18
Not Addressed
Once printed, the Bank holds contingency stocks of all notes at its premises to avoid...
Conclusion
Once printed, the Bank holds contingency stocks of all notes at its premises to avoid shortages. The Bank sets its minimum contingency stock level by considering potential supply and demand shocks, and benchmarks itself against the practice of other major central banks.45 During 2020 the Bank’s stocks of notes have been nearly double its minimum contingency levels. At the end of March, it held contingency stocks with a value of £39 billion, against its minimum guidance levels of £20.5 billion, and at the end of July, 39 C&AG’s Report, para 4 40 C&AG’s Report, para 3.19 and Figure 12 41 Qq 52, 53; C&AG’s Report, para 3.21 42 Q 51; C&AG’s Report, Figure 12 43 Q 51 44 Qq 52, 53; C&AG’s Report, para 3.20 45 C&AG’s Report, para 3.29 The production and distribution of cash 13 contingency stocks were at £30.4 billion, against minimum levels of £15.6 billion. The cost of producing the stocks held at March 2020 above the minimum contingency levels was around £35 million, before taking account of any fixed costs, such as depreciation of machinery.46
Government Response Summary
The Bank of England's response does not directly address this conclusion, which details the Bank's high contingency stock levels and associated costs. Instead, it commits to reviewing documentation around stock decisions and ensuring factors are clearly recorded, which relates to a different recommendation.
Government Response
Not Addressed
Government Response
Not Addressed
HM Government
Not Addressed
5.1 The Bank of England agrees with the Committee’s recommendation. Target implementation date: December 2021 5.2 The Bank of England needs to hold sizable stocks of printed notes, ready to be issued, to ensure there are sufficient banknotes available to meet public demand, which can change suddenly and by large amounts. For example, demand for banknotes increased by 10% (£7.5 billion) in 2020 relative to the peak in 2019. Having insufficient notes to meet demand would risk significantly undermining the public trust in the currency. 5.3 The Bank of England has a robust process in place for making decisions about how many notes to print and believes its stock levels are appropriate. Decisions regarding stock levels do, however, involve judgement. The range of considerations includes forecasts of the demand for banknotes, the impact of events such as note launches, and the need to ensure value for money by having efficient print runs and making the best use of the Debden site’s print capacity. It is important that how these factors are balanced is clearly documented. Therefore, as recommended by the Committee, the Bank of England will review its documentation around stock decisions and contingency requirements and ensure that it clearly records the main factors contributing to final decisions on print volumes and stocks.
Source
Committee
Public Accounts Committee
Report
Thirtieth Report - The production and distribution of cash
04 Dec 2020
HC 654
Addressee Bodies
HM Treasury
Timeline
Recommendation age
5.6 yrs
Report published
04 Dec 2020