Switzerland: New Series of Banknotes Delayed

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SNB Study Finds Evidence of 1,000-Franc Banknote Hoarding

By Catherine Bosley
July 9, 2019, 10:04 PM GMT+5:30

The majority of Switzerland's high-denomination bills are effectively parked in vaults or stuffed under mattresses, according to a Swiss National Bank working paper.

In a study that has implications for officials at central banks, who must figure out how much below zero they can cut interest rates before the public begins stockpiling cash, the authors calculate that in between 80% and 90% of 1,000-franc ($1,007) notes were hoarded in 2017. For the 200-franc note the proportion was between 30% and 60%.

High Demand

The amount of 1,000-franc bills in circulation has increased.

"Our results indicate that a significant part of large-denomination banknotes is hoarded," authors Katrin Assenmacher, Franz Seitz, Joern Tenhofen wrote.

The Swiss National Bank unveiled an updated design for its top denomination bill -- one of the world's most valuable -- earlier this year, in defiance of international calls that the bills aid crime and tax evasion. The European Central Bank has stopped new issuance of its 500-euro note.

A spokeswoman for the SNB declined to comment on the working paper.

Source: Bloomberg

[redlock]

"Our results indicate that a significant part of large-denomination banknotes is hoarded,"

Doesn't surprise me at all. I am very confident the same can be said for the €500 banknote.

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Swiss National Bank declines comment on franc strength while unveiling new note

John Revill

BERN (Reuters) - Swiss National Bank Chairman Thomas Jordan declined to comment on Tuesday on the value of the franc, which has risen to its highest level in two years against the euro, or measures the SNB was taking to curb its strength.

He was speaking as Switzerland's central bank unveiled its new 100 franc note, the latest overhaul of the country's banknotes which have increased in value amid the safe-haven currency's surge.

The franc has gained nearly 4% against the euro EURCHF= this year as investors seek refuge from fallout of the U.S.-China trade war and the slowing global economy.

The trend has sparked speculation the SNB could relax further its ultra-loose monetary policy by taking interest rates more negative from -0.75% now or step up currency interventions.

The central bank is due to give its next monetary policy update on Sept. 19.

"We would like to answer questions about the new 100 franc note and not speak about our monetary policy," Jordan said.

The new note, featuring a design of a channel bringing water down from a mountain, will enter circulation on Sept. 12. It follows the launch of new designs for the 10, 20, 50, 200 and 1,000 franc notes over the past three years.

Jordan said he did not think the latest bank note series - Switzerland's ninth - would be the country's last despite the rising popularity of alternative payment methods.

"We are in the middle of technological changes and it is very difficult to look into the future," Jordan told a news conference. But he added:

"The reason why we still have cash is still there, it is a very useful means of payment. It is detached from other infrastructure and functions even if electricity does not work."

The 100, 200 and 1,000 franc notes are potentially affected by hoarding, according to an SNB study. Between 8% and 16% of the 100 franc notes are used for hoarding by people wishing to avoid negative rates charged by the central bank to ward off interest in the franc.

Jordan said the SNB had not noticed a "significant" change in demand for cash since the bank introduced negative rates.

"There has been a certain increase but not a radical shift in demand," he said, citing the costs of keeping physical money safe.

Additional reporting by Angelika Gruber; Editing by Michael Shields

Source: Reuters

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Press release by Swiss National Bank is here.

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