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Will another high denomination bite the dust ?

Categories : Uncategorized
January 13, 2017
Tags : Central Bank, Denomination mix, Legal tender, Regulators, Tax evasion
In 2016, several high-denomination notes were withdrawn from circulation around the world. Other countries could follow.
Guillaume Lepecq

In 2016, several high-denomination notes were withdrawn from circulation.

The Swiss, on the other hand, decided to stick with the CHF1,000. According to Jean-Pierre Roth, former President of the SNB (Swiss National Bank) “The decision to stop issuing high-denomination banknotes will receive the blessing of well-meaning souls but it will fail to meet its objective of fighting efficiently against criminality and will have negative side effects.”

Other countries could be contemplating the withdrawal of high denominations from circulation.

In December the FT reported that the £50 was in danger of being dropped by the Bank of England. One explanation is that the note is hard to get hold of; amongst the major UK banks, only Barclays’ ATMs dispense the £50. But the article emphasizes that this is “linked to a wider drive to push us towards a cashless society”. Some central bankers and economists like the cashless concept because it provides an opportunity to perfect monetary policy in an age of negative interest rates: its cuts off an escape route for anyone impertinent enough to want to retain the full value of their money.

Meanwhile, in Australia, Revenue and Financial Services Minister Kelly O’Dwyer announced on ABC Radio in December, a review of the $100 note and restrictions of cash payments over certain limits as the government looks to recover billions in unpaid tax. According to the Sydney Morning Herald, the government “will set up a taskforce, to be headed by former KPMG global chairman Michael Andrew, to draw on the experience of France, where the government is banning cash payments of over 1000 euros, and Sweden, where businesses that trade in cash are required to use a certified cash register that is seen by tax authorities.” However, the December issue of the Reserve Bank of Australia Quarterly Bulletin states: “Moreover, the current mix of banknote denominations continues to meet community demand for a secure means of payment and store of wealth.”