New Developments in Banknote and Currency Management

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Monday 12 April 2010

The Banknote Life-Cycle and Risk Management

Introduction: the currency life-cycle
Bill Melbourn, Former Deputy Chief, Department of Banking Operations, Bank of Canada

In this introductory session, the course chairman will highlight the themes to be covered throughout the course and re-examine the currency life-cycle. Discussion will focus on the pressing demands placed on banknote and currency managers today, including the organisation of the function itself and managing the risk it faces. With an emphasis on cost savings, central banks need to look carefully at where maximum efficiencies can be made, as well as, be aware of the risks in outsourcing. Participants will be offered the
opportunity to express their main areas of interest for discussion during the course.

New challenges in currency management
Alex Jarvis, Former General Manager Printing Works, Sorting and Cash Centres, Bank of England

What are the new 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 risk management, policy concerns and new developments across the broad range of activities that constitute the currency management function. The main focus will be on public education strategy and communication with the public. Delegates will also be asked to speak on public education strategy in their home countries.

Contingency and interruption planning
Break out sessions facilitated by Alex Jarvis and Bill Melbourn

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. In this workshop, the group will consider a variety of scenarios that explore the key challenges central banks face in this area and how they are tackling them.

The impact of alternative payments means
Antti Heinonen, Former Director of Banknotes, European Central Bank
Cash still remains very popular with the increasing amount of currency in circulation globally. What challenges does this scenario present for central banks and what is the future of cash? Is the competition for payments “fair”? This session will consider policy issues surrounding cash and its competitors and discuss latest thinking on the provision of currency.

Value for money: working with external suppliers
Andrew Bailey Chief Cashier, Bank of England

When considering a note order, currency managers must weigh up the importance of price against considerations such as time of delivery and quality of product. Central banks that outsource some or all of their currency production must monitor production and quality standards. Procurement from external suppliers is expensive (one of, if not the, most expensive items in a central bank’s budget) and complex. This session examines the Bank’s experiences in this area and considers general rules for best practice in
banknote procurement.

Tuesday 13 April 2010

Demand Forecasting, Fitness Standards, Sorting and Processing

Forecasting the demand for banknotes
Thomas Schweikart, Head of Currency Management Division ECB

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. Indeed, strategic management of currency is impossible without accurate forecasts. Currency demand models must draw on interest, inflation and growth forecasts, and also incorporate historical data on currency deposits/withdrawals and replacement rates. The benefits are clear: good forecasting allows more efficient procurement and reduced stockholding costs. This session considers how a central bank can produce useful forecasts and the resources it needs to do so.

Fitness standards and key aspects of note sorting and processing
Francisco Lopez, CEO, Intelligent Currency Solutions

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. Group discussions here will focus on ways of setting, monitoring and maintaining fitness levels for currency in circulation. This session will also address the key at the challenges central banks face in sorting and processing banknotes. Discussion will also focus on issues of selecting the appropriate technology for note sorting to meet specific needs.

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 thirdparty operators to print, store, process and, uniquely, destroy its notes. Moreover defining incentives for cash sorting to secure the quality of banknotes in circulation needs special attention. As a long mountainous country, geographic factors played an important role in determining the extent to which Norway could economically centralise services. In this session, the speaker from Norway’s central bank discusses how its approach was developed and is managed at present, and examines the lessons to be learnt from this successful example of outsourcing.

Designing cash-processing centres
Terry Glude, President, Productivity Systems International Inc

Investment in a cash-processing centre represents a considerable outlay for a central bank. Central banks reviewing their processing areas for modernisation can look at either renovations or to construction of new facilities. Irrespective of the choice, designs must incorporate not only current needs but also those for future decades. In addition, central banks planning entirely new distribution systems in their country need to consider optimising the location(s) of their operations based on projected growth rates. This session will consider options for the most efficient processing arrangements including vault, receiving/shipping and processing.

Panel: questions of demand, fitness, sorting and processing
Featuring Trond Eklund, Terry Glude, Francisco Lopez, Thomas Schweikart and moderated by Bill Melbourn

The day concludes with a panel session which brings together the critical elements of note processing discussed during the day. Discussion will focus on the relationship between the elements – such as fitness standards and demand – and allow participants to revisit issues raised during the day and discuss them in a holistic fashion.

Wednesday 14 April 2010

New Directions and New Demands in Banknote Design

Banknote designs: comparison and appraisal
Hans de Heij, Cash Policy Department, De Nederlandsche Bank

For currency managers, note design presents a series of interlooking challenges. New designs should deliver value recognition, incorporate proper security features and meet durability and processing standards. Critically they must win public acceptance, where identity and communication are two key design aspects. Currency managers need have a clear understanding of these concerns as well the needs of specialist interest groups, such as the partially sighted. The speaker draws on work at the Dutch 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.

Note workshop
Participant presentations, moderated by Bill Melbourn

In this session, participants will be divided into small groups and given the task to come up with their own interpretation of a banknote. They will then make short presentations discussing new features in banknotes from their country, or new developments in processing.

Security features against counterfeiting
Karel Schell, Director, Schell Consulting BV

The arrival of photography in 1834 spelled the end for black-and-white security features printed in letterpress with unique type as effective deterrents against counterfeit banknotes. Then the answer was colour. The development of image-reproduction technology, its impact on banknote security and the counter-attacks through the development and launch of security features is a recurring theme in the “arms race” with counterfeiters. How can central banks stay ahead? This session will discuss security features for the general public and for the professional cash handlers as well as some features for forensic analysis. The speaker will also address developments of new hybrid substrates which are scheduled to be released in the second half of 2010.

Thursday 15 April 2010

Contingency Planning and Communication

Talking money: the public and banknotes
Olivier Radelet, Principal Project Manager, European Central Bank (invited)

Issuing banknotes is a core task for any central bank. Ensuring the integrity of the banknotes requires efficient communication, which has to be directed at the general public as well as at specialised target groups such as cashiers, retailers and cash-in-transit companies. Unlike other areas of central bank communication, it has to employ the whole array of tools known from the commercial sector. Participants will be briefed on the latest concepts and ideas regarding ways to raise awareness of banknote security features and how to roll out a campaign that reaches the entire population.

Business interpretation and disaster planning
Tomáš Hládek, Cash and Payment Systems, Czech National Bank

This session will focus on contingency planning and the specific role of cash in the event of a national disaster or catastrophe. The speaker will be prepared to share his first-hand experience and he will describe the lessons learned in currency management with regard to contingency planning and operational risk management.

Lessons and key issues
Wrap-up discussion and action points led by Bill Melbourn

This session draws together the themes of the course and focuses on key ideas and conclusions. Delegates will reflect on lessons learnt throughout the course and identify opportunities for moving forward, in their own organisations. The group will review the challenges identified as most pressing and discuss together the most effective possible solutions presented.