The European Central Bank (ECB) announced yesterday that it has agreed the details with banks to ensure a smooth changeover to euro banknotes when it becomes the legal currency on January 1st 2002.

Banks will be debited for the euro banknotes they receive before the change-over takes place at the start of 2002, according to a statement issued by the ECB in Frankfurt yesterday.

One-third of the front-loading cash will be debited on January 2nd, January 23rd and January 30th 2002. This coincides with the provisional schedule of the ECB's first, fourth and fifth main refinancing operations.

The ECB has set September 1st 2001 as the earliest delivery date of euro banknotes to credit institutions in the euro zone. The banks will not have to provide collateral for this cash at the time of delivery because of an agreement by which ownership of the still non-legal tender euro will be retained by the Eurosystem central banks.

But banks will be required to provide collateral to cover the risks of theft or robbery when they deliver banknotes to retailers, vending-machine and and cash-in-transit companies.

The ECB also announced an extension to March 31st 2002 of the facility whereby members of the public in each euro zone country will be able to exchange their national banknotes for the new currency at the official conversion rate - without commission.

Provision for the facility, currently provided in the Central Bank in Dublin, had originally only been made until December 31st 2001.