SNB Shouldn’t Scrap Its Biggest Bill, Former President Roth Saysby
Former SNB President Roth opinion piece published by BCGE
ECB is phasing out 500-euro note because of criminal links
Switzerland should be wary of “well-meaning” international pressure to withdraw its 1,000-franc ($1,007) note, according to the central bank’s former president.
Concern has mounted globally that big banknotes make life easier for criminals and should therefore be scrapped. While officials in the euro area have announced plans to phase out their most valuable note, the Swiss National Bank has stated its intent to retain its most valuable bill.
“It is an illusion to think that criminality or tax evasion will be reduced by withdrawing high-denomination banknotes, because other means of settlement or alternative forms of dissimulation will be found,” former SNB President Jean-Pierre Roth wrote in an opinion piece published on the website of BCGE, where he now is chairman. “We should, however, be wary of the risk of significant political pressure being brought to bear on the National Bank for it to follow the ECB’s example.”
The European Central Bank will stop producing its 500-euro ($560) note from the end of 2018, a decision that met with sharp opposition in Germany, the region’s biggest economy. Proponents of the move argue that making wads of cash more cumbersome would render life harder for criminals, terrorists, tax evaders and corrupt officials, while critics say cash itself risks coming under threat at a time when negative interest rates have the potential to undermine savers.
Roth noted that Switzerland, which all but bowed to international pressure and virtually gave up banking secrecy for offshore accounts, risked incurring sharp criticism again over the 1,000-franc bill. Charles Goodhart, a former Bank of England policy maker and an authority on money supply, told a conference last year that the SNB was “absolutely shameless” in its issuance of high-denomination notes.
“We could even ask ourselves whether the real reason driving those who advocate the withdrawal of high-denomination banknotes is simply the desire to reinforce the financial repression already in force, which is penalizing savers by forcing them to endure negative interest rates,” Roth said.