordinary notes.

Cameron Bevers
Colonial Acres Coins

 

 

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