Why Has Japan’s Cash Demand Remain Strong?
Category: MacroeconomicsCash is a safe and highly liquid instrument for payment of goods and services and other transactions which is issued by a central bank.
“The measures undertaken by NBP during the pandemic have helped to limit the fall in GDP in Poland this year and will support the recovery in activity in 2021. According to NBP experts the easing of monetary policy will increase GDP by as much as 1.4 percentage points in total this year and in 2021,” informed the NBP President Prof. Adam Glapiński.
Prof. Adam Glapiński, prezes NBP (©NBP)
The President of NBP announced in his speech to the participants of the Cash Handling Congress that NBP was beginning work on a national cash security strategy.
Prof. Glapiński said that the decisions taken recently by the central bank had helped the banking sector. “Easing monetary policy, increasing liquidity and lowering capital requirements will also support the banking sector, as a milder recession as well as lower unemployment and fewer corporate bankruptcies means lower credit losses in this sector.”
NBP is helping the economy thanks to the Polish złoty
According to President Glapiński, an appropriate response of the central bank to the current economic situation would not be possible if Poland was currently in the euro area. In the euro area, “the monetary policy response would not be adapted to the national macroeconomic processes. From this point of view, it is very important that we have the złoty and that NBP conducts independent monetary policy adapted to Polish conditions,” stressed the NBP President.
“Possessing the złoty also has a positive impact on ensuring the efficient circulation of cash, especially considering that the availability of cash is the foundation of the safe functioning of the infrastructure of our state,” he added.
NBP statistics show that since March this year the value of cash in the economy has increased by PLN 80 billion, or approx. one third, reaching PLN 320 billion. For NBP the high level of customer withdrawals during this time was a test of the efficiency of the whole payment system. “It was a very difficult time,” acknowledged the NBP President.
“Today we can say that cash circulation in Poland passed the exam. It is obviously a reason for NBP and the whole of the cash handling sector to be proud,” said the head of the central bank.
Cash ensures the safe functioning of the economy
The President of NBP assured that the central bank as the issuer of the national currency would always be an advocate of cash – Polish banknotes and coins – since cash ensures, particularly in difficult situations, the safe and uninterrupted functioning of the economy, unaffected by external influences and free from the risk of non-performance of obligations. He also noted that, “the elimination of cash […] is not conducive to broadening and strengthening individual freedom.”
“NBP supports digital means of payment; however, we do not forget about the foundations which give us freedom, which is about cash,” declared the NBP President.
He added that in times of pandemic it has ceased to be simply a payment instrument and become a crucial element of the stabilisation of the infrastructure of the whole state. “Banknotes and coins are general circulation money. For Narodowy Bank Polski this means universal availability and universal acceptance, as well as the universal understanding of the whole of the banking sector that cash must be subject to special protection and cannot be seen exclusively through the prism of costs and profits,” said Prof. Glapiński.
Cash is safe for Poles during the pandemic
The President of the central bank informed that NBP had agreed with the National Epidemiological Consultant on the rules for handling banknotes and coins. Procedures had been introduced at NBP to neutralise the risk of any possible transmission of the virus thanks to, among others, the quarantine of banknotes lasting several days.
Research commissioned by NBP shows that 9 per cent of respondents had been refused the possibility to make a payment in cash, and this happened most frequently in such places as supermarkets, restaurants and even local government offices. Pharmacies, bookshops and bakeries were also mentioned among the replies. “Let us remember, however, that roughly 10 per cent of citizens do not have a bank account and a further 10 per cent immediately spend all their funds on their basic needs. This is a very large group which must not be discriminated against in any way. These citizens need support and our protection so that the state guarantees them the possibility to use cash,” said Prof. Glapiński.
Banknotes and coins issued as legal tender should in principle be accepted in all transactions.
He added that, “NBP takes the position that banknotes and coins issued as legal tender should in principle be accepted in all transactions.” According to NBP, an entrepreneur cannot make the conclusion of an agreement with a consumer for the provision of a service or sale of goods conditional on making the payment in a non-cash form or refuse to accept payment from the consumer in the form of currency issued by NBP.
The NBP President informed that the central bank reiterates its demand to introduce an appropriate provision in the Act on electronic payment instruments, which would strengthen consumers’ rights, resolving unequivocally that they have the right to make payments in cash form always and everywhere.
“NBP takes the position that all payment instruments should be supported equally and that their selection is exclusively the right of the consumers and citizens,” stressed Prof. Glapiński.
He added that it is natural that during periods of uncertainty the customers of banks withdraw some of their savings in order to have them at home just in case. “I personally also believe that it is prudent to keep a certain amount of cash at home. I’m thinking here of amounts enabling the payment of several days of shopping. However, let’s remember that savings kept on bank accounts are guaranteed by the Bank Guarantee Fund to the amount of 100 thousand euro. One should remember that keeping large amounts of money at home incurs the risk of their loss as a result of theft. In this case, as everywhere else, prudence is needed,” said the NBP President.
He appealed to banks to enable cash machine customers to make withdrawals in high denomination banknotes – PLN 200 and PLN 500 – due to the limited cash handling in banks. The NBP President pointed out that a situation where, on the one hand, withdrawals cannot be made at the bank’s cash desk, and on the other, lower denomination banknotes prevail in the cash machines was hard to imagine over a longer period. “This puts banks’ customers in a very difficult position.”
NBP announces a national cash security strategy
“NBP takes the position that it should support cash circulation in such a way as to ensure customer access to cash at a rational time and place,” declared the NBP President.
“That is why I announce here the start of work under the direction of NBP on a national cash security strategy,” President Glapiński summed up his speech, at the same time inviting other entities to join NBP’s efforts on this issue.
The full text of the President’s speech is here.
Prof. Adam Glapiński, prezes NBP (©NBP)
