News in Brief

Belgian Competition Authority to Investigate Batopin

The four largest Belgian commercial banks, Belfius, BNP Paribas Fortis, ING and KBC, set up the Belgian ATM Optimisation Initiative (Batopin) in March 2020 to address the infrastructure challenge of falling cash usage volumes by developing an optimal network of ATMs in Belgium. The ATMs are branded neutrally and are established away from bank branches. The aim is to have an ATM not more than 5 km from people.

Just before Christmas, the Investigation and Prosecution Service of the Belgian Competition Authority (BCA) opened an investigation to determine whether the Batopin agreement could affect the quality of banknote distribution and deposit services or the competition between retail banking service providers under Article IV.1 of the Economic Law Code and/or Article 101 of the Treaty on the Functioning of the European Union.

The timescale of the investigation is unclear.

Brazil and Argentina Propose Common Currency

Brazil and Argentina, with the two largest economies countries in South America, wish to forge closer ties, including by developing a common currency, according to a joint statement by their presidents.

‘We intend to overcome the barriers to our exchanges, simplify and modernise the rules and encourage the use of local currencies,’ they said.

The intention is to create a currency for financial and trade flows to facilitate exchange, rather than create a single currency, with the Brazilian real and Argentina peso continuing to exist alongside. The common currency, which could be extended to other members of the MERCOSUR economic bloc, would also help reduce reliance on the US dollar for trade.

The latest statement joins a string of previous initiatives to create a common currency in the region – including the gaucho, the sur and the sucre. Analysts have dismissed the idea as ‘pie in the sky’ given the discrepancies between the Brazilian and Argentinean economies.

Separately, it has been reported that Argentina is running out of vault space to store banknotes. Annual inflation is nearing 100% and stocks of pesos are ballooning, particularly as the highest denomination remains the 1,000 peso, now worth just over US$5.

Last year, the Central Bank of Argentina issued over 1.4 billion of the notes, accounting for 75% of notes in circulation. There have been several attempts in recent years to introduce higher denominations notes, and it is reported that the government is again considering the issue of 5,000 and 10,000 pesos.

US Coin Production Slows

The pace of minting US coins for circulation slowed for a third year in a row, according to final 2022 production figures from the United States Mint.

US minting facilities shipped just over 13.6 billion coins to Federal Reserve Banks for release during the calendar year, a drop of 6% from the nearly 14.5 billion coins struck in 2021 and 7.8% from the more than 14.7 billion coins made in 2020, when production ramped up again to alleviate coin circulation issues brought on by the pandemic.

The majority of coins produced were 1 cents (6.3 billion, or 46.7% of the total), down from 54.6% in 2021. Each of the coins now cost 2.72 cents to make and distribute.

India Court Upholds Demonetisation

India’s Supreme Court has upheld the legality of the government decision in 2016 to demonetise 86% of the country’s cash in circulation, saying the decision was taken in consultation with the central bank and followed due process.

A five-judge bench of the country’s top court passed the verdict by a majority of four to one on a batch of petitions questioning the move.

Prime Minister Narendra Modi personally led the shock move to outlaw Rs 500 and Rs 1,000 notes to target undeclared ‘black money’ and fight corruption.

But the move badly hurt India’s cash-dependent economy, with a fall in GDP and several deaths as hundreds of thousands of people lined up outside banks for days to exchange their cash savings for legal tender.

Whilst the move was intended in part to flush out criminal activity, it was also an attempt to reduce dependence on cash and move India towards digital payments. However, virtually all the demonetised banknotes were returned, suggesting that the circulation of so-called black money in the economy was much overstated. Moreover, since the exercise, cash in circulation has increased by more than 80%.

BSP Swaps Cash for E-Money

Bangko Sentral ng Pilipinas (BSP) has conducted its first ‘Piso Caravan’ – a currency exchange program that replaces unfit money by depositing the equivalent amount to clients’ e-wallets. The aim is to increase the return of soiled or damaged notes and coins and drive the use of digital cash.

‘The BSP Piso Caravan is in line with the central bank’s commitment to preserve the integrity of Philippine currency and promote digital payments to bolster financial inclusion,’ the BSP said in a statement.

The conversion of cash to e-money via the Piso Caravan is part of the BSP’s Paleng QR Ph programme, which was launched last year with the objective of onboarding market vendors and tricycle drivers via the digital platform using QR technology and to promote account ownership using QR Ph.

Nigeria Delays Note Changeover

The Central Bank of Nigeria has postponed phasing out old, high-value banknotes for 10 days amid criticism that millions of people have been unable to obtain replacements, putting business activity and livelihoods at risk weeks before presidential elections.

The introduction of new 200, 500 and 1,000 naira banknotes in mid-December, with a very short period to recall the old versions before demonetisation, is intended, says the CBN, to reduce the use of cash, deter hoarding (around 80% of notes are held outside of banks) and prevent counterfeiting. About 1.3 trillion naira in old notes has been deposited into the bank since the announcement in October, the Bank said this week.

However, the new notes have been slow in reaching the public, particularly in rural areas, with ATMs and bank branches continuing to dispense old notes. Many retailers have also refused to accept the old-style notes well in advance of the deadline, exacerbating the problem.

Bowing to pressure, the CBN has now given a further 10 days’ grace for the changeover, moving the deadline from 31 January to 10 February.