by Ursula Kampmann
translated by Annika Backe
December 3, 2015 – Between October 21 and 23, 2015, the Coin Conference took place in Madrid. In seven sessions, topics revolved around circulating coins. Logistics, security, cost efficiency, progress of cashless payment and sustainable mint management were at the center of attention. CoinsWeekly gives a brief summary of the lectures presented during the conference.
In the fourth part, we report on specific projects conducted by central banks, aiming at involving the general public in their activities to work in a more cost-efficient way.
Session 6: Cost efficiency
Jon Cameron, United States Mint: Stakeholder Involvement and the Search for Low Cost Materials for US-Coinage
On December 14, 2010, the Coin Modernization Act came into effect with the signature of the President. With this Act, the government decided to look for less expensive alternatives to the cost-intensive smaller denominations of circulating coins. To this end, the Office of Coin Studies was founded in 2013, which, on behalf of the Secretary of the Treasury, reports every other year on the cost of and alternatives to the coins currently in circulation. Jon Cameron is Director of the Office of Coin Studies. He presented the results of the latest study which was published in December 2014.
Firstly, it included the costs for the denominations.
- 1 cent: 1.66 cents
- nickel (= 5 cents): 8.09 cents
- dime (= 10 cents): 3.91 cents
- quarter (= 25 cents): 8.95 cents
- dollar (note): 5.4 cents
It was clear to see that the costs decreased slightly, not only thanks to savings on the part of the mints during the procedure, but, most of all, thanks to the substantial decline in the cost of materials.
Many other materials have been tested for their suitability and their price. These tests were accompanied by a series of talks with representatives of the free economy. They expressed their serious concerns about a currency changeover which would modify both the denominations’ weight and their EMS.
Above all, this would affect the quarter with its current production costs of 8.39 cents. A modification of its parameters could only be achieved by making costly adjustments. The free economy, therefore, estimates the costs incurred by a currency changeover at 2.4 to 6 billion dollars. The potential savings of the mint, in contrast, only amounts to a, comparatively modest, estimate of 46 to 57 million dollars.
Consequently, the 2014 report does not propose any specific amendments. The next report is slated for 2016.
Alvon Moore, Central Bank of Barbados: From Charity to Withdrawal
Barbados was likewise faced with the problem that the smaller denominations required an outstanding amount of work and incurred very high minting costs. Between 2004 und 2012, the costs for the 1 cent coin had increased from 2 to 5 cents. In 2010, almost the entire budget of the mint was spent on manufacturing 1 cent coins (ca. 80%) as well as 5 cent coins while there was almost no redemption of those coins. To retrieve the coins that were hoarded in private households, the Central Bank, in collaboration with the Rotary Club of Barbados and the Barbados Alzheimer’s Association, developed a concept to motivate the public to donate the cents at central collecting points between September 21 and the end of 2012. 5 million 1 cent coins were collected this way. For the Central Bank this charitable action brought a large increase in sympathy.
In 2013, the Central Bank decided to stop the minting of 1 cent pieces altogether. The reasons for this was still a large stock of 1 cent coins in the vault, for which there was no corresponding demand, and the resulting knowledge that most of the cents are not returned into circulation but hoarded by the families. In the light of the substantial production costs generated by the cash logistics the smallest denomination requires, it becomes easy to understand the decision of the Central Bank.
The final decision to abolish this denomination was made in November 2013. In February 2014, a guide was developed as to how the former prices for everyday shopping should be rounded. The general public is being made aware of this guide since February 2014. On May 7, 2014, the minting of the 1 cent pieces stopped.
The coins will not cease to be valid, and customers can certainly use them for payments as long as the coins are still circulating. Traders and banks, on the other hand, are not allowed to hand out any more cents, but are obliged to give them to the Central Bank instead. Anyone who transgresses these regulations may face penalties in the amount of $ 500 or 3 months in prison. No rounding will be done in the case of virtual payments and the calculation of taxes.
Alvon Moore pointed out that, market prices fluctuating considerably, one has to be cautious about taking account of the proceeds from the sale of the scrap metal in the calculation. Speculating with scrap metal must not the done by any central bank but should rather be left to the free market.
Jovent C. Rushaka, Bank of Tanzania: Lessons learned from the Introduction of 500 Shillings Circulation Coin in Tanzania
In 2012, the Bank of Tanzania decided to replace the TZS 500 bank note with a coin. The main reason for the conversion was that the note survived for only seven months. At first glance, it seemed more expensive to produce this note than a comparable coin. While 1,000 bank notes used to cost EUR 32.32, now the sum of GBP 31.10 (EUR 44.18) has to be paid for 1,000 coins. In the light of the fact that these coins have to be replaced only every 20 years on average, the Central Bank benefits from high savings. The bank decided start the minting of a lavishly produced TZS 500 coin made of 94% steel with a layer of 6% nickel in the weight of 9.5 g. Thanks to this material, the coin remains corrosion-free even in the very humid climate of Tanzania. As security feature, the coin is equipped with a hologram effect.
Whether or not this new issue will turn out a success largely depends on the public relations work promoting the coin. This is a particular great challenge for the Bank of Tanzania in that it has to reach the rural areas as well. No easy task in the light that the size of the country is 947.303 square kilometers with an average population of 52 inhabitants per square kilometer.
Session 7: The general public
Lydia Yip, Hong Kong Monetary Authority: HKMA’s Coin Collection Program – Challenges and Lessons Learned
Hong Kong has to deal with entirely different problems. The state territory densely packed, the price per square meter is so high that banks refuse to install a coin counting machine. This is why private citizens only rarely enjoy the service of getting larger quantities of small change exchanged. As a result, Hong Kong knows the problem of coins being hoarded in private households all too well. In addition, due to the high rents, the Hong Kong Monetary Authority cannot afford to simply establish central departments for the coin exchange either. Therefore, another solution had to be found.
The solution is called Coin Cart, and it is a success story for a year now. Two converted trucks currently serve as a mobile station for the exchange of coins. Keeping to a regular timetable, these trucks go to the various city districts where the people can then exchange their accumulated coins either for bank notes or add the value to a stored-value card. So far, 100 million circulating coins have been collected with a total face value of $ 15 million. More than 127,000 people have already visited the carts. The campaign has been very well-received by the national and international press.
The high rents in Hong Kong notwithstanding, the Coin Carts now provide a convenient means for the citizens to exchange their accumulated small change.
If you are interested to learn more about the topics addressed at the conference, please have a look at the previous parts of the article.
Here you can find the homepage of the Coin Conference.
This is the link for the conference attendees to download most of the speakers’ PowerPoint presentations.