Politique Internationale — Cash is an industrial sector in its own right, and involves a large number of players. How does the Bundesbank choose its partners?
Johannes Beermann — We don’t identify these partners on our own. For matters related to the production of banknotes, for example, we work in close collaboration with all the central banks in the Eurosystem. The Bundesbank covers about a quarter of the banknote requirements in the euro zone. We do it so much the better thanks to the development of a common charter: this reference document allows us to select our partners on the basis of very specific criteria. It’s quite simple: if these criteria are not fulfilled, businesses and players in general who would like to be selected by the German Bundesbank will not be able to be candidates. By the way, an important point: in contrast to other national banks, our establishment does not manufacture money directly. We are therefore obliged to rely on different companies: traditional tender procedures are regularly launched in order to employ one manufacturer or another.
P. I. — How long do these tender offers last? Does the Bundesbank operate according to a specific timetable for the production of notes and coins?
J. B. — First, a reminder of how the decision-making chain is organised. The European Commission is at the top of it because it is in charge of allocating the volume of cash each State can produce. Once the tenders are launched, it is very difficult to set a timeframe for the way production should proceed. The producers of notes and coins are like any other manufacturer: they work on a more or less just-in-time basis, depending on the time of year. If their order book is full, it is that much harder for them to speed up. The question of price also plays an important role: if you agree to make an effort on tariffs, your partner can produce more quickly, or else become available more rapidly. This is a classic form of economic functioning. Knowing at the same time that, beyond the costs and the work rate, currency manufacturers are above all experts in security. On this precise issue, the specifications are demanding and take precedence over everything. There is no compromising when it comes to the production of secure products.
P. I. — After production comes the putting into circulation. How does your institution manage the conveyance of these volumes of cash?
J. B. — Our organisation has several channels. By value, more than half of the banknotes in circulation in the euro zone come from the Bundesbank’s coffers. Everyone, or almost everyone, knows that the headquarters of the German Bundesbank are in Frankfurt. On the other hand, people are perhaps less aware that we have nine other registered offices across the whole country. Carefully distributed, these additional locations manage issues that are less centralising than those in Frankfurt. And that’s not all: no less than 35 branches complete the arrangement. Across the country, our institution’s network is thus tight-knit. I emphasize these branches, because putting notes and coins into circulation is part of their mission. For that, they choose private companies that will make the cash available. Consumers can obtain cash from teller machines or over bank counters. They can also get notes directly from stores, either in the form of change or by recourse to the option offered by some stores to take out cash by debiting their current account, in the framework of or independently of a purchase.
P. I. — Which department within your institution is responsible for the fight against counterfeiting?
J. B. — The risk of false currency exists, of course, but at the German Bundesbank we can’t say that it’s something we are being fiercely confronted with. The technological countermeasures — and I’ve just mentioned how highly we value security — partly explain the situation. Our branches also play a crucial role. About once every six weeks, all the notes in circulation pass through their structures. This occurrence means that if there is any counterfeiting, it will be detected very quickly. In such circumstances, the police can be called in right away. Furthermore, we also have a national analysis centre in Mainz where counterfeit notes are examined more closely.
P. I. — For almost a year, the coronavirus has imposed itself on the scene. Does this health crisis have an impact on the way the German Bundesbank functions? Furthermore, have you observed any reticence among the population when it comes to using banknotes?
J. B. — Do we need reminding that this pandemic is an abnormal event? This being the case, the German Bundesbank continues to work normally. The health crisis has thrown into question neither the range of our missions nor the operation of our procedures. When it comes to the fears of the population, we have a duty to inform. Generally speaking, central banks like the Bundesbank conduct a lot of research into the health risks associated with banknotes. Quite soon after the start of the crisis, we held a news conference to make one specific point. It was found, using a scientific approach, that banknotes were not vectors for transmission of the virus. What could have been a legitimate source of fear no longer is one.
P. I. — Since the start of the crisis, have you noticed a decline in the spending of cash?
J. B. — Such spending did decline, but that has nothing to do with the fundamentals of cash usage. It simply stems from the fact that at certain times, stores and many other places remained closed: under such conditions, people don’t have the same latitude for shopping. Consumers have also adapted their behaviour. During this time of pandemic, many purchases are made online — which is reflected in the payment processes. Moreover, this decline doesn’t only concern spending in cash. All the other means of payment have been affected in the same way.
P. I. — Sometimes one wonders whether there are geographical disparities in the use of cash, as determined by region or by whether one lives in the city or the country…
J. B. — You can’t really say there are differences. Whether in Berlin, Hamburg, Munich or Münster, people consume in the same way and their use of payment methods is very similar. Our studies have shown that when it comes to the provision of banknotes, there is no gap between the cities and the country. Even if certain agencies have been closed over the last few years, the number of automatic tellers remains almost unchanged.
P. I. — As new payment methods are developed, the role of cash is fuelling a number of scenarios. Are you among those who see it playing a permanent role, or do you believe in a profound change in the landscape?
J. B. — I don’t really see how cash’s major role could disappear, or even how it could weaken. There are several reasons for that. First, cash is simple to use; it does not require any particular support. This practicality is fundamental because people don’t all have equal access to the new means of payment. Then, the use of cash guarantees respect for privacy. At a time when confidentiality and the protection of personal data are major works-in-progress, this aspect needs to be emphasized. Cash is the only form of currency that establishes a direct link between households and the central bank. As such, it is widely accepted. It excludes any risk of insolvency or cybercriminality. According to our latest study on behaviour with regard to payment methods, nine out of ten Germans want to continue using cash to settle their purchases. For many of them, it is synonymous with stability and personal freedom.
P. I. — Does the German Bundesbank interact with other institutions and other international establishments on all these subjects?
J. B. — Such exchanges are part of our daily life. We collaborate closely with other national banks, in the framework of reciprocal services. That’s the case, notably, with the central banks of Latvia and Lithuania; the volume of banknotes that we are authorized to produce incorporates the quantities needed by these two countries. Generally speaking, we are frequently in touch with our colleagues at other central banks in the Eurosystem when it’s a matter of meeting demand for notes, in one direction or the other, because stocks are exhausted.
P. I. — You have held numerous positions throughout your career, which doesn’t prevent you, at the German Bundesbank, from getting involved in very technical matters. Could it be argued that working on the currency requires both expertise and a more global vision at the same time?
J. B. — I became a senior civil servant after studying at the German equivalent of France’s École Nationale d’Administration. I was lucky enough then to have a variety of experiences. I was even a lawyer during the 2000s. The more solid the training, the more concentrated the career, and the more one can benefit from these advantages when carrying out one’s responsibilities. But what’s essential is the composition of the board of the German Bundesbank: three of its six members are named by the federal government, and three by the lower house of Parliament. That makes for a combination of skills in service of an efficient operation, with a concern for relying on experienced people.