XVI Meeting of Central Bank Treasurers

XVI Meeting of Central Bank Treasurers sponsored by the Center for Latin American Monetary Studies (CEMLA), held in Mexico City on May 18, 2023.

Inauguration of the XVI Meeting of Central Bank Treasurers

Roberto Marino, Advisor to the Director General of CEMLA and Alejandro Alegre, Director of Issuance of the Bank of Mexico, welcomed the participants. They stressed that the presence of a significant number of Treasurers of Latin American and Caribbean central banks, as well as experts in the subject participating from other regions of the world such as North America, Europe and Asia in this Meeting denotes the growing interest in the subject in the various areas that make up central banks.

For CEMLA it is a great satisfaction to resume these meetings in person.

They pointed out that the theme of this Meeting is fundamental to understand the functioning of modern central banking, above all, the essential and vitally important 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 over the past few years, as well as experiences related to the launch of new banknote series and associated problems.  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.

Topics such as the adequacy of Central Bank cash inventories, lessons learned and the future of post-pandemic cash management, new technologies, digital currencies and their impact on the use and management of cash, as well as challenges and trends in the field of currency were discussed.

In the theme of this meeting and in the design of new infrastructures and regulation, there is a continued need for global cooperation between Latin American and Caribbean central banks, which will continue to be a key objective of CEMLA.

The first session was a tour de table, where central banks presented recent events, activities and projects in the field of currency issuance.

Helena Tejero, Deputy Director General of Financial Conduct and Banknotes of the Bank of Spain, commented that the use of cash in Spain has decreased since the high levels reached during the pandemic, The use of coins has increased significantly since mid-2021, which has generated an inventory problem. She pointed out that the exchange of the previous currency “the peseta” has already been completed, which led to a large influx of people to the branches, she also highlighted the participation of the Bank of Spain in the studies of the euro zone regarding the environmental impact.

Luz Helena García Cortés, Director of the Treasury Department of Banco de la República de Colombia, presented a promotional video prepared by Banco de la República to celebrate the Bank's 100th anniversary, describing the development of central banking in Colombia and the history of cash processes.

Yvonne de Lint, Deputy Managing Director of the Bank of Canada presented the latest developments in Bank of Canada's cash management. She emphasized that the Bank of Canada is the sole issuer of currency and aims to maintain confidence in the currency and combat counterfeiting. There is a significant decrease in the use of cash, although the use of high-denomination notes remains high. Low levels of counterfeiting are observed, but she considers that new technologies represent a threat. She noted that Canadians consider cash to be easy to use and inexpensive, and is widely accepted and are not planning to stop using cash neither individuals nor businesses.

Claudia Bentjerodt Legisos, Head of the Cash Cycle Department of the Central Bank of Chile, highlighted that a large amount of cash was issued until March 2021 when the annual variation rate of the amount of banknotes was 51.3%. However, as of March 2023, this rate decreased by 20%, although cash levels remain at levels above pre-pandemic levels. She shared information about the "know your money" training program and the importance it has in today's environment. She stressed that meeting the demand for cash is one of the main objectives of the BCCH.

Isabel Morales Pasantes, Director of Cash Programming and Distribution at Banco de México, pointed out that the COVID-19 pandemic had two important impacts on the provision of cash in Mexico: a sharp increase in demand for banknotes and a reduction in the ability to print them, as sanitary measures forced the closure of the two factories for almost four months (between April and July 2020). This combination of factors led to a gradual decline in banknote inventories, which eventually fell short of demand. She commented that the banknote inventory policy sets the average inventory level in approximately 12 months of next year demand and was not enough to face the additional requirements generated by the pandemic, nor to withstand the temporary closure of the two Factories.

Rene Luis García, from the Central Bank of the Argentine Republic, confirmed that, as in other countries, the demand for cash skyrocketed during the pandemic: 7,400 million banknotes circulated in 2022 and that now, once the pandemic is over, the number is 8,000 million, which represents a 7% increase in the number of pieces. He shared with the audience the start-up of a new destruction center for old banknotes. With respect to coins, there are 9.7 billion coins in circulation, but the public tends to hoard them because the metallic value exceeds the face value.

Antonio Medina, head of the Treasury Department of the Central Bank of Brazil, commented on the sustainability policy in banknote disposal in Brazil. In particular, that old banknotes are used as an energy input in the manufacture of new banknotes, which reduces the emission of carbon dioxide. Likewise, the new cooperation agreement in the distribution of low denomination banknotes of 2, 5 and 10 reais with the company responsible for the ATM network to guarantee the supply of banknotes.

Javier Gutiérrez González, Manager of Cash Management at the Central Reserve Bank of Peru, emphasized that in Peru there was also a significant increase in the demand for cash during the pandemic, since between December 2019 and January 2021 the demand for cash increased by 50%. This coincided with a change in the family of banknotes, and to meet the demand, the recirculation of damaged banknotes was allowed, affecting the quality of the banknotes in circulation, so the challenge facing the authorities is to restore the quality of the banknotes prior to the pandemic.

Jorancie Mayas and Bercy Valbrun, of the Banque de la République de' Haiti, stressed that Haiti faces an inflationary problem that makes it difficult for the public to accept banknotes and coins, especially of low denomination, so the response of the Central Bank is to issue and mint notes and coins of higher denomination. They asked if there is a way to force the public to accept the notes and coins issued by the central bank.

Ronald Corrales Brenes, Director of the Department of Issuance and Securities of the Central Bank of Costa Rica noted that the demand for cash increased during the pandemic.  Fortunately, in 2018 the decision was made to change the family of banknotes and therefore there were already contracts in process, which allowed to have satisfactory levels of coverage. There was up to 107% coverage of the monetary issue in September 2020, and by December 2020, the month of greatest demand for banknotes, the coverage fell to 73%. He stressed that in the last 2 years the demand for cash has decreased, in 2021 it grew only 2% and in 2022 it decreased by 2%, so the factors behind this behavior are being evaluated.

The second session presented the experience of various countries in the demand and management of cash after the pandemic.

Luz Helena Garcia, Director of the Treasury Department of Banco de la República de Colombia, presented the "post-pandemic experience: cash contingency in the event of crisis or disaster". Her presentation included general information from Colombia regarding the number of treasury branches, the number of banknotes in circulation, banknote denominations and the proportion of cash payments, debit cards and electronic transfers. She mentioned the evolution of banknote contingency inventory from 2017 to 2023, the contingency composition of Bogotá 2017 disaster and the behavior of COP banknotes departures in pandemic 2020. She described the process of updating the methodology for security inventory.

Oscar Romaneli, from the Central Bank of the Argentine Republic, presented the "Planning of the Central Bank of the Argentine Republic to meet the demand for cash". His presentation included projections of the demand for money in Argentina, and definitions of demand for money. He delved into how the central bank answers the question of how many banknotes it should print and the logistical process of distributing banknotes. He explained the methodology for determining the basket of denominations of banknotes and coins and the models that exist to estimate the demand for money and the variables they use.

Shrivalli Nanduri, Head of the Cash Strategy and Management Department of the Central Bank of Chile, presented "Lessons learned about the impact of the pandemic on the Cash Cycle, its impact on the operation and management strategy of cash and the prospects that are observed in the future". She noted that the pandemic altered payment behavior in the world, and had a very significant impact on the cash cycle, and affecting not only demand, but also cash in circulation. Regarding the case of Chile, she commented that there was a sharp decrease in the use of cash and cash transactions.  In 2020 and 2021, cash usage fell and the debit card increased. She highlighted that in the early stages of the pandemic there was a surge of cash withdrawals from bank ATMs, as people wanted to make sure they had enough cash and the use of digital payment methods accelerated.

Lucero Pérez, Manager of Programming and Cash Studies of the Bank of Mexico, in her presentation "Update of the banknote inventory policy of the Bank of Mexico after the episode of the pandemic", described the banknote inventory policy over time and how they were insufficient to face the increase in demand, as well as the insufficiency in the manufacture of banknotes due to the pandemic, and the elements that make up the current emission policy.  She detailed the proposed modification of the banknote inventory policy and the components of the current policy, as well as the new component to deal with a total and prolonged interruption in banknote manufacturing. She commented on the banknote manufacturing plans that would have to be contemplated to comply with the proposal considering the restrictions on the capacity of banknote factories.

In the third session, the topics of control and improvement of the quality of banknotes were discussed.

Fernando León, Head of the Research, Development and Manufacturing Technology Division of the Bank of Spain presented the study of banknote substrates. He pointed to the countries that are part of the study: 19 Latin American countries that use a wide variety of substrates: paper, polymer, or hybrid, representing 16 currencies, since three countries use the dollar (Ecuador, El Salvador and Panama).  The second block of countries are the United States and Canada and the third block of countries, the countries of the Euro system and the non-euro Europe zone.  It shared statistics on banknotes in circulation per capita in the sample countries and a correlation of the substrates used according to the country's climate. He commented on the different substrates used and their durability, as well as environmental sustainability. He commented that paper is the dominant substrate followed by polymer and then hybrid. In conclusion, he stressed that paper is mainly used, and that the polymer stands out for low denominations, although it is also used in medium and high denominations. The benefits of the polymer are durability, sustainability and resistance to counterfeiting, although drawbacks have been detected in the selectors, durability of the inks and bending.

Helena Tejero, Deputy Director General of Financial Conduct and Banknotes of the Bank of Spain presented the experience with monitoring the quality of cash, those of the central bank and the role of commercial banks. She commented on the actions to monitor cash, which focus on three blocks: 1) The annual quality study and its indicators, for example, the rate of unfit banknotes; 2) The evaluation of the perception of quality by the public; 3) and The verification of the authenticity and suitability of banknotes and its recirculation. She shared the results of the quality indicators for the case of Spain, pointed out the causes of low quality and the mechanisms of action, highlighting that the frequency of return is closely linked to quality. In Spain, the 5- and 20-euro banknotes have the lowest quality and the lowest return frequencies.

Paloma Varela, Head of the Cash Management Division of the European Central Bank, presented "Results of the SPACE study (Study on the payment attitudes of consumers in the euro area)" The ECB studies consumer payment behavior in the euro area every two years to see how it is evolving and to determine what action needs to be taken. The full study is published on the ECB's website. She outlined the objectives and methodology of the study, the way consumers pay in the euro area, preference in the way payments are made, consumer access and acceptance of means of payment, as well as information from other studies on the payment behavior of companies and their main findings. Among these, he highlighted that an expected result is that online purchases increased from 6% in 2019 to 17% in 2022, in terms of number, cash is still used for most payments, but its proportion has declined; the proportion of electronic payments is increasing; consumers prefer electronic payment but value having the option of being able to pay in cash The next SPACE study is expected to be published in 2024.

The fourth session addressed the topic of recycling and environmental care in the cash cycle and sustainability actions in cash management

Luz Helena Garcia, Director of the Treasury Department of Banco de la República de Colombia, presented "Progress towards carbon footprint neutrality at Banco de la República (of Colombia)". She commented that the Bank of the Republic has just obtained its certification in zero carbon footprints. She commented on the objectives in the strategic plan of the BoR regarding climate risk, the milestones and international references of climate change, the description of the processes and facilities (branches and cultural agencies, banknote printing and coin factory) of the BdR. She also shared information on carbon footprint management, progress towards the carbon neutral goal, and carbon offsetting.

Linda Rodríguez, Manager of Development and Process Reengineering at Banco de México, presented "Recycling and Environmental Care in the Cash Cycle: Sustainability Actions". As background, the Bank of Mexico developed a cash life cycle analysis to obtain information on the impact of the provision of national currency. She highlighted the main findings: polymer banknotes have a lower environmental impact compared to cotton substrate banknotes, due to the use of water and agricultural land and the greater environmental impact is associated with the withdrawal of banknotes through ATMs (90%). She shared information on the benchmarking of recycling processes and sustainability practices, as well as the composting process with waste banknotes and the formation of briquettes with banknote waste.

In the fifth session, a tour de table was held on coin issues.

Isabel Morales Pasantes, Director of Programming and Cash Distribution of the Bank of Mexico, made a presentation regarding the currency inventory policy that credit institutions in Mexico must observe. She described the evolution of banks' demand for coins and their inventories in Mexico and the reasons that led to their regulation. She highlighted the regulation regarding the policy of inventories of currencies that must be observed by credit institutions and commented on the results of the implementation of  said policy, the benefits obtained for the central bank and the operational consequences for banks. She noted that the new policy has led to more efficient use of coins, improved coin demand forecasts, fewer changes in coinage plans, and better planning by commercial banks in their coin demand.

In the tour de table, Isabel Morales commented that, during 2020, and due to the effect of the pandemic, the demand for coins also increased and on the other hand, the Mexican Mint interrupted operations for almost two months (between the end of March and the beginning of May), so its production was affected by social distancing sanitary measures, which were reflected in delays in the deliveries of coins made to the Bank of Mexico. Currently, the Mexican Mint is operating at full capacity. However, the Mexican Mint has been facing difficulties in the supply of sheet by its suppliers due to the Russia-Ukraine war, resulting in delayed coin deliveries.

Ronald Corrales Brenes, Director of the Department of Issuance and Securities of the Central Bank of Costa Rica, said that recently the board of directors of the BCCR agreed to change the whole cone of coins, described the characteristics of the new cone, among which stand out: decrease the diameter of the coins, changes in thickness, alloy and theme. He elaborated on the theme chosen for each coin.

Carlos Mauricio Matamoros Castro, Head of the Issuance and Treasury Department of the Central Bank of Honduras, commented that on October 24, 2019, the Board of Directors of the Central Bank of Honduras approved the introduction of the denomination of the 200 lempiras note to the current monetary structure, which was done to commemorate the 200th Anniversary of the Independence of Honduras. He explained the design of the banknote and the particular security measures that are state-of-the-art.

Kobe Ferguson, Circulation Analyst, Central Bank of the Bahamas. shared the process of issuing the new series of banknotes in the Bahamas, which began in 2016. He noted that each year a new denomination was introduced until concluding in 2021 with the $100 bill. He stressed that they used a hybrid substrate for the elaboration of the banknotes and with respect to the coins, he showed the current cone with denominations of 1, 5, 10, 25 and 50 cents.

María del Carmen Álvarez García, Head of the Treasury Department of the Central Bank of Uruguay, referred to the situation of currencies in Uruguay, highlighting that commercial banks do not have inventories of currencies and officials at the central bank wonder where all the coins are. She commented that Uruguay imports the coins and that they are trying to use lower-cost metals for their manufacture, given the very important increase in the cost of these metals as a result of the war in Ukraine. She pointed out that in Uruguay the denominations of 1, 2 and 5 pesos are used, the 10 pesos is not very accepted, in general, she pointed out that the population prefers the bill to coins.  She commented that the metallic value of the 1 peso coin is already higher than its face value, which represents a problem for the central bank.

Javier Gutiérrez González, Manager of Cash Management, Central Reserve Bank of Peru, commented that the cone of coins in Peru is composed of six coins, the lowest value are brass, and the highest value are metallic and alpaca is also used. During the pandemic, the demand for currencies fell, but demand has been recovering after the pandemic. He said they have faced uncertainty regarding the supply of metals as a result of the war in Ukraine and that the monetary cone has been in place since 1991.

Helena Tejero, Deputy Director General of Financial Conduct and Banknotes of the Bank of Spain, commented that in Spain the currency is widely used compared to other countries in the euro zone. She commented that an increase in coin production was requested by 2023. They are promoting the entry of coins into financial institutions, but with little success. They are trying to repackage coins they receive from the public and expand ancillary coin deposits.

Claudia Bentjerodt Legisos Head of the Cash Cycle Department, Central Bank of Chile, commented that in 2020 and 2021 there was a high demand for coins as a result of the pandemic and confinement. She said a working group with commercial banks and chambers of commerce and a social media and communication campaign were launched to restore the flow of coins. She pointed out that by March 2023 the demand for coins to the central bank was zero, said  demand was satisfied by interbank purchases.

In the sixth session, treasury services provided by third parties was discussed.

Javier Gutiérrez González, Manager of Cash Management, BCRP. Peru presented the "Peruvian Experience in the Outsourcing of Treasury Services". His presentation included a description of the cash cycle in Peru, and the outsourcing of services, transportation of cash, window service and currency processing.

The seventh session discussed the evolution of the means of payment and use of digital currency and its impact on the demand for cash.

Othón Moreno, Director of Policy and Studies of Payment Systems and Market Infrastructures of the Bank of Mexico, presented: "State of the digital currency issued by the Bank of Mexico" He commented that many cryptographic assets have been developed in the market outside the regulated financial environment and have the objective of supplying the entities and financial institutions to which the public has placed their trust for access to financial services. He identified three categories of crypto assets: Virtual assets; stable coins; and central bank digital currencies. He briefly talked about the Bank of Mexico's project to issue a digital currency. He commented that traditional financial institutions and the financial authority have the challenge of developing payment alternatives at a lower cost, more agile and secure for the user. He defined central bank digital currencies as a denomination of legal tender, whose value and trust come from that deposited in the Central Bank.

Mariana Gutierrez, Merida Regional Cashier of the Bank of Mexico, presented a video with an online course developed by the Bank of Mexico on banknote and currency issues, entitled "Meet the banknotes and coins of Mexico."

Roberto Marino, Advisor to the CEO of CEMLA, closed the XVI Meeting of Central Bank Treasurers, thanked the more than 100 participants for their interest and the panelists for their excellent presentations. He commented that the next Meeting of Treasurers will be in 2025, and indicated that he wants it to be again in person.