Meeting of the Central Bank Treasurers Committee and XV Meeting of Central Bank Treasurers

Inauguration of the XV Meeting of Treasurers of Central Banks

M.ª Concepción Jiménez, General Director of Cash and Branches of the Bank of Spain and Roberto Marino, Advisor to the General Director of CEMLA welcomed the participants. They pointed out that it is very pleasant to have the presence of a significant number of Treasurers of Latin American and Caribbean central banks, as well as experts in the field participating from other regions of the world such as North America, Europe and Asia. They considered that the large participation in this XV Meeting of Treasurers denotes the growing interest in the subject throughout the various areas that make up the central banks.

They stressed that the theme of this Meeting is fundamental to understand the functioning of modern central banking, above all, the essential and vital role of cash management and the good organization of currency issuance in ensuring the proper functioning of the economy. They stressed that the Meeting would share important actions and achievements of central banks in cash management during the pandemic and international cash statistics. Experiences related to the launch of new banknote series and the associated problems would also be presented. On the other hand, recycling and environmental care in the cash cycle would be discussed, and in general, the environmental sustainability actions that are being taken in cash management.

The first session was the presentation of the results of the virtual tour de table by Luz Helena García Cortés of the Bank of the Republic of Colombia. The virtual tour de table refers to the answer to 13 questions aimed at identifying the behavior of cash demand, problems for its supply and habits of use of cash. The sample was from 31 countries: Argentina, Bahamas, Barbados, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Cuba, Curacao, European Central Bank, Central Bank of the Eastern Caribbean, Ecuador, El Salvador, Spain, United States, Guatemala, Haiti, Honduras, Hungary, Italy, Jamaica, Mexico, Nicaragua, Paraguay, Peru, Portugal, Dominican Republic, Trinidad and Tobago, and Uruguay.

The second session was the round table on countries' experience in cash management during the pandemic. This session was moderated by Luz Helena García Cortés, Banco de la República de Colombia. The following speakers were: Ricardo Mare Peruzzotti, Treasury Operations Manager of the Central Bank of Argentina; Leonam Guimaräes Martins, Deputy Head of the Cash Department, Banco Central do Brazil; Cecilia Feliú, Treasurer Manager of the Operations Division, Central Bank of Chile; and Isabel Morales Pasantes, Director of Programming and Cash Distribution, Banco de México.

Ricardo Mare Peruzzotti, Treasury Operations Manager, Central Bank of the Argentine Republic, made a presentation highlighting the following topics: 1) Detail of Payments made, 2) Supply conditions of the interior of the country; 3) Monetary Circulation – Its evolution; 4) Monetary circulation – Impact of the pandemic during 2020 on the denomination palette; 5) Monthly cash managed during 2020 –; 6) Total cash managed by branches and by Month; 7) Current situation in 2021. en 2021.

He commented that there was a reduction in the operational capacity of the Treasury Operations Department since it was affected by the social isolation measures taken within the framework of the Covid-19 pandemic. Some of the routine operations were altered or cancelled. The Regional Agencies were closed and their tasks carried out from the headquarters.

Leonam Guimaräes Martins, Deputy Head of the Cash Department, Banco Central do Brazil, presented the challenges in the cash cycle during the Covid-19 pandemic for the Brazilian case. He stressed that during the pandemic restrictive measures were taken: closure of schools and shops, traffic restrictions, remote work. These measures affected economic activity and led to an increase in demand for cash for security reasons. He stressed that there were government aid programs for the most affected people. And that the launch of the emergency aid program produced an increase in the demand for cash.

Cecilia Feliú, Treasurer Manager of the Operations Division, Central Bank of Chile, presented the experience in cash management during the pandemic of the Central Bank of Chile. She commented that the pandemic brought with it an unprecedented growth of cash in Chile and that recently the historical maximum of issuance of Banknotes and Coins was reached since there are data of this variable. She pointed out that in recent months the growth rates of the issuance have decreased, although still remaining at high levels, over 30% per year, persisting the accumulated effects of the social crisis at the end of 2019, plus the effects of the pandemic and the withdrawals of pension funds that are still in force. Much of this increased issuance has come out through ATMs, mainly in high denominations of banknotes. This despite the fact that during the pandemic the number of operations via ATM decreased, however, the average transaction grew by about 40% in mid-2020. Regarding the contagion of the virus, she pointed out that at first there were apprehensions due to the possibility of contagion through banknotes and coins. The BCCH denied it early on, however, a significant percentage of the population continues to think that there may be contagion through cash.

Isabel Morales Pasantes, Director of Programming and Cash Distribution, Banco de México, presented Banco de México's experience in cash management during the pandemic. She noted that the pandemic led to a sharp increase in the demand for cash. She pointed out that during 2020 demand increased its growth trend, to grow at historically high rates (25%). During 2021, demand remains high, but not at the growth rates of 2020, but closer to the average of recent years. She considered that the precautionary reason led households to opt for a liquid asset, such as cash, to face unexpected expenses related to health or the temporary loss of employment and therefore, income. She stressed that the risk of contagion led to the significant relative reduction in the number of ATM operations, which implied a sharp increase in the average value of such operations. Also because of the risk of contagion, the opportunity cost of going to a bank branch to make deposits increased, so less cash returned to the banking system.

In the third session, Ton Roos. Director of Banknotes at the European Central Bank, spoke about the lessons learned from the introduction of the Europa Series and perspectives on the development of future euro banknotes.

He stressed that the launch of new or improved series must be organized efficiently, in order to limit social costs. For example, procure combined launches of 2-3 denominations. Every time a banknote handling/sorting machine has to adapt to a new denomination it is expensive. Combined launches therefore save retailers, cash management companies and banks a lot of money.

He considered that the parallel reissue, that is, the reissue of the old series as long as the banknotes are in good condition, reduces the launch volumes to be produced ("natural roll-over"), which allows combined launches and faster launches. However, it will take longer for all old serial banknotes to be replaced, but no good banknote will be destroyed. The technical limitations of sorting machines and the problems with counterfeiting should not be forgotten. He considers that launch dates should not be communicated too far in advance to allow flexible project planning in case of technical or logistical problems. The dimensions of the banknotes should not be changed to facilitate the dual handling of the series. With regard to stock management, he considered that stocks should not be reduced too early to avoid a shortage if demand increases unexpectedly, nor too late, otherwise it would be a long time before all unused banknotes were issued.

He considered that cash will continue to play an important role as a means of payment and as a store of value in 2030, and that it must always be steps ahead of counterfeiters by updating banknotes to preserve public confidence in cash. He noted that the Eurosystem's "Cash 2030" strategy aims to ensure good access to cash and its acceptance as a means of payment; create attractive banknotes with which Europeans can identify with new themes and designs; reducing the environmental footprint of euro banknotes; have innovative security features and convenient banknotes.

The fourth session addressed the topic of recycling and environmental care in the cash cycle: sustainability actions in cash management. The speakers were: Gregorio Sánchez, Deputy Manager of Industrial Engineering, Banco de México; Bruno Batavia, Coordinator of the Cash Department, Banco do Brazil; Constanza Muñoz, Head of the Control Group of the Department of Infrastructure and Services, Central Bank of Chile.

Gregorio Sánchez, Deputy Manager of Industrial Engineering, Bank of Mexico; explained the actions for environmental sustainability in the Cash Life Cycle (LCA) in the case of the Bank of Mexico. He presented the Action Plan to minimize environmental impact during the Cash Life Cycle (LCA). He pointed out that derived from the results of the Cash Life Cycle Analysis, an Action Plan was developed consisting of individual initiatives that contribute to reducing the environmental impact of the LCA. The main initiatives are: 1) Use materials that improve the durability of banknotes, both substrates and varnishes, to increase the life of banknotes; 2) Generate alternatives for the disposal of banknote waste; 3) Use renewable energy sources for the production of banknotes, alternatives to reduce the consumption of electricity and natural gas, making the use of energy in the Mexico city complex more efficient; 4) Coordinate actions with banks and equipment manufacturers to reduce the energy consumption of ATMs; 5) Reduce the consumption of non-renewable energy resources in the transport of cash by exploring the use of green vehicles. He concluded by highlighting that in order to maximize the benefits of actions in favor of the environment and the sustainability of the cash life cycle, it is necessary for Central Banks to include in their collaborative work agenda initiatives related to the green agenda on issues of provision of banknotes and coins.

Bruno Batavia, Coordinator of the Cash Department, Banco do Brazil, made a presentation on environmental sustainability in the Cash Life Cycle in the case of Brazil. He commented that Brazil's national solid waste policy aims to promote an environmentally sound approach. He also stressed that alliances have been established to promote the recycling of waste or ensure the environmentally correct disposal of such waste. He pointed out that the Central Bank of Brazil is solely responsible for issuing banknotes and coins and performing its cash management services. Banco do Brazil’s Sustainable Logistics Management Plan seeks to consolidate, organize, improve and systematize good sustainability practices already in place and provide guidelines for new actions.

Constanza Muñoz, Head of the Control Group of the Department of Infrastructure and Services, Central Bank of Chile, made a presentation regarding the responsible management of waste in the case of the Central Bank of Chile. She stressed that Chile adhered to the 2015 Sustainable Development Summit, committing to the 2030 Agenda for Sustainable Development and that Chile has a set of laws and decrees that support the obligation to implement policies and actions in favor of the sustainable development goals. She commented that the contribution of the Central Bank of Chile (BCCH) to responsible waste management is to develop concrete actions and initiatives for improvement beyond the economic, financial, statistical and regulatory functions assigned to it by law. Improvements in waste management and implementation of recycling; Energy efficiency and emission reduction projects; Programs Central in your life, Know your banknotes, etc.; Strategic Planning 2018 – 2022, definition of the "Sustainable Bank" initiative. In particular, she pointed out that the BCCH's sustainability strategy consists of: 1) Implementing and managing energy efficiency mechanisms in BCCH facilities, seeking to reduce the carbon footprint to contribute to the mitigation of climate change and the reduction of its effects; 2) Reduce or reuse waste; 3) Being responsible for the impact of the working capital on society and the environment, manage its life cycle, including from its production to its residual stage; 4) Contribute to the circular economy by reducing the materials acquired to the maximum and seek to give a new life to those that are already available.

Linda Rodríguez, Manager of Reengineering and Process Development, Banco de México, presented the recent experience of the Bank of Mexico with the new families of banknotes and coins. She pointed out that, in 2013, the Governing Board of the Bank of Mexico authorized the beginning of activities related to the design, manufacture and issuance of a new family of banknotes. The motivations and objectives of the update of the Mexican banknote family were: 1) to increase the security of the banknote to reduce counterfeiting; 2) Improve functionality; 3) Search for the most intuitive naming and authentication by users and cash processing equipment; 4) Increase durability, (medium and high denominations have an average life of between 30 and 40 months, it was planned to obtain a longer duration by the substrate-varnish combination); 5) Innovate in theme and representativeness to honor the natural, historical and cultural wealth of the country. She commented that the methodology for the selection of the characteristics of the banknotes included the following aspects: security, functionality, durability and aesthetics. An analysis of international banknote trends was carried out; analysis of substrates and safety elements available in the industry; international design workshop with surveys, focus groups and neuroscience studies; printing tests; banknote processing studies; and thematic studies with experts.

Javier Gutiérrez González, Manager of Cash Management, Banco de Reserva del Perú, presented the experience and problems of Peru with the new family of banknotes. He stressed that the new family of banknotes incorporates: 1) high technology and permanent development in printing techniques; 2) Newly developed security features; 3) New and modern designs. Regarding the theme of banknotes, he commented that on the obverse they include personalities of the twentieth century who have stood out in the fields of music, literature, history, science and painting and on the reverse the biodiversity with motifs of the flora and fauna of Peru. For the election of characters, a referential survey was conducted to personalities specialized in the different fields and for the choice of motifs on the reverse, the General Directorate of Biological Diversity of the Ministry of the Environment served as advisor.

Regarding the substrate, he commented that the cotton substrate is maintained, and that alternatives were evaluated considering the experience of other countries with respect to price, durability, processing and destruction, and coexistence of two substrates. He pointed out that, on the subject of security elements, the evolution of counterfeits of security elements was analyzed, a database of the available security elements was developed, with their respective classification and the information from the knowledge and use of cash surveys was used. Regarding the elaboration of the designs, he commented that the main printers were invited to a design contest based on the information provided by the Bank regarding: the predominant colors by denomination, characters, motifs of the reverse, security elements and conditions of exchange of deteriorated banknotes.

In the fifth session an executive summary of international cash statistics was presented by Helena Tejero, Director of the Issuance and Cash Department, Banco de España.

She noted that international cash statistics contain information from 18 American countries, 11 European countries that do not use the Euro, and from all Eurosystem countries. She stressed that cash increases year after year both in number of pieces and in value and that in 2020 there is a notable increase in the circulation of cash in all areas of study. She pointed out that in 2020 the paradox of cash occurs as circulation increases despite the economic contraction and a lower use of cash for the realization of transactions.

 

She offered the following conclusions:

Cash continues to grow annually in all areas analyzed in both number of pieces and value, with significant growth in 2020 in all areas.

The share of the value of banknotes in circulation increases markedly in relation to GDP in 2020 due to the growth of cash in circulation and the contraction of GDP in all areas.

The circulation of banknotes in the Eurosystem has decreased while in Latin America it has remained more stable. The entry of banknotes into circulation decreases to a greater extent in all areas, which translates into an increase in banknotes in circulation. Processing and destruction also decrease markedly in 2020, this is explained by the uniqueness of the year 2020 and the repercussions generated by the COVID-19 pandemic. Banknote manufacturing continues to grow in Latin America, and the Eurosystem changes its trend with a significant increase in 2020.

While the Eurosystem and the United States have been maintaining the total number of denominations, in Latin America and Canada there have been increases or decreases in the total number of denominations of coins and banknotes.

Helena Tejero. Director of the Issuance and Cash Department, Banco de España. presented the conclusions of the meeting. She commented that central banks were successful in adapting quickly to the circumstances arising from the pandemic, showing flexibility and efficiency in the management of cash stocks, authorizations were quickly handled and contractual arrangements were effectively adjusted. On the other hand, she stressed that the process of recirculation of smaller denomination banknotes was successful due to the type of demand that arose during the pandemic. The central banks had good collaboration and communication with the agents of the cash cycle and there was a rapid training of human resources according to the new needs due to the pandemic. She stressed that cash was a fundamental refuge which led to the increased demand for cash for security and privacy reasons in the face of the prevailing uncertainty.

M.ª Concepción Jiménez, General Director of Cash and Branches of the Bank of Spain closed the XV Meeting of Central Bank Treasurers, thanked the more than 160 participants for their interest and the panelists for their excellent presentations. She commented that the next Treasurers' Meeting will be in 2023, and indicated that she wants it to be in person.