Welcome Address by Gerry Quinn, Chief Operating Officer, at ICCOS

19 April 2018 Speech

Central Bank of Ireland


17 April 2018

Good morning. I am delighted to have the opportunity to speak at the Europe Cash Cycle Seminar and to welcome you here today.

By way of introduction, my name is Gerry Quinn and I am the Chief Operations Officer of the Central Bank of Ireland. I joined the Bank in May 2010 and my responsibilities include Information Technology, Human Resources, Financial Control, Facilities, and of particular relevance to this seminar responsibility for Currency Issue and Currency Production - so I have a particular interest in the seminar and will be very interested to hear the outcome of the discussion on the wide range of interesting and relevant topics for discussion over the next few days. Indeed we can see from the short survey you have just completed the challenges to be discussed.

Firstly for those of you visiting Ireland for this event, a brief word in relation to the Irish economy.

The crash of the Irish economy between 2008 and 2013 was quite dramatic. In the previous decade, house prices had increased by over 300 per cent and the share of construction in national output had doubled. In 2006, at the height of the boom we built over 90,000 houses in Ireland for a population of 4.5 million. In the same year, the UK with a population of over 60 million just over 200,000 houses were completed. Just as housing was at the centre of the boom, it played a prominent role in the subsequent bust. Housing output fell by over 90 per cent from peak to just over 8,300 completions in 2013. House prices collapsed also and were down by 50 per cent at their low point in 2012. The shock waves from the implosion of the construction sector - non-housing construction also collapsed – spread throughout the domestic economy resulting in a huge loss of employment, output and income.

GDP declined by 7.9 per cent between 2007 and 2013. The domestic side of the economy was hardest hit:

  • Consumer spending fell by 6.4%
  • Investment declined by 27.9%
  • Unemployment increased from a pre-crisis 5% to a peak of 15.9%
  • The economic crash and the related collapse of the banking system had a catastrophic impact on the Public Finances. Following a decade of budget surpluses, the deficit increased enormously, reaching a post–war record for a developed economy of 32% of GDP in 2010. The size of the deficit in that year reflected both the collapse in economy but more particularly the cost of the bank bailout, which amounted to about 17% of 2016 GDP and added €52 billion to the national debt.
  • The scale of the crisis was overwhelming and the Irish authorities, at the end of 2010, called on financial assistance from the IMF, EU and ECB (Troika) in support of a substantial economic adjustment program. With Ireland contributing €17.5 billion, a financial package of €85 billion was put in place to cover the financing of the fiscal deficit, debt maturities and bank recapitalisation costs over 2011-2013, thus providing a window for Ireland to address its problems.
  • Having reached a low point in 2012 with unemployment peaking at close to 16 per cent, the economy has since recorded five consecutive years of growth. Our most recently published macroeconomic forecasts point to growth of about 4.8 per cent this year following GDP growth of 7.8 per cent in 2017.
  • The labour market is the best indicator of the scale of the recovery. During the crisis, employment declined by 364,000 with about half of the job losses accounted for by the construction sector. At the end of last year, 99.5 per cent of the lost jobs had been recovered. Based on our most recent projections, employment should exceed pre-crisis peak levels this year. This is a most welcome development but bearing in mind that the previous peak was over ten years ago what we are looking at here is effectively a lost decade. Unemployment is currently about 6% of the labour force and based on our current forecasts, unemployment will dip below 5% next year.

Therefore, you are visiting Ireland at a time when the Irish economy continues to perform well, and we continue to move beyond the legacy of the financial crisis.

The Central Bank of Ireland works to support the people of Ireland, our economy and financial systems as a member of the European System of Central Banks. In that regard the issue and supply of cash to our society is a core function. We have been working with stakeholders to drive efficiency in the cash cycle, to ensure the cash cycle is effective as a payment system and to achieve resilience in the cash cycle so that the citizens of Ireland and visitors to Ireland can use cash with convenience, confidence and satisfaction.

Later this morning, my colleague Josephine Healy will present to you in detail about the work we have completed in relation to the cash cycle over the past five years, but I would like to take the opportunity to give you some of the highlights of this work and to explain the positive impact this work has made.

Firstly, a word in relation to cash usage in Ireland. While Irish citizens have embraced electronic means of payment, and in particular, new technology with more than one in four card payments being contactless, cash remains an important means of payment in Ireland. I understand our colleagues from the ECB will shortly discuss with you in more detail, the Use of Cash by Households. I hope they will not mind me referencing some of the data from that study to inform you that Ireland had the highest number of cash withdrawals or replenishments per person per week, and were above average for the value of cash withdrawals per week.

I acknowledge that we need to work closely with our stakeholders to bring about any meaningful change. In that regard we established the National Cash Forum as a vehicle to optimise efficiency and effectiveness of the National Cash Cycle in the interest of stakeholders and national competitiveness. With the support of the National Cash Forum, the Central Bank has taken on an oversight role for the cash cycle. We have developed a dedicated Industry Engagement team to allow us to expand our engagement with stakeholders in the cash cycle in order to allow us to work together to deliver on that oversight mandate we have concentrated our efforts in three areas – efficiency, effectiveness and resilience.

To achieve efficiency we introduced Service Level Agreements with customers that promote efficient practices in the relation to the supply and handling of cash. These SLAs have reduced the number of unnecessary movements of cash within the cash cycle as well as encouraging supply within the market, particularly for coin. We have worked with the Irish Government’s Department of Finance to implement a voluntary rounding initiative for cash payments. This has seen the adoption by consumers and retailers of voluntarily rounding transactions to the nearest 5c, and has brought an efficiency to the Cash Cycle by significantly reducing our dependence on low denomination coin. Subsequently we have swapped some of our resulting excess stocks of 1c and 2c coin with other Member States, and this has ensured that this coin is not removed from circulation, but instead used efficiently and effectively by the citizens of other Eurosystem countries.

Working to promote cash as an effective means of payment, we maintain confidence in the quality and integrity of the euro cash in circulation by continuing to meet our legislative and regulatory obligations through the monitoring of compliance by Professional Cash Handlers in relation to EU legislation. We also host the Counterfeit National Analysis Centre and work closely at a local level with our police force (An Garda Síochána) and also with our Eurosystem colleagues in relation to counterfeits.

Our work to build resilience in the cash cycle has resulted in the establishment of a National Cash Contingency Group with the development of a national contingency plan. This work could not have been completed without the key involvement of the cash cycle stakeholders. The group has worked through contingency scenarios in a co-operative and collaborative way, including the actual exit from the market of one of Ireland’s largest Cash in Transit companies in 2016, minimising the impact on the cash cycle and the consumer’s experience.

Indeed we have seen the benefits of the contingency in the recent ‘red’ weather events in Ireland.

So while our work continues to maintain an Irish Cash cycle which is efficient, effective and resilient, I welcome your attendance at this conference to discuss ways of promoting efficiency and security in cash operations, be that within National Central Banks, commercial banks, cash management companies or other institutions. For some people, cash will always remain the preferred choice. As stakeholders in the cash cycle, we should all be concerned about ensuring an efficient and effective payment method, which if achieved, does not compete with electronic payment methods but instead complements it and offers a choice to consumers.

I will conclude by wishing you all an enjoyable few days in Dublin. I hope you find the seminar worthwhile, and that you get an opportunity to enjoy your visit our wonderful city.

Thank you for your attention.