The BCRA has put into action a plan to take out of circulation and subsequently destroy the huge volume of worn-out banknotes that are currently deposited with financial institutions.
By using a new shredding machine powered by German technology, the BCRA underwent a process that allowed destroying 350 million banknotes of all denominations—particularly of 100 pesos—from January to April, 2017. Thus the total amount of banknotes in circulation was reduced by 260 million units during March and April.
The BCRA aims at normalizing and reducing the amount of cash held by economic players while expanding the use of electronic means of payment.
The BCRA started to receive worn-out banknotes that had been stored in financial institutions’ vaults. The wear-and-tear period had exceeded the term recommended by international standards.
In 2017, the BCRA has already taken out 510 million of banknotes from banks. Their removal from the system will allow reducing logistics-, security-and storage-related costs for the financial system, including the BCRA.
Wads of worn-out banknotes are delivered by financial institutions from all the country to the BCRA after perforating them to evidence they have been withdrawn from circulation. Once they are received, a control and recounting procedure is followed. In some cases, this task is accomplished manually given that some worn-out banknotes cannot be counted by machines due to their poor condition. The shredding machine destroys from 6 to 8 million bills a day. Within a few minutes, it turns wads into small “bricks” of shredded and pressed banknotes; such bricks are then given a special waste treatment as per current regulations.
To achieve this normalization and reduction in the amount of banknotes in circulation in Argentina, this plan must be accompanied by other measures:
– Banknotes with higher denomination: ARS200 and ARS500 banknotes were launched in 2016. As a result, the capacity of the network comprising 20,000 ATMs across the country increased since their replenishment system was streamlined. Their launch also paved the way for an orderly development of the amount of money in circulation. At present, cash held by Argentinians is broken down as follows: 25 % in ARS500 and ARS200 banknotes; 70% in ARS100 banknotes, and the remaining 5% in banknotes of a lower denomination. In June 2016, before the launch of the ARS500 banknote bearing the jaguar image, ARS100 banknotes accounted for 93% of cash in circulation and the other banknotes represented the remaining 7%.
– Electronic means of payment: for over a year now, the BCRA has been taking measures to modernize and spread the use of electronic means of payment, one of the core principles of its management. The measures adopted provided, among other things, that saving accounts and their debit cards be free-of-charge; that an “Alias CBU” identification be created to simplify transfers; that checks may be electronically deposited; and that new means of payment—such as the mobile Point of Sales Terminals (POS), the e-wallet, and the payment button—be launched. The BCRA also established that electronic transfers (via online banking, ATMs, and mobile applications) be free-of-charge for individual users, which led to a sharp rise in the use of such electronic channels. The transfers carried out by individuals in March 2017 (latest available information) increased 34% y.o.y.in terms of transactions, and 70% in terms of amounts.
For further information on the cash management policy implemented by the BCRA, refer to the Financial Stability Report, First Half, 2017 (see page 52.
