Topic: Mangled bank notes a messy problem for the Bank  (Read 4112 times)
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« on: November 05, 2006, 10:40:38 pm »

Globe and Mail
Sunday, November 05, 2006

— Too many mangled $5, $10 and $20 bills are gumming up the currency-counting machines at the Bank of Canada, prompting an expensive overhaul.

The central bank's geriatric machines run on 1980s-era software and often jam as they try to rapidly read and sort through millions of ratty banknotes.

“We face the challenges of increasing frequency of breakdown and difficulty finding parts for maintenance and repairs,” says an internal document, obtained under the Access to Information Act.

“Moreover, the system software itself is dated, and is more and more difficult to support.  Looking ahead, we expect these challenges to intensify as electronic parts are becoming increasingly difficult to find.”

The Bank of Canada, which introduced high-speed banknote processing in 1981, bought its current machines from a Munich-based manufacturer between 1992 and 1994 for its Toronto and Montreal operations.

But these two centres “were designed for bank note flows consisting primarily of fit bank notes.  Under the existing bank note distribution system, they now receive a much higher percentage of poor quality bank notes,” says an internal audit.

Prior to 1998, Canada's currency distribution system required financial institutions to deposit their surplus banknotes at Bank of Canada regional centres across the country.

The centres would process the notes, culling the worn and damaged ones, and shipping the fit ones to banks and credit unions that had shortages.

But for the last eight years, financial institutions have been allowed to exchange currency directly among themselves, enabling the central bank to close its regional centres while keeping the two high-volume centres in Toronto and Montreal.

Under the old system, only about 20 per cent of the processed currency consisted of ratty, worn notes. Today, financial institutions hang on to their fit notes and generally ship only the worn ones to the central bank — raising to 80 per cent the ratio of unfit notes that now pour into the Toronto and Montreal centres.

At 750 million notes processed annually, that works out to about 600 million poor-quality notes, with folded corners, holes, tears, graffiti and tape repairs.

Canada's $5 and $10 notes typically have a lifespan of between one and two years, while $20 bills last between two and four years. The less common $50 and $100 denominations last longer.

The overworked machines can also spot and remove any counterfeits and older series bills.

The central bank is currently in talks with Giesecke & Devrient America Inc., a subsidiary of the original manufacturer, for a series of upgrades beginning in the spring.

The company supplies currency-counting machines to more than 100 central banks around the world, as well as to commercial institutions and casinos.

The overhaul is expected to add another 15 years to the life of the equipment, which under ideal conditions can handle as many as 40 banknotes a second.

“We'll be able to see less stoppages, less jams, things like that, that occur with unfit notes,” Richard Wall, director of currency production and services, said in an interview.

Mr. Wall declined to provide an estimate of the cost of the upgrade, saying negotiations are still under way for a deal that will likely be signed in the next month.

Giesecke & Devrient America Inc. already has a $1.2-million, 18-month contract to service the existing machines, so a full upgrade is likely to cost many millions more.

The current equipment, for example, is run by computers based on the long-outdated Intel 486 microprocessor and all will have to be replaced.

© Canadian Press
« Last Edit: November 05, 2006, 10:42:38 pm by coinsplus »

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