|
Best Practice in Banknote and Currency Management
4-day intensive residential programme, 26 -30 March
2006
Venue: Cumberland Lodge, Windsor
Course adviser: Bill Melbourn, Currency Consultant and former Deputy
Chief, Department of Banking Operations, Bank of Canada
Details of how to register
are here
Dear
Delegate,
BEST PRACTICE IN BANKNOTE AND CURRENCY MANAGEMENT
For a central bank’s reputation, no function is
more critical than currency management.
In the eyes of the public, the integrity of the currency and efficient
supply of banknotes are everyday indicators of a well-functioning central
bank. However, issuing and destroying cash, maintaining note quality and
guarding against counterfeit notes is an increasingly costly – and
complex – business.
This seminar has been designed to assist central banks in taking a strategic
approach to their currency management. This requires first of all an understanding
of the currency life-cycle and subsequently a hard-headed analysis of
the extent to which other stakeholders can take on more functions.
Alongside note printing/procurement, cash distribution (often requiring
a large branch network) is increasingly under the spotlight when cost
savings are needed. However, ill-considered or poorly implemented outsourcing
has proven counterproductive. The seminar contains a series of case studies
which illustrate the key practical lessons for central banks wishing to
modernise cash processing and distribution arrangements.
The course focuses on four key themes:
• A strategic view of currency management: the trend for central
banks to focus on “core functions” and a desire to reduce
costs prompts many central banks to reassess their currency management.
What should be considered in these reviews? How can central banks best
approach their role as currency manager?
• Design and production: alongside logistical and manufacturing
challenges, banknote design raises complex economic and social issues.
How should central banks approach these linked challenges?
• Distribution, processing and destruction: cash distribution and
processing inevitably involves multiple stakeholders with different incentives.
How can these interlocking relationships work best? What are the most
effective models for banknote distribution?
• Research and development: currency managers need to keep up to
date with new technical developments, especially regarding anti-counterfeiting
features. How is this best achieved?
The aim of this course is to provide
a forum for central bank currency managers to review together best practice
regarding all elements of the banknote life-cycle, with an emphasis on
how specific national situations require tailored solutions.
Throughout the week delegates will work in interactive groups combined
with case-study sessions to examine how leading central banks have in
fact approached new challenges in designing, producing, distributing and
destroying their currencies.
The roundtable format offers an independent and informal setting within
which participants can share their experiences and debate issues at the
forefront of their field. Each session of the seminar allows participating
central bankers an opportunity to “benchmark” their work against
best practice internationally.
Since 1999, over 1,000 central bankers and supervisors have attended roundtable
seminars hosted by Central Banking Publications Ltd.
I look forward to welcoming you to Windsor.
Yours sincerely,
William Clarke, PhD, CBE
Chairman, Central Banking Publications
Implementing
a life-cycle approach to currency management
Gerry Gaetz
Head of Banking Operations Department, Bank of Canada
Efficient and effective currency
management begins with a strategic analysis of the currency life-cycle.
This starts with an in-depth review of the roles and functions of all
major stakeholders in the currency life-cycle both within the central
bank (including executive management and accounting and audit departments)
and externally (the cash-in-transit industry, commercial banks, other
large commercial users and the police). Canada, facing the prospect
of having to replace or even expand its branch network to deal with
demand, undertook just such a review in 1994 and now boasts a world-leading
Note Exchange System. This session draws on the Canadian experience
to examine how central banks can take a holistic view of their currency
mandate.
External factors: governors, boards and the political dimension
Peter
Nicholl
Member of the Board and former
Governor, Central Bank of Bosnia & Herzegovina
Alongside the prodigious logistical
challenges involved in banknote procurement and production, some of
the trickiest issues for central banks arise in the area of currency
design. Often, issues surrounding themes and portraits on banknotes
series are resistant to compromise and can have wider social, economic,
and political concerns. These concerns can complicate already challenging
project management. This session explores some of these issues and examines
the most appropriate governance and management arrangements for currency
managers to interact effectively with the central bank’s board
and governor.
Forecasting the demand for banknotes
Speaker to be confirmed
Strategic management of currency
is impossible without accurate forecasts of the demand for banknotes.
Long lead times in banknote production make it essential for central
banks to be able to model banknote demand (at least) five years into
the future. Currency demand models must draw on interest, inflation
and growth forecasts, and incorporate too historical data on currency
deposits/withdrawals and replacement rates. Good forecasting allows
more efficient procurement and reduced stockholding costs. Modelling
demand for euro notes (of which almost ten billion are now in circulation)
was complicated by uncertainties about its international circulation.
This session examines best practice in banknote forecasting.
Key challenges in currency management
Roundtable workshop
This workshop builds on the experiences
of participants in their home institutions. Each delegate will talk
briefly about the key issues that present them with challenges at their
central bank in their work. Delegates will be asked to give a brief
account of their central banks’ approach to currency management,
and identify the key external players which influence strategy. The
group will examine, in this session and throughout the week, the wider
implications of different currency management models. Delegates will
have an opportunity to learn about each other’s experiences and
draw on alternate solutions to common problems.
Ion Nitu
Head of Issue Department, National Bank of Romania
Issuing a new note series represents a huge project management and logistical challenge. In summer 2005, the National Bank of Romania introduced an entirely new range of polymer banknotes (and coins) as it rolled out a redenominated version of its currency, the leu. This session, in the form of a case-study, highlights how the central bank tackled the problems faced when planning and designing this new currency: what denominations to choose? What size and material to use for the notes? Where to set the note-coin boundary? What security features to include?
Key elements in banknote design
Hans de Heij
De Nederlandsche Bank
For currency managers, note design presents a series of interlocking challenges. New designs must win public acceptance, incorporate requisite security features and meet durability and machine processing standards. Currency managers must have a clear understanding of these concerns, and excellent project management skills. This session draws on work of the Netherlands central bank designed to ensure effective cooperation between all stakeholders in the design and production process. This includes the use of market surveys to gain feedback from the public.
Working with external suppliers
Andrew Bailey
Chief Cashier, Bank of England
Even central banks which outsource some or all of their currency production must nonetheless monitor production and quality standards. Procurement from external suppliers is expensive (one of, if not the, most expensive items in the budget) and complex. Currency managers must weigh up the importance of price against considerations of time of delivery and quality of product. Following the sale of the Bank of England’s printing operations in March 2003, the Bank now relies entirely on external supply for UK banknote needs. This session examines the Bank’s experiences in this area and considers general rules for best practice in banknote procurement.
Paper vs. polymer
Myles Curtis
Securency Ltd
A key decision in banknote production is the choice of paper or polymer. Following the move by the Reserve Bank of Australia to introduce polymer notes in 1998, 23 countries have chosen polymer substrates for their national currency. For low denomination notes, polymer substrates undoubtedly offer costs savings from improved durability. However, replacing only low-denomination notes with polymer alternatives may not be feasible. This session examines the implications of this key choice and looks at the experiences of those countries which have adopted the polymer note.
When
should currency management
be outsourced?
Alan Gerard
Currency Processing and Design
Consultant
Many central banks are reviewing the
division of responsibilities and work in the area of cash distribution.
Often these reviews point to savings to be made from outsourcing some
or all of cash distribution functions. However, such outsourcing programmes
are not without risk. The quality of note processing must be maintained
and monitored. Outsourcing can only be effective if processing equipment
meets a specific level. Security concerns must still be addressed, and
private sector agents should have incentives to discharge their function.
Otherwise note quality may fall, and security and counterfeiting risks
rise. A dialogue with the commercial banking sector is essential, and
this session investigates the practicalities involved in successfully
outsourcing functions involved in maintaining the circulation of currency
from holding to processing, transporting and through to destruction.
Case-study 1: Norway’s approach
to cash distribution
Trond Eklund
Director, Chief Cashier’s
Department, Norges Bank
Norges Bank has been at the forefront
of successful outsourcing of cash-processing functions, using third-party
operators to store, process and destroy Norwegian notes. In this session,
the speaker from Norway’s central bank discusses how their approach
was developed and is managed at present, and examines the lessons to be
learnt from this successful example of outsourcing.
Case-study 2: Restructuring
cash distribution
Kai Barvèll
Head of Market Operations
Division, Sveriges Riksbank
Sweden has experimented with various organisational structures
for distributing currency. In this session, the speaker, from Sweden’s
central bank, will outline the evolution of arrangements between the central
bank and the commercial sector for transporting and storing cash and explain
the Riksbank’s plans to introduce consolidation and private-sector
depots which can receive interest compensation.
Fitness standards and note processing
Alan Gerard
Currency Processing and
Design Consultant
Whether currency sorting is carried out in-house or outsourced,
fitness standards for currency in circulation must be set and monitored.
The proliferation of ATMs has had a considerable impact and sharpened
the focus for both commercial and central banks. This session will consider
various ways of setting, monitoring and maintaining fitness levels for
currency in circulation, as well as how to select the appropriate technology
for note sorting to meet specific needs, from semi-automated; medium and
high-speed systems.
Anti-counterfeiting
measures
Speaker from the Central
Bank Counterfeit Deterrence Group
Research and development is
at the heart of the central bank’s arms race with counterfeiters.
Over time new technology and new counterfeiting techniques tend to undermine
new security features, meaning that central banks need to be vigilant
and forward-looking in order to maintain their advantage. At the core
of international efforts against counterfeiting is the G10’s Central
Bank Counterfeit Deterrence Group (CBCDG). This session draws on the recent
work of the CBCDG and its 27 member central banks and note printing authorities
to look at how central banks can maintain their R&D edge, and what
future developments in this area are likely to be.
Lessons and key issues
Wrap-up discussion and action points
This session will bring together
the different themes of the course and focus on key ideas and conclusions.
Delegates will reflect on lessons learnt throughout the course and identify
opportunities for moving forward, both in their own organisations and
at the international level. The group will review the challenges identified
as most pressing on the first day of the course and discuss together the
most effective possible solutions presented.
|