4.2 Banknotes and cash supply

One of the basic functions of the Bank of Finland is to maintain the cash supply and issue banknotes in Finland. The Bank of Finland acts in cooperation with other parties involved in cash supply to ensure that banknotes are available, genuine and in good condition. In recent years the importance of this cooperation has increased.

The COVID-19 pandemic reduced the use of cash substantially in 2020 and 2021, but in early 2022 its use picked up as the pandemic eased and travel and tourism revived.

Cash use then grew more quickly than expected following Russia’s invasion of Ukraine at the end of February, as people wanted to prepare for possible disruptions to payment systems by putting aside extra cash.

Demand for cash increased in 2022

In March 2022, EUR 253 million more in banknotes was issued than in February. In May too, the issue of banknotes increased by EUR 193 million compared to the previous month. Chart 14 shows the figures for banknotes issued by the Bank of Finland, and Chart 15 the difference between the orders and returns of banknotes from and to the Bank of Finland in different years.

In the early part of the year, there was considerable discussion about the ‘home emergency kit’ for payments and generally about preparedness for unexpected events. The Bank of Finland recommends that households should keep enough cash to last them for up to 72 hours in the event of payment system disruptions.

The rises in key European Central Bank (ECB) interest rates in the summer and autumn were also reflected briefly as increases in the number of banknotes returned to the Bank of Finland (Chart 16).

Cash payments in Finland are few

With the outbreak of the COVID-19 pandemic in 2020, the use of cash – already in decline – decreased even further and undermined the profitability of cash services.

According to a consumer survey conducted by the Bank of Finland in March 2022, the availability of cash had declined, and consumers felt that the problem had worsened, especially at bank branches. At the same time, Russia’s war nevertheless highlighted the importance of cash in preparing for a crisis. The Bank’s March 2022 consumer survey revealed that approximately 7% of respondents use cash as a means of payment for groceries. The ECB’s study on the payment attitudes of consumers in the euro area (SPACE) gives a similar result.

The Bank of Finland also published a study on the costs of retail payments. The study suggests that payment by card was the lowest cost payment method: in 2018 a single card payment cost society around 15 cents, a cash payment 22 cents and a bank transfer 25 cents.

Bank of Finland wishes to safeguard cash services

In March 2022, the Bank of Finland proposed a legislative initiative for securing a sufficient level of cash services.

In 2018, the Bank published its guiding principles for the maintenance of cash services. The aim of the regulatory initiative is to achieve a level of service that matches the guiding principles on cash and over the longer term as well.

The Bank of Finland considers it appropriate to initiate a regulatory project for defining the level of cash services, the availability of cash and cash deposits and the acceptance of cash as a means of payment.

The regulation should enter into force before services deteriorate to below a level that is reasonable for society.

The status of cash is also a subject of debate within the Eurosystem. The Euro Legal Tender Expert Group (ELTEG) examined the situation within the entire euro area and published a final report on the matter. According to the report, most countries that use the euro have regulation in place for defining mandatorily the legal tender status of euro cash.

Newly amended Coins Act now reflects EU law

Under the Coins Act (216/1998) (in Finnish), in Finland the State has the right to mint coins and the coins are issued by the Bank of Finland. Damaged coins may not be used as a means of payment and need not be accepted as payment.

The Bank of Finland is obliged to accept and exchange damaged coins if it can be established with certainty that they are genuine.

The updated version of the Act entered into force in November 2022 to reflect the content of the Regulation of the European Parliament and of the Council on the matter.

The amended Act includes a provision that the Bank of Finland can refuse reimbursement of coins that have been altered either deliberately or by a process.

Furthermore, the Bank of Finland may refuse to accept coins where the acceptance or processing of them constitutes a health risk for handlers or a submission fails to meet packaging and labelling standards.

Use of counterfeit euro cash at an all-time low in 2022

In 2022, there were fewer counterfeit euro banknotes detected in circulation in Finland and the euro area than ever before – for the second year running.

A total of 469 counterfeit banknotes were discovered in Finland in 2022. The number of counterfeit coins found was 1,826. (Chart 17). Most common among the counterfeits were 20 euro notes, of which there were 229.

After a two-year break, seminars on banknotes were organised by the Bank of Finland for professional cash handlers and held in Helsinki and Lappeenranta.

Furthermore, at the Bank of Finland Open Doors event at the end of September and beginning of October, visitors had an opportunity to inspect counterfeit banknotes and compare them with genuine notes.