Note Issuance Facilities

A note issuance facility (NIF) is a medium-term commitment under which a borrower can
issue short-term paper in its own name. The NIF commitment is typically made for a few
years, while the paper is issued on a revolving basis, most frequently for maturities of three or
six months. A broader range of maturities, however, is available, ranging from seven days up
to one year. Most euro notes are denominated in US dollars and are issued in large
denominations. They may or may not involve underwriting services. When they do, they are
sometimes referred to as RUFs (revolving underwriting facilities). When they do not, they are
often called euro-commercial paper programs (ECPs). When underwriting services are
included in the contract, the underwriting banks are committed either to purchase any notes
the borrower is unable to sell, or to provide standby credit.

NIFs have some features of the US commercial paper market and some features of
commercial lines of credit or loan commitments by banks. Like commercial paper, notes
issued under NIFs are short-term, non-secured, debt of large corporations with high credit
ratings. Like loan commitment contracts, NIFs generally include multiple pricing components
for various contract features, including a market based interest rate and fees known as
participation, facility, and underwriting fees. The interest on notes issued is generally a
floating rate based on LIBOR, the London Interbank Offered Rate, but occasionally other
bases are used. The contract often includes a series of clauses or covenants that allow the NIF
provider to revoke the arrangements under certain circumstances. These may have to do with
deteriorations in the borrowers creditworthiness or external changes that affect the costs to
the NIF providers.

The provider of NIFs agrees to accept notes issued by the borrower throughout the term of
the contract and to distribute them either at a fixed margin or on a best efforts basis to
investors. The notes are distributed under pre-arranged terms. Underwriting services in the
NIF means that the borrower is assured a given interest rate and rapid access to funds. Like
underwriting arrangements in other markets, NIFs are provided by a lead manager who puts

together a tender panel of banks. These then purchase `member are determined in the
underwriting agreement. The panel members usually agree to take up notes that cannot be
placed or to extend automatically short-term loans to the issuer in place of such notes.

There are several variations on the basic product. A decade ago banks introduced NIFs with
an issuer-set margin, where the issuer determines the margin (spread over LIBOR) at which
notes will be offered. Notes not taken up (at the issuer set margin) are allocated to the
underwriters at a pre-set cap rate. During the same period the multiple component facility
(MCF) was introduced as another major development in the market for euro notes. This type
of facility allows the borrower to draw funds in several currencies or in several forms,
including short-term advances, swing line credits, etc. The borrower gains greater flexibility,
choosing the maturity, loan form and interest rate base of his credit utilization.

A growing proportion of new facilities have included extra borrowing options. The most
popular option has been short-term advances, enabling borrowers to draw in any of several
forms of instruments. Options for such alternatives were included in around 50 percent (by
value) of the underwritten facilities arranged since 1986. One of the most popular has been
swing lines, which enable borrowers to draw at short notice (generally same-day funds) to
cover any delay in issuing notes.

While in the early 1980s most NIFs did include some form of underwriting service, more
recently a growing number of NIFs have been arranged partly or entirely without
underwriting commitments. Non-underwritten NIFs expanded from about 33 percent in 1985
to 70 percent in 1992. Most of these facilities, known today as euro-commercial paper (ECP),
are similar to underwritten NIFs except that they do not include underwriting guarantees or
standby credit in case notes cannot be sold. The borrowers under such facilities have been of
the highest credit rating. They are presumably confident in their ability to sell notes without
underwriting services. As a result they are able to save the cost of underwriting.

Euro Note
The euro banknotes are the banknotes of the euro, the currency of the Eurozone. The first
series has been in circulation since 2002. They are issued by the National Central Banks of
the Euro system or the European Central Bank. In 1999 the euro was born virtually, and in
2002 notes and coins began to circulate. The euro rapidly took over from the former national
currencies and slowly expanded around the European Union.
Denominations of the notes range from 5 to 500, and unlike euro coins, the design is
identical across the whole of the Eurozone, although they are issued and printed in various
member states. The euro banknotes are pure cotton fibre, which improves their durability as
well as giving the banknotes a distinctive feel. They measure from 120 by 62 millimetres
(4.7 in 2.4 in) to 160 by 82 millimetres (6.3 in 3.2 in) and have a variety of colour
schemes. The euro notes contain many complex security features such as watermarks,
invisible ink, holograms and micro printing that document their authenticity. While euro
coins have a national side indicating the country of issue (although not necessarily of
minting), euro notes lack this. Instead, this information is encoded within the first character
of each note's serial number
There are seven different denominations of the euro banknotes 5, 10, 20, 50, 100, 200
and 500, each having a distinctive colour and size. The designs for each of them have a
common theme of European architecture in various artistic eras. The obverse of the banknote
features windows or gateways while the reverse bears different types of bridges. The
architectural examples are stylised illustrations, not representations of existing monuments

Security features
The European Central Bank has described some of the basic security features of the euro
notes that allow the general public to recognise the authenticity of their currency at a glance:
For the first series: the firm and crisp paper, the raised print, the watermark, the security
thread, the see-through number, the hologram, the micro-perforations, the glossy stripe for
20 and below, the color-changing number for 50 and above, UV light, infrared and
the microprint.
For the Europa series 5 and 10: the firm and crisp paper, the raised print, the
portrait watermark, the security thread, the emerald number, the portrait hologram, UV
and UV-C, infrared and the microprint.
However, in the interest of advanced security of the euro notes, the full list of these features is
a closely guarded secret of the European Central Bank and the National Central Banks of the
Eurosystem.
Still, between the official descriptions and independent discoveries made by observant users,
it is thought that the euro notes have at least eleven different security features, which are:
Holograms The lower value notes carry a holographic band to the right of the obverse. This
band contains the denomination, the euro sign, the stars of the EU flag and perforations in the
shape of the euro sign. In the Europa series 5 banknote, there is Europa, a gate, 'EURO' and
the euro sign, the number 5 and perforations in the shape of a euro sign. The higher-value
notes include a holographic decal containing the denomination, the obverse illustration, micro
printing, and perforations in the shape of the euro sign.
Variable colour ink This appears on the lower right-hand side corner of the reverse of the
higher-value notes. When observed from different angles, the colour will change from purple
to olive green or brown. The ink is also on the left bottom on the Europa series 5 note.
Checksum Each note has a unique serial number. The remainder from dividing the serial
number by 9 gives checksum corresponding to the initial letter indicated on the note. Using a
variation of the divisibility rule shortcut, the remainder from division by 9 can easily be
found by adding the constituent digits and, if the sum still does not make the remainder

obvious, adding the digits of the sum. Alternatively, substituting the letter with
its ASCII value makes the resulting number exactly divisible by 9. Taking the same example,
Z10708476264, the ASCII code for Z is 90, so the resulting number is 9010708476264.
Dividing by 9 yields a remainder of 0. Using the divisibility rule again, the result can be
checked speedily since the addition of all digits gives 54; 5 + 4 = 9so the number is
divisible by 9, or 9010708476264 modulo 9 is 0.
EURion constellation Euro banknotes contain a pattern known as the EURion constellation
that can be used to detect their identity as banknotes to prevent copying and counterfeiting.
Some photocopiers are programmed to reject images containing this pattern.
Watermarks There are possibly four watermarks on the euro notes.They are:

Standard watermark Each denomination is printed on uniquely watermarked paper.

This may be observed by holding the note up to the light. In the first series, the
standard watermark is a gate/window that is depicted on the note and the
denomination for the 5 of the Europa series, it is the face of Europa and the
denomination as well

Digital watermark Like the EURion constellation, a Digimarc digital watermark is

embedded in the banknotes' designs. Recent versions of image editors, such as Adobe
Photoshop or Paint Shop Pro refuse to process banknotes. This system is called
Counterfeit Deterrence System (CDS) and was developed by the Central Bank
Counterfeit Deterrence Group.

Infrared and ultraviolet watermarks When seen in the near infrared, the banknotes
will show darker areas in different zones depending on the denomination. Ultraviolet
light will make the EURion constellation show in sharper contrast, and also some
fluorescent threads stand out.

Security thread A black magnetic thread in the centre of the note is only seen against
the light. It features the denomination of the note, along with the word "euro" in the
Latin alphabet and the Greek alphabet.

Magnetic ink Some areas of the euro notes feature magnetic ink. For example, the
rightmost church window on the 20 note is magnetic, as well as the large zero above
it.

Microprinting The texture lines to the bottom, like those aligned to the right of
mark on the 5 note, consist of the sequence "EURO " in microprinting.

Matted surface The euro sign and the denomination are printed on a vertical band
that is only visible when lighted at an angle of 45. This only exists for the lowervalue notes.

Raised print On every banknote, the initials of the ECB are in raised print. In the
first series, every banknote has a bar with raised print lines. On the 200 note of the
first series, there are lines at the bottom which are raised to make blind people able to
identify the note. On the 500 note of the first series, these line are on the right-hand
side. On the 5 note of the Europa series, there are lines on both sides of the banknote.

Bar code When held up to the light, dark bars can be seen to the right of the
watermark. The amount and width of these bars indicates the denomination of the
note. When scanned, these bars are converted to Manchester code.

Legal information
Legally, both the European Central Bank and the central banks of the Eurozone countries
have the right to issue the 7 different euro banknotes. In practice, only the NCBs of the zone
physically issue and withdraw euro notes. The European Central Bank does not have a cash
office and is not involved in any cash operations. However, the European Central Bank is
responsible for overseeing the activities of national central banks in order to harmonise cash
services in the Eurozone.