Banks request permission to destroy Argentine peso bills: why is this?

The national capital banks asked the Central Bank of the Argentine Republic (BCRA) to allow them to destroy a huge amount of deteriorated banknotes, mostly $100, which are piled up in their treasuries. It is that for a long time the entity has not received banknotes in poor condition and, although it has destruction power, it does not have the operational capacity to do so: 198 million 5-peso bills that have already stopped circulating still remain to be broken.

For the banks, it is not feasible to fill the ATMs with $100 bills, because it forces them to constantly recharge them; and it is much less useful for them to do so with lower denomination bills. The count, transfer and custody of banknotes is one of the most relevant operating expenses for any company, surpassed only by staff salaries. And it is in this framework that The Association of Argentine Banks (Adeba) presented a document entitled Digital Money Initiative in Argentina (IDDA), with which it proposed a series of measures to reduce the use of cash and replace it with electronic money.

The project in question was one of the issues discussed at the meeting held on Thursday by the head of the Central, Miguel Pesceand that of Adeba, Javier Bolzicowithin the framework of a more urgent agenda linked to the financial situation.

“Much of the cash that is in banks is of low denomination and has become obsolete, in the sense that it cannot be used in ATMs (cashiers) or delivered to customers, due to its low real value. This is the case of banknotes $100 bills, for example. Transporting damaged bills and $100 bills to the BCRA treasuries implies a high economic cost,” they highlighted in this regard in the aforementioned Association. And they added: “The destruction of banknotes at the bank headquarters, under the supervision of the BCRA, is an efficient and adequate solution, which would additionally mean cost savings for the BCRA”.

According to official information, 2,340 million $100 bills circulate in Argentina, another 184 million 50 pesos, 369 million $20 and 537 million units of $10. Due to its inability to receive surpluses, process them and destroy them, the BCRA allowed entities to compute them as “cash deposits”: that portion of each customer deposit that the bank must leave as a safeguard in the Central. However, banks must keep it in their own treasuries.

In Adeba they think of two formats to start the destruction of banknotes in the bank buildings: one is that large banks can have their own banknote destruction machine, to reduce their own cash and even provide this service for smaller banks ; and the other is to do it in Prosegur, the money carrier where many banks have “outsourced” their treasure and rent a physical space to protect their bills. In both cases, the BCRA should supervise the operation.

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