The Reserve Bank of New Zealand (RBNZ) halted cash repurchases from banks last December for the first time outside a crisis, coinciding with historically low bank cash reserves and shifts in cash-in-transit services. The decision aimed to mitigate risks to public cash access during supply chain changes, including potential crises like natural disasters. While the RBNZ resumed buying undamaged $100 notes in May, it continued repurchasing damaged currency throughout.
Assistant Governor Karen Silk explained the 'cash paradox': despite banks holding record-low cash levels, overall cash in circulation has risen. This trend may reflect increased public demand for cash as a crisis backstop, as seen after Cyclone Gabrielle and other disasters. The National Emergency Management Agency recommends keeping cash for emergencies, highlighting its role in power outages affecting digital payments.
Concerns about cash use in criminal activities were raised, but the RBNZ cannot quantify this impact. Silk noted criminals also use digital payment methods, including Bitcoin. Public surveys show cash remains valued for legitimate transactions, especially in rural areas.
The RBNZ proposed a cash service standard in February, estimating annual costs of $104 million for banks. While banks prefer a voluntary approach, the RBNZ seeks agreement to maintain adequate cash access. Silk emphasized flexibility in meeting customer needs without dictating specific solutions.