Banking on trouble
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The Jamaica Observer
The Bank of Jamaica has been rationing $5,000 notes issue.

THE Bank of Jamaica (BOJ) is now rationing the supply of $5,000 notes issued to banks for stacking automated banking machines (ABMs) going into the busy Christmas shopping season, leaving the deposit-taking institutions concerned that when people start getting paid next week, the machines may not be able to facilitate the expected level of withdrawals without running out of cash quickly.

Banks have told the Jamaica Observer that issue became a worry after they placed orders last week for the $5,000 notes ahead of the Christmas shopping season and were told they could not get the quantities they want because it was throwing the central bank’s usual projections for the demand of the high-value denomination off kilter.

“You know what NCB did after the ABM standards were introduced in April? They went and readapted more of the machines to use more $5,000 notes and that has caused a problem,” a person familiar with the issue, who requested anonymity to speak freely, told BusinessWeek.

The issue, BusinessWeek understands, has caused the central bank to be managing the outflow of $5,000 notes since the middle of this year to ensure it doesn’t deplete its stocks which are ordered only once per year. Consumers, we were told, are being irked by being forced to accept the larger currency notes from the machines.

“Yes, we have had complaints from the public regarding… the large proliferation of $5,000 in the ABMs,” said Natalie Haynes, deputy governor at the BOJ with responsibility for the banking & currency operations and financial markets infrastructure divisions, at the central bank’s quarterly monetary press briefing in late November in response to queries on the matter.

“I think it’s expediency on the part of the cash-in-transits, in terms of not going so often to replenish the ABMs if you put high-value notes in them,” Haynes added.

Still she said the BOJ is “working with the banks and with Beryllium to say, do not put so many $5,000 [notes in the machines] because we are getting complaints,” as she indicated that she would rather have the banks taking more of the $2,000 notes while she insists adequate supplies of $5,000 notes remain.

“There is no shortage of any denomination of bank notes. You probably won’t see any $50 or $100 because based on the number of trays in the ABMs, they will put the high-value notes, $5,000, the $2,000 that can take it, the $1,000 and the $500.”

The central bank added that it was told by Beryllium in a letter that its decision to stack the machines with mainly $5,000 notes “is for security reasons”. Efforts to get a comment from Beryllium for this story were unsuccessful with direct calls to officials going unanswered and messages left with the switchboard for a return call not being honoured.

The issue first emerged in the aftermath of the central bank issuing standards for the operation of ABMs in April 2024, requiring banks to ensure the machines are working at least 90 per cent of the time and not being out of cash for more than one hour in urban areas and three hours in rural areas, following public frustration in 2023 about ABMs being out of service too frequently. To cauterise that situation, commercial banks turned to stacking the machines with $5,000 notes, with both NCB and Scotiabank acknowledging in written replies to BusinessWeek that they are issuing more $5,000 bills through their machines “because it makes sense”.

“Our primary focus is to ensure that a machine has sufficient cash to meet the demand, to minimise downtime and to minimise the number of trips the custodian has to make to replenish the machine,” Scotiabank’s response to the issue said.

NCB, on the other hand, responded: “It is essential to utilise $5,000notes to satisfy the highest number of customers with an average transaction size, thereby reducing the instances of cash depletion.”

Only NCB and Scotiabank were asked for responses to the issues raised by the central bank after they were identified as the banks placing large orders for $5,000 notes after the ABM standards were issued earlier this year.

One banking executive who requested anonymity summed up the rationale behind stacking the machines with $5,000 notes.

“If you put in $5,000 notes versus $2,000 notes or $1,000 notes, the machines with the $5,000 notes are going to stay longer [with cash] without needing to be replenished than the machines with the $1,000 notes or the $2,000 notes. Just the maths, just the literal maths of it makes sense. So if you stack it with higher denominations and the demand is what it is, it lasts longer.”

That sentiment found favour with Edmundo Jenez, CEO of JETS Limited, the operators of the MultiLink network which facilitates intrabank transactions at ABMs and point-of-sales machines.

Jenez pointed out that each machine holds four trays, each of which can take a maximum of $2,000 notes arguing that stacking higher denomination notes is practical for banks.

“Loading the machines with small denominations cause them to run out real fast. So the banks have been looking at that and reconfiguring the machines,” Jenez pointed out. He said that is why consumers will hardly see machines with $100-bills adding that the number of terminals supporting $100-bills have fallen by about 48 per cent over this year alone.

But the banks have also taken the matter in their hands to ensure they have enough $5,000 notes to meet demand this Christmas.

“Although there has been no shortage of $5,000 notes, we have contingency plans to address any supply challenges, including monitoring cash levels, reallocating resources, and timely replenishments,” NCB said.

We understand that means holding on to the $5,000 notes collected from customers instead of sending them back to the central bank for reissuing.

“They want to say people want smaller denominations and it is the wicked banks that are not giving them smaller denominations, so they want to push the narrative that we should not be issuing the $5,000-notes in the volumes that we are because people do not want the $5,000 notes, which is a different problem all together. You can’t in one hand telling us that we need to keep the ABMs up and we are putting in denominations that the country has, it’s not like the country does not have $5,000 notes, and then telling us that we still need to maintain the uptime. The machines are going to go down faster with the lower denominations…we need to be honest with each other and talk about what we need to do and not point fingers.”

NCB said it would be changing out some of the tills in their machines that are now loaded with $5,000 notes to accept $2,000 notes, but said that will be done early in the new year so that there is no disruption to the supply of currency during the Christmas shopping season which has been forecast to be a record-breaking one.
Jamaica
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2024-12-13
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Banking on trouble
Banking on trouble