- Is the ARB a real bank?
- Without a permit, who monitors the bank?
- How is the bank financed?
- How will the revenue be spent?
- What happens with the remaining capital when the experiment is completed?
- Where can I exchange my coin(s) back to regular currency?
- Which exchange rate do I receive when I trade my coin(s) back?
- Which is the period over which I can exchange my coin(s) back?
- What about the 10% interest?
- How is the bank able to offer such a high interest rate?
- Where does the bank get the money from to pay the interest?
- To what extent can the ARB guarantee that money can be returned?
- What is the prize of a coin?
- What do I get when I buy a coin?
- What material are the coins made of?
- What is the quality of the coins?
- What can I do with a coin?
About the bank
No. The ARB is monetary experiment, shaped to resemble a bank. The goal of the experiment is to investigate whether or not it is possible to introduce a new kind of reserve currency: a coin with an intrinsic value that is based on art. These coins are produced via a bank, or to be more precise, an organization with a coin press, a vault and a counter. These elements represent the basic elements of which a bank consists (or rather: ought to consist). However, the ARB is a project by artists and not a regular bank and as such not in the possession of an official banking permit. The ARB does not issue loans or mortgages and it is not a part of the deposit guarantee system.
The stakeholders monitor the bank. The ARB is registered as a non-commercial cooperative association. Everyone who owns a coin becomes a member of the association by definition, and as such a co-owner of the ARB. Those who have a real interest in the sound management of the money in the vault are the same persons who are in charge of the ARB. The bank has no other owners aside from the members, nor are there shareholders who might push for excessive risk-taking or the creation of either immoral or misleading products.
The ARB was created by artists, not by investors of any kind. Furthermore the bank was created without any form of subsidy: because starting a bank with public funding would defy the concept. This means the whole initiative is financed by the initiators who have put all their savings into the setup of this experiment. They were helped by a small group of supporters who became paying members of the association in the early stages. Using these contributions and thanks to a number of enthusiastic sponsors and volunteers, we were able to realize our main office and center of operations at the Zuidas. This means the bank has no formal or informal investors and no financial obligations to third parties.
The financial arrangements made for the creation of the bank need to be distinguished from the financing of everyday operations. The experiment is to investigate whether or not the ARB is a sustainable concept, in other words, will enough reserve coins be sold to cover the costs of operations? A lack of intereset from the general public will result in insufficient turnover to cover all the costs and an early end of the experiment.
Out of every euro of revenue, 10 cents goes to our reserves. This money is meant for refunding customers that want to trade their coin back to regular currency. The remaining 90 cents will be used to cover exploitation costs: designs, material, stamps, location, maintenance, packaging, postal costs, publicity and administration.
As from this moment (June 2012) revenues are barely sufficient to cover the most necessary expenses. For this reason all budgets are kept as low as possible. Funds for employees are nonexistent and at the moment the ARB is completely run by volunteers.
Whenever revenues increase the members of the association will decide what will happen with the funds: investing in the experiment – e.g. by starting branches abroad – or simply perhaps a visit to the casino (although the latter seems common practice in the banking branch, we will obviously advise against taking that route...).
This is also decided by the members/co-owners of the association. If everything goes as planned, they still have five years to reflect on the various options. However, if the experiment has to stop in an earlier stage, the liquidator will decide how to distribute the remaining funds.
About the exchange
You can change your coin back to euro's by returning the coin over the post to the bank's headquarters in Amsterdam.
See also: Change back
The exact same rate on which the coin was issued. Each coin has an unique number which is related to the date of issue. This number can thus be used to trace all information about each specific coin.
Until May 1st 2017: this is the date on which the experiment will end and the ARB will close its doors unless the experiment fails and the bank is forced to end its activities at an earlier date. This may be for various reasons: not enough coins are sold to cover expenses or too many people want to exchange their coins back for regular currency. If this happens the bank will declare bankruptcy.
The ARB wants its customers to be content with their coins, and if this doesn’t happen the bank wants to compensate them for having to cycle all the way back to the Zuidas. That is why the bank offers 10% interest as compensation. This interest is a non-cumulative interest on the amount that was paid for the coin. So for a coin that was bought for € 100 one will receive € 110 after one year, € 120 after two years and so on. The actual deposit values of each coin can be found here on the website.
Economically speaking we’re issuing customers that were not satisfied a small sum to compensate. Over time that sum is increased by a high estimated inflation correction. Obviously our trust in the stability of the euro, dollar or yen is rather limited.
To be frank: we are bluffing for it still remains to be seen if the capital reserve of the ARB will be sufficient to issue each dissatisfied customer with 10% interest. If too many people return to exchange their coins, the reserve will be depleted and the bank will have to declare bankruptcy.
We deliberately created a very high incentive to exchange the reservecoins back to regular currency. This forces buyers to make a serious deliberation between the true value of the new reserve coin and the value of the euros, dollars, pounds and yens it can be exchanged for.
How do people assess the value of the coins? Does a currency based on Art have any real value? These are exactly the questions this experiment tries to answer. If enough people have faith in the new reserve currency and decide to keep their coins, the experiment will be able to continue. A lack of trust on the other hand will inevitably lead to an untimely end. So by raising the temptation to 10% we are bringing some real tension and relevance to the experiment.
A regular bank invests the savings in things that offer a certain yield: loans, mortgages, etc. That is because the debts to the bank must be repaid with interest and that interest is considerably higher than the paltry 2 or 3% the savers receive as compensation for storing their money at the bank. The interest rate differential between attracted and borrowed money is where banks traditionally exist from.
But the ARB does not grant loans or mortgages and it certainly doesn’t trade on its own account. So by what magic trick does the ARB create the 10% interest?
To answer that question, we need to delve a little deeper in the story above. For each loan that a regular bank supplies, the bank actually holds only 10% of money in possession (in practice that can be much less but that carries too far to explain here). The remaining 90% of the borrowed money the bank creates... out of thin air. This may come a shock to those who are not familiar with the banking system, but almost all the money in the world is nothing but ‘debt to the banks’.
On the other hand loans are usually covered by collateral: houses, factories, etc. Thus the balance-sheet works out: the bank creates debt (money) which is covered by assets (claims on physical goods). When the customer pays the loan back, the assets are transfered to him and the money the bank receives as repayment of the loan, disappears back into nothingness.
But the loan that the customer has taken must be repaid with interest. So where does that interest money come from? Here we are witnessing the miracle of the capitalist system. For this system forces the customer to create value - out of thin air. Unlike the banks, the customer can not create this value with a press of a button on a computer, but he has to use his labor and ingenuity to create it in the real world. This newly created value can be expressed in money (again created by the banking system) which is then used to pay the interest to the bank. Thus in the capitalist system ever more money and ever more value is created.
For this miraculous engine to work, everyone must continue to believe that the debt created from nothing holds some actual value. Confidence in the value of money is therefore essential for the system.
The ARB also creates its 10% interest from nothing. I.e. with our labor and ingenuity we create some confidence in our new currency. Hopefully enough confidence that most people prefer our currency above the euros they can exchange it back for. The refund with interest to those who prefer euros, the ARB pays out of the 10% capital reserve (see above). Obviously, this also works out as long as enough people have confidence in the value of our reserve currency.
Almost to the same extent regular banks guarantee that all money in your bankaccount can always be withdrawn. Just like regular banks we assume that not everyone will withdraw his or her money at the same time. This means banks will only have a fraction of all money that can be claimed in reserve. Untill the financial crisis of 2008 this amount was somewhere between 3 and 4%. According the new Basel-III regulations this has to be increased to 8% by 2019. The ARB already uses a ratio of 10%. So for every € 100 coin sold, € 10 will be set aside just in case somebody wants to exchange the coin back.
However, we anticipate buyers will understand that the coins issued by the ARB are pieces of Art with an intrinsic value and will choose to keep them. If we turn out to be wrong and are confronted with a bankrun, the ARB will have to file for bankruptcy. In that case the general public apparently does not have faith in the coin and the experiment should be considered failed. You will still be in the possession of an unique work of Art, but the possibility to exchange it back at the ARB will be forfeited. For unfortunately, the ARB cannot fall back on the deposit guarantee system.
One should be aware that if one of our larger banks really fail, all accountholders will probably also lose all their money. When financial giants like ING, ABN, RABO or SNS do fail, the deposit guarantee system is not by far sufficient and the Dutch government will have to step in. And the government is of course not capable to issue each of the millions of account holders up to € 100.000. Just so you know how safe your money actually is with these \'safe\' big banks...
About the coins
The coins are sold for the daily exchange rate. This rate is determined by the average commercial value of the coins already in circulation. That value can be determined every day by taking the average of all supply and demand prices in the online dealing room.
Until September 1, 2012, there was not enough trade to calculate a realistic average. Until that date the coins were sold for the opening rate of € 100.
You get a coin wrapped in a coin capsule coin which protects against moisture, etc. In addition, each coin comes with a certificate of authenticity signed by the artist.
As the owner of a coin, you are automatically a member of the cooperative Art Reserve Bank and therefore co-owner of the bank. At the annual meeting in which the policy of the bank is established, each coin equals one vote.
The coins are made of a silvery alloy of copper-nickel-zinc known as nickel silver (CuNi12Zn24). Other names used for this alloy are alpaca, hotel silver, nickel silver, poor man\'s silver or Berlin silver.
The alloy is extremely hard and durable and is often used for cutlery. The surface does not corrode and is hardly susceptible to influences of moisture, salt or acid. Thus it keeps its yellow-silver sheen almost indefinitely.
All our coins are of so-called \'Proof\' quality. This means that both the stamps and the washers are polished and that the coins are minted with a force of at least 100 tons.
In numismatic circles Proof is considered to be the highest quality. The image in Proof coins are particularly attractive because of the extra gloss and sharpness but they are also very vulnerable because in the polished parts even the smallest scratches are immediately visible. Even the fat of our skin has a direct effect on the metal. Therefore, these coins shoud always be handled with gloves. To prevent damage, after minting all our coins are immediately packed in a coin capsule.
The coin is not legal tender so it cannot be used to pay your taxes. Officially it cannot be used to pay for anything. Also the coin does not work as a voucher for cultural activities or to purchase art or something. In fact you cannot do anything with it.
But with the coin, you obviously have something in possesion that you may enjoy: as a unique work of art, as an interresting story, as proof of participation in a remarkable experiment or just as a visually attractive investment. But more importantly the coin has a stable value and can literally serve as a reserve currency in case things go wrong with the euro or the dollar or any currency whatsoever within the current monetary system. Furthermore, as a possessor of the coin, you are also co-owner of the bank and you can take part in setting the artistic and financial course of the project.
If all that is not enough, you can always return your coin and change it back to euros.