Central bank stockpiles cash for Y2K
$23-billion reserve to be compiled in case of a run
MARIAN STINSON
The Globe and Mail
Friday, October 15, 1999
Toronto -- The Bank of Canada is laying on four times the amount of money it normally keeps on hand -- a staggering $23-billion -- just in case Y2K computer glitches spark a run on cash at year's end.
The central bank is also setting up a special command post to make sure communications run smoothly with the chartered banks at the dawn of the year 2000.
Part of the central bank's extra cash will be old notes waiting to be destroyed, and some will come from an advance printing of next year's supply. The amount of bank notes, or reserves, normally held by the central bank is about 20 per cent of the amount in circulation.
However, people are expected to take out extra cash because they are worried some computers may have trouble dealing with the year 2000, or Y2K, if they read 2000 as 00 and interpret it as 1900, causing chaos in the financial system.
As the country's central bank, the Bank of Canada issues all bank notes and is responsible for the smooth operation of the entire payment system.
Bonnie Schwab, chief of the banking operations department at the Bank of Canada, issued a statement last night saying that no serious cash famine is likely at the end of the year. "Nonetheless, it is important that the Canadians be confident that bank notes will be available to meet their needs," she said.
Scott Mullin, a vice-president of the Bank of Montreal, said the planned cash stockpile reflects the personality of Gordon Thiessen, head of the central bank.
"He's a prudent guy. Central bank governors are, by definition, conservative and want to ensure that all prudent measures have been taken to ensure that Canada's financial system is ready for this or any other situation."
Consumers and businesses will be able to continue to use other methods of payment, such as debit and credit cards and cheques, so the need for extra cash for the century-changeover weekend should not be any greater than for any other long weekend.
The bulk of the reserves will be held by the Bank of Canada in Toronto, Montreal and Ottawa. A portion will be held by financial institutions. Security carriers will be available to transport bank notes where they are needed.
On the Saturday, Sunday and Monday of the long weekend -- Jan. 1, 2000, falls on the Saturday -- central bank staff will be on duty. They will be in regular communication with the chartered banks and the Canadian Bankers Association throughout the weekend.
There will also be an alternate command centre with its own power generator.
In the event of major disruptions, such as an electrical outage for the first week of January, the central bank is prepared to pare back its operations to the essential tasks needed by the financial system.
The central bank has been working with the chartered banks and other lenders to ensure automated teller machines will be well serviced and supplied with cash. The measures include more frequent restocking, and reprogramming machines so higher denominations of bills can be dispensed.
Besides planning the extra distribution measures, the chartered banks are working co-operatively to pass cash throughout the system. The central bank is boosting liquidity -- cash flow -- by setting up a special line of credit to make sure chartered banks and other lenders have enough cash, from Nov. 1 through the end of March.
CANADIAN BANK NOTES IN CIRCULATION (1998)
$1 $160,370,000
$2 $232,613,000
$5 $774,833,000
$10 $1,014,074,000
$20 $9,569,673,000
$25 $46,000
$50 $4,210,957,000
$100 $13,252,651,000
$500 $23,000
$1,000 $3,409,390,000
TOTAL $32,624,630,000
Source: Statistics Canada
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