BUSINESS IN BANKNOTES AND COINS ENTERS A NEW DIMENSION
More than 190 million pieces of Bulgarian banknotes worth a total of BGN4.5BN are constantly in the hands of citizens and traders. It is not certain how much of them are kept under the mattresses or in jars but no matter what that size is, the everyday turnover of levs changing hands is really huge. In the evening, a considerable part of that money enters the public and firms' safety vaults and in the morning goes out of them again. And on Fridays, the collection vehicles with the companies' cash depart for the regional branches of banks where they are kept during the weekend and on Monday morning take the road back.
Banks themselves do not like to keep big quantities of cash for two reasons. The first one is the risk of robbery, and the second - that money in cash does not bring yields. On the contrary, its maintenance is connected with costs. Therefore, credit institutions plan very carefully the money they need for effecting payments with clients who draw cash from them. On the background of the aggregate cash amount which is circulated by the population, the number of banknotes in banks is simply trifling - about 28 million pieces, worth BGN629.5MN. Half of that money is in the ATMs, and the rest - in bank branches.
As of the beginning of April the entire activity regarding the safe-keeping, packaging, counting, and transportation of money, is subordinated to BNB's new Ordinance No 18. The document also sets the rules for replacement of damaged banknotes and confiscation of faked money. On April 6 BNB's Governing Board approved the central bank's general terms for servicing clients with banknotes and coins and a respective tariff for those services. Commercial banks are already obliged to accept from citizens and firms all damaged coins and banknotes and replace them with new ones against respective fees. For instance,
for replacement of damaged levs and stotinkas
United Bulgarian Bank (UBB) charges 10% of their value. Moreover, if 75% of a banknote's surface can be recovered, clients are entitled to get 75% of the nominal value before charging the fee.
A check of a dubious banknote costs BGN1. Counting coins and banknotes without depositing them costs 5% of the value of handled money.
For counting banknotes or coins over BGN100 BULBANK charges 1.5% of the amount. However, the bank's tariff has not included yet the replacement of damaged levs service.
HVB Bank Biochim, which is within the UniCredit Group together with BULBANK and HEBROSBANK, accepts Bulgarian levs of a poor quality without charging anything, and charges 2% of the money's value if it is foreign currency. For checking suspicious levs the credit institution charges BGN0.25 per banknote, and the fee is 10 euro cents per banknote for checking forex.
Post Bank changes citizens' damaged levs free of charge and the fee for foreign currency is 5% of the amount but not less than EUR2 or USD2. Clients pay BGN1 for checking a banknote and 1% of the amount for counting and changing money. Exchange of coins for banknotes costs 5% of the amount.
Citizens are already entirely deprived of access to BNB for receiving and handing over money.
The central bank works only with credit institutions
ministries and state departments, municipalities, and the Bank Deposit Insurance Fund.
The BNB does not charge anything from credit institutions for accepting and delivering a valuable consignment of banknotes worth up to BGN1,000. The same holds true about consignments of coins worth up to BGN100. When the banknotes in the consignment are worth more than BGN1,000 the central bank charges 0.3% of the difference but not less than BGN0.50. The fee for consignments of coins is 0.8%, but not less than BGN1. When the money in a valuable consignment is not classified according to the nominal value, the respective fees are 0.5% for banknotes and 0.9% for coins. All these rules hold true even for packages of damages banknotes. The word package may annoy some of the readers, but it is not mentioned arbitrarily. This is the exact term in the document about BNB's general conditions for servicing clients with banknotes and coins. What is the meaning behind it?
The packages of banknotes and coins
are plastic or textile sacks with double inside seams that can endure about 20 kg. They hold packs of ten wads, each of 100 pieces of banknotes of one and the same nominal value - BGN2, BGN5, BGN10, BGN20 or BGN50. Only the packs of BGN100 banknotes may contain five wads of 100 pieces of banknotes. When the banknotes are damaged the standard contents of packages should be a pack of banknotes of one and the same nominal value. The central bank accepts also non-standard packages of damaged coins, provided that the packs in them are not more than ten. However, a special fee is charged in that case. Regarding coins the standard contents of one package is 1,000 pieces of stotinkas of one and the same nominal value, distributed in twenty rouleaus, each of 50 coins. The same holds true about BGN1 coins.
Upon their arrival at the BNB the valuable consignments of banknotes are checked and afterwards enter the so-called reserve cash storage depot of the central bank and the credit institutions' accounts with the BNB are endorsed by them. In case a damaged or faked banknote is found, or a banknote of a different nominal value, the central bank deducts its worth from the amount by which the bank's account is endorsed. Moreover, the BNB charges
It was them that caused tension between the BNB and credit institutions during the last two or three months. Bank managers protested that by those fees the central bank was practically imposing a second punishment for one and the same mistake (the deduction of the amount being the first one). However, experts from BNB's Issue department counter-argued that when the contents of a valuable consignment did not correspond to the description of the accompanying documents, it should be once again handled at the central bank, which is an additional service. Ultimately, the BNB and the credit institutions reached a mutual agreement about the specific sizes of additional fees. When the banknotes or coins in the packs are not separated according to the set terms in BNB's general conditions, the central bank charges 0.05% of the aggregate amount of the money within the valuable consignment, but not less than BGN10. The fee for unpacked banknotes is 0.1% of the valuable consignment's worth. If BNB's experts find faked money in the package the fee is BGN5 for each counterfeit banknote or coin. Special fees of BGN5 will be also paid by banks if they deny or change their
orders for drawing or depositing banknotes and coins
or for the purchase and sale of euro. A strict order has been set for that, too. Even the biggest banks are not allowed to order deliveries from the BNB or sell to it banknotes and coins at their whim. A special electronic order is needed for that. It is sent over a special info channel - the so-called VNP net of the BNB. Each order is assigned a special 16-digits code, containing information about the bank, the date and kind of the operation - purchase, sale, etc., the bank's code and BNB's branch with which the deal will be closed. Special rules have been set for letting the collection vehicles of credit institutions to the loading platforms of BNB's money storage depots. They are presently located in a specially guarded building of the central bank's printing house. In order to ensure a higher level of security, however, the BNB intends to build a self-contained cash storage depot, to be built just opposite the central bank's printing house. According to the project, that will be a 3-storey building of 7,000 sq m built-up area and another 2,000 sq m of underground and overground garages. BNB's Governing Board has already invited a tender for a preliminary design of the cash storage depot. The winner is to be known by July 15, 2006.
As a whole, the handling, transportation and keeping of banknotes and coins is quite a labour-consuming and expensive work which banks are obliged to carry out at a very high professional level as trust in them depends on it to a considerable extent. It's a fact that only big credit institutions with a well-developed branch network may afford good-quality cash collection offices. Some of them have even set up their own subsidiaries for handling and transportation of banknotes and coins. However, the stance of most managers is that maintaining such structures is quite expensive. Therefore, the Association of Commercial Banks is considering the possibility for the establishment of a specialized money collection company, in which all credit institutions would be shareholders, like in Bankservice and Borika. The idea is that the company undertakes the unprofitable cash collection activities and the banks share between themselves the respective expanses. That will be practically the finale of the business in cash, stipulated by Ordinance No 18. These changes are reforming one of the most sensible spheres of the domestic financial sector - operations with money in cash.