Swiss govt re­jects ECB plan to slash 1000 ban­knote

The Pak Banker - - COMPANIES/BOSS -

Swiss of­fi­cials have no plans to fol­low the Euro­pean Cen­tral Bank and con­sider with­draw­ing their high­est-de­nom­i­na­tion ban­knote to help fight crime. A day af­ter ECB Pres­i­dent Mario Draghi told law­mak­ers that there's "in­creas­ing con­vic­tion" around the world that such bills are used for crim­i­nal pur­poses, Swiss Na­tional Bank Spokesman Wal­ter Meier said that his in­sti­tu­tion "isn't think­ing about get­ting rid of the 1,000-franc note."

Draghi has told law­mak­ers twice this month that of­fi­cials are re­view­ing the 500-euro ($559) note, which law-en­force­ment of­fi­cials say makes it eas­ier for crim­i­nals and ter­ror­ists to smug­gle large sums of money. There were more than 43.3 mil­lion of the more valu­able 1,000-franc ($1,015) bills in cir­cu­la­tion as of Novem­ber, ac­cord­ing to Swiss cen­tral bank sta­tis­tics, more than twice as many as in 2000. Switzer­land's stead­fast­ness on large-de­nom­i­na­tion bills risks mak­ing the coun­try a black sheep in fi­nan­cial cir­cles once again af­ter in­ter­na­tional pres­sure forced it to all but give up bank­ing se­crecy for off­shore ac­counts. The mat­ter has be­come a po­ten­tial fo­cus of the Group of 20 na­tions, whose fi­nance min­is­ters meet this month in Shang­hai.

More than $2 tril­lion in money re­lated to il­le­gal ac­tiv­i­ties is moved glob­ally each year, with cor­rup­tion amount­ing to an­other $1 tril­lion, ac­cord­ing to a re­port that Peter Sands, the for­mer chief ex­ec­u­tive of­fi­cer of Stan­dard Char­tered Plc, pre­sented ear­lier this month. He said the 1,000franc note, the 500-euro note and the $100 bill should be elim­i­nated and called for an agree­ment by the G-20, which Switzer­land isn't a mem­ber of.

Ac­cord­ing to cal­cu­la­tions by Swiss news­pa­per Neue Zuercher Zeitung pub­lished on Feb. 4, stor­ing the equiv­a­lent of $1 bil­lion in 1,000franc notes would take up less space than in 500euro notes or 1,000 Dan­ish-krone bills. Charles Good­hart, a for­mer Bank of Eng­land pol­icy maker and an au­thor­ity on money sup­ply, told a con­fer­ence last year that the SNB was "ab­so­lutely shame­less" in its is­suance of high-de­nom­i­na­tion notes.

The SNB pro­duces notes in a man­ner "com­men­su­rate with de­mand for pay­ment trans­ac­tions," ac­cord­ing to its web­site. "The high pro­por­tion of large de­nom­i­na­tions in­di­cates that ban­knotes are used not only as a means of pay­ment but also - to a con­sid­er­able de­gree - as a store of value," it says. Al­though Switzer­land ranks among the world's most tech-savvy coun­tries, its 8.2 mil­lion in­hab­i­tants are par­tic­u­larly par­tial to pay­ing with cash, ac­cord­ing to Bank for In­ter­na­tional Set­tle­ments data.

The in­tro­duc­tion this year of new due dili­gence rules for re­tail­ers ac­cept­ing cash pay­ments in ex­cess of 100,000 francs met with skep­ti­cism among some law­mak­ers, who ar­gued the right to pay anony­mously was a ba­sic lib­erty.

Draghi said on Mon­day of­fi­cials were "re­flect­ing" on use of the 500-euro note, just days af­ter euro-area fi­nance min­is­ters asked the cen­tral bank to re­view how the size of its ban­knotes might as­sist ter­ror­ists' fi­nanc­ing.

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