Spring
2007 Training Course/Seminar Series
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Best Practice in Banknote and
Currency Management
4-day intensive residential programme, 25-29 March
2007
Venue: Cumberland Lodge, The Great Park, Windsor
Course Chairman: Bill Melbourn, Currency Consultant and Former Deputy
Chief, Department of Banking Operations, Bank of Canada
Series Adviser: Charles Goodhart, CBE, Professor Emeritus, London School
of Economics, Financial Markets Group
Details of how to register
are here
Dear
Delegate,
BEST PRACTICE IN BANKNOTE AND CURRENCY MANAGEMENT
In the eyes of the public, no function is more visible
than currency management. Recent natural disasters and the threat of pandemics
have highlighted the risks to physical stocks of cash at the same time
as increasing demands are placed on the distribution system.
A currency’s integrity and efficient supply are unequivocal everyday
indicators of a well-functioning central bank. Banknotes are the foundations
on which a central bank’s reputation rests.
However, issuing and destroying cash, maintaining note quality and guarding
against counterfeit notes is an increasingly costly – and complex
– business. In addition, central banks need to keep current with
the latest technological developments to combat sophisticated forgers.
This seminar has been designed to assist central banks in taking a strategic
approach to their currency management and to help them address current
risks and threats. This requires first of all an understanding of the
currency life-cycle and subsequently a thorough analysis of the extent
to which other stakeholders can take on more functions. All this needs
to be set in a proper risk-management framework.
Alongside note printing/procurement, cash distribution (often requiring
a large branch network) is often first in line for scrutiny when cost
savings are needed. However, ill-considered or poorly implemented outsourcing
can prove counterproductive. The seminar contains a series of case studies
drawn from recent experience which illustrate the key practical lessons
for central banks wishing to modernise cash production, processing and
distribution arrangements.
The course focuses on four key themes:
- The currency life-cycle:
the trend for central banks to focus on “core functions”
and a desire to reduce costs prompts many to reassess their currency
management. What should be considered in these reviews?
- Demand, design and production:
alongside logistical and manufacturing challenges, including forecasting
the demand for notes, 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. What are the
most effective models for banknote distribution? What can be outsourced?
- 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 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 1,200 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
Chairman: Bill Melbourn, Former Deputy Chief, Department of Banking Operations, Bank of Canada
New challenges
facing currency managers
Alex Jarvis
Former General Manager Printing Works, Sorting and Cash
Centres, Bank of England
What are the current challenges
facing currency managers in central banks? The speaker, a former head
of printing works at the Bank of England, will lead a discussion on
policy concerns and new developments across the broad range of activities
that make-up the currency management function.
Contingency planning in currency management
Workshop session led by
Bill Melbourn
and by Alex
Jarvis
In 2007 no central bank is unaware
of the requirement that all key business areas be included in effective
contingency plans. This session will examine the experiences of the
group in the area of contingency planning and operational risk management.
This session, in workshop format, invites delegates to describe and
discuss the key challenges their central banks face in this area and
how they are tackling them.
Implementing a life-cycle approach
Bill
Melbourn
Former Deputy Chief, Department of Banking Operations,
Bank of Canada
Efficient and cost-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). This session draws on the Canadian
experience to examine how central banks can take a holistic view of
their currency mandate.
Case-study: 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 print, 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.
Working with external suppliers
Andrew Bailey
Chief Cashier, Bank of England
The risk management system must address
the unique situation of each central bank, its environment, and the
measures available to balance effectively the achievement of objectives
and the risks incurred. What are the essential components of a risk
management system for a central bank's operational framework? How have
systems been adapted to meet new and emerging risks? How do different
risk management techniques impact on the systems needed to support the
operations? The session will examine the key features of a risk management
system in a central bank. The group will discuss the extent to which
central banks can learn from the commercial sector and the arguments
for and against a decentralised system of risk management.
Chairman: Bill Melbourn
Hans de Heij
Staff Member, Cash Policy Department, 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 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.
Introducing a new note series: case-study
Lionel Van Lare Dosoo
Deputy Governor, Bank of Ghana
Issuing a new note series presents represents a huge project management and logistical challenge. In summer 2007, the Bank of Ghana will introduce an entirely new range of banknotes as it rolls out a redenominated version of its currency. This session, in the form of a case-study, highlights how the central bank is tackling 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?
Polymer notes ten years on
Myles Curtis
Managing Director, Securency Ltd
A key decision in banknote production is the choice of paper or polymer substrates. 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.
Chairman: Bill Melbourn
Fitness standards and note
processing
Richard Wall
Director
of Currency Operations, Bank of Canada
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. l, 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.
Forecasting the demand for banknotes
Richard Wall
Director of Currency
Operations, Bank of Canada
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. This session examines best practice in banknote forecasting, drawing on the experience of the Bank of Canada.
From vault to furnace
A roundtable discussion
led by Bill
Melbourn
In this session, participants will consider the major
topics and issues raised in the day’s discussion of distributing,
processing and destroying banknotes and examine how to formulate approaches
to challenges faced in these areas.
Chairman: Bill Melbourn
Effective
anti-counterfeiting measures
Marc Salade
Head of the Printing Department, National Bank
of Belgium
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 led by
Bill
Melbourn
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 and discuss together the most effective possible solutions
presented.
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