CBSI Annual reports: Currency operations

The Central bank of Solomon Islands' annual reports feature a section dedidated to currency operations. These currency reports are presented in this document (commencing with the year 1999, when polymer notes were first mentioned in the reports, and ending in 2005, when it has been decided to retire the $2 polymer note).

CBSI Annual report 2005 2005

Currency Operations
 

Total currency in circulation in 2005 increased by 22% to $168 million compared to a rise of 24% in the previous year. This consisted of $161 million in currency notes and $7 million in coins. The $50 denomination accounted for 83% of the total circulated notes, an increase of 3% over 2004. (See Graph 21).

The value of $20 denomination represented only 7% of the total circulation, edging down by 1% from the previous year. In terms of volume, the $50 and $2 denominations increased by 10% bringing a total of 5 million pieces of both in circulation in 2005.

Total notes destroyed in 2005 amounted to $24.5 million compared to $22.9 million in 2004. The rise however was only 7% compared to 127% in the previous year. The reduction in notes destroyed was attributed to ongoing efforts to educate the general public through awareness talks and media about money handling issues.

The Bank continues to place great emphasis on currency management aiming to address operational and cost factors that would enable the country to progress towards achieving efficiency in handling currency.

In 2005, new notes introduced into circulation totalled $55.8 million: 76% constituted $50 denomination followed by $20 denomination at 11% and the remaining fairly distributed between the other low valued denominations.

In terms of volume, the $50 and $2 denominations constituted 60% of total new notes issued during the year. There is pressure on the $50 and $2 denominations as a result of the pricing system and the volume of transactions between business houses and individuals. This also explains the positive correlation between the increase in the volume of notes destroyed during the year and notes dispensed to the public via the banking system. The Bank is confident that the introduction of a new $100 denomination in 2006 will help absorb the current pressure on the $50 denomination.

During the year, the Bank decided to revert the printing of the $2 note from polymer to cotton paper. The decision was taken in response to public complaints about the quality of the $2 polymer note. Both the new $100 and $2 denominations will include upgraded security features to counter increasing threats of digifeiting. The inclusion of the national flag and coat of arms on both notes is in line with Bank policy to portray minor design elements in Solomon Islands banknotes.

On numismatic coins, the Bank received $1.8 million in royalties from overseas sales of commemorative coins. This is an increase of $0.6 million from previous year sales. A bulk of this amount came from sales of commemorative coins by Royal Mints and World Coins to its European market. The Bank also approved minting of coin programmes in silver proof and cupro nickel sets depicting battle ships. A coin programme depicting HM The Queen’s 80th Birthday had also been approved for minting and sales. While commissions on sales of circulation notes and coins improved substantially in recent years, local sales of commemorative coins remained relatively weak. The only coin programme aside from the World War II commemorative coins that attracted local sales was the RAMSI silver proof, which became available for sale in mid-2005.

CBSI Annual report 2004 2004

Currency Operations

Total currency in circulation increased by 24% to $138 million in 2004 compared to a rise of 14% in the previous year. This figure consisted of $131 million in currency notes and $7 million in coins. The $50 denomination accounted for 80% of total notes in circulation by value whilst the $5 denomination consisted of 2% of total notes by value. In terms of volume, both the $50 and $2 denominations made up over 60% of the total notes in circulation in 2004.

During the year, the Bank destroyed $22.9 million of mutilated notes compared to $10.2 million in 2003. The cumulative total of notes destroyed was $167.4 million at end-year. This was an increase of more than 100% compared to previous year data. This indicated the need to address the issue of currency management more seriously, and in partnership with financial institutions.

The increase in the volume of notes destroyed during the year resulted in similar increases in orders for notes by the banking sector and the public in general. New notes introduced into circulation in 2004 totalled $40.4 million. This comprise of 74% in $50 denomination followed by $20 denomination (15%) and the remaining fairly distributed between the lower value denominations. In terms of volume, the $50 and $2 denominations made up 62% of the total new notes issued during the year. This agrees with the analysis of the total notes composition in circulation by volume in the same period. Again this signals amongst other factors the need to introduce a high value note.

During the year, the Bank also introduced the upgraded $20 and $5 denominations with improved security features. The most outstanding features in the upgraded notes included the cornerstone to strengthen the corners of the $20 denomination, as well as the inclusion of the national flag on both notes as part of the standardisation of Solomon Islands Banknotes.

On numismatic operations, the Bank received $1.2 million in royalties from overseas sales of commemorative coins. Commission on sales of circulation notes and coins improved a lot from recent years as well as local sales of commemorative coins. The Bank also approved the minting of the smallest gold coin in the world introduced into the market towards the end-year. With the success of the coin programme depicting the anniversary of powered flights entitled ‘history of powered flights,’ the Bank has also approved a similar commemorative program relating to battleships. This should be in the market in 2005. The RAMSI commemorative coin was also one of the coin programs approved during the year, which will become available for local sales in mid-2005.

CBSI Annual report 2003 2003

Currency Operations

Currency issued by the Bank in 2003 increased by 13.7% to $111.2 million compared to a rise of 11% in the previous year. Of the total stock of currency issued, $104.7 million was in currency notes an increase of 14% while $6.5 million was in coins representing an increase of 8.3%. The $50 denomination accounted for more than three quarter of the total notes in circulation whilst the $5 being the least denomination in circulation. This clearly demonstrated increasing public demand for higher value notes and hence the need for the Bank to start preparing for issuing a higher denomination note. During the year, the Bank destroyed $104.4 million in mutilated notes compared to $134.3 million in 2002. To enhance this process of cash management more inefficiently and effectively a note-sorting machine had been partly acquired, tested in 2003 and delivery would be in the first quarter of 2004. Another currency issue resolved during the year was the quality of the $2 polymer note. Note Printing Australia has upgraded the quality of the polymer note and replaced a total stock of $2.42 million at their own costs to supplement the stock in hand. The Bank also signed an agreement for the issue numismatic coins during the year, depicting the ’History of Air Travel’ targeted mainly the US and European markets. A total of 180,000 coins were minted in gold, silver and cupro-nickel. Numismatic sales during the year were far from satisfactory. Gross sales during the years accounted for only $0.25 million whilst royalties received from offshore sales was $0.12 million.

CBSI Annual report 2002 2002

Currency Operations

Total currency in circulation increased by 6% to $97.8 million in 2002. Of this, notes increased by 6.0% and coins rose by 5.0% during the year. In contrast, currency in trust deposits operated by commercial banks (CBSI holdings) decreased by 10% to $3.1 million from $3.46 million at end-2002. This reflected the concentration of banking services in Honiara, which could be attributable to shrinking business activity in the rural sector coupled with increasing costs of maintaining branches in the provincial centres. Total notes destroyed in 2002 amounted to $17.5 million. This more than trebled the total destroyed in 2001. Of the total destroyed, more than 50% were $50 and $20 notes. This is a concern that management is dealing with to ensure more effective and efficient currency management systems in the Bank. In this regard, a new note sorting machine with higher note processing capability, especially in the sorting of unfit notes, counting and detection of counterfeits and mutilated notes would be acquired by the Bank in 2003. It is hoped that the installation of this machine would see a change in the Bank's note handling with positive effects on currency handling by public. A total of $40,303.80 in notes and coins was sold to collectors both locally and overseas. This was a reduction by $17,579.20 from the total sold the previous year. During the year, the Bank requested the note printing company responsible for the printing of the $2.00 commemorative polymer banknote to carry out analysis and evaluation on $2.00 polymer mutes, particularly the ink used on the polymer substrate. Results from preliminary tests on the mutes, however have not confirmed suspicions that the ink used was the problem. Further evaluations were carried out towards the end of the year, but the Bank has yet to receive their result. Discussions are continuing with the note printers with the view to replenishing of stock in 2003 at their cost.

CBSI Annual report 2001 2001

Currency Operations

Total currency in circulation in 2001 marginally declined by 1% to $91 million, from $93 million at the end of the previous year. The amount comprised of $88 million in currency in active circulation and $3 million in commercial banks’ till holdings. The balance in till holdings represented around 4% of total currency in active circulation at the end of the year. Currency replenishment during the year amounted to $53 million. This consisted of $50 million of the upgraded $50 banknotes and $3 million of the recently introduced $2.00 polymer notes. During the year, a total of 18,426 pieces of banknotes, worth $57,883.00 in value were also sold to both domestic and foreign currency collectors. This was a significant increase of more than 100% from the previous year’s balance of $9,000 but 33% lower than the figure in 1999. It is expected that sales of bank notes would increase further in 2002 attributable to the newly established website which enables access internationally. A total of around $6 million in mutilated notes were also destroyed during the year, 42% and 59% lower than in 2000 and 1999 respectively. The significant falls may have been due CBO department rescheduling destruction times from twice yearly to once in 2001. During the year, two cases of counterfeit $50.00 notes were reported to the Currency and Banking Operations Department (CBO) and, subsequently reported to Police to investigate. With the upgraded security features in the paper and print specifications, illegal duplication of all banknotes would be difficult in the future. The commemorative $50.00 and polymer $2.00 banknotes were put into circulation on the occasion of the Bank’s silver jubilee anniversary in June 2001. The commemorative $2.00 polymer substrate, made of polypropylene plastic is stronger and more durable than other paper notes. They are expected to last nearly five times the life in circulation as compared to the old paper notes.

CBSI Annual report 2000 2000

Currency Operations

Currency issued by the Bank in 2000 declined by 11% to $93 million compared to a rise of 21% in the previous year. Of the total stock issued, $88 million was in active circulation and $3 million in commercial banks’ till holdings. Over the year, the Bank destroyed $10 million in mutilated notes compared to more than $14 million in 1999 Currency replenishment during the year totalled $0.5 million, constituting additional stock of 10 cents and 20 cents denominations. Upgrading of the currency notes was carried out during the year on the $2 and $50 denominations. The new bank notes are expected to be issued by June 2001 to commemorate the Bank’s Silver Jubilee. The upgrading work included the printing of the $2 denomination on polymer substrate to increase durability of the note, enhance security of the note and thereby reduce printing costs in the long run. As regards the $50 bank note, the upgrading work was mainly to introduce additional security features on the note. Besides, this is an initial step taken to standardise the size of the currency notes in Solomon Islands.

CBSI Annual report 1999 1999

Calendar of Events

November: a representative of Note Printing Australia made a presentation to the Bank about polymer notes.