Declining cash volumes, exacerbated by the global pandemic, have caused inefficiencies that are putting the UK cash infrastructure under pressure, creating risks of disruption to consumers and businesses who need access to cash.

The Bank says the current system was designed for a world with higher cash usage and that rationalisation is necessary to ensure the future viability of the wholesale distribution system.

The Wholesale Cash Distribution system sits between the Bank, the Royal Mint, and commercial issuers issuing new banknotes and those notes/coins being sent to individual bank branches, ATMs and retailers.

With cash processing volumes in the UK dropping by 50% since 2016, the Government announced its intention to give the Bank of England new powers to ensure the future effectiveness, resilience, and sustainability of the wholesale cash infrastructure.

These new powers are contained in the Financial Services and Markets Bill, which is currently going through Parliament. The Bill also contains complementary provisions on retail cash access services which will be under the Financial Conduct Authority’s (FCA) remit.

Under the new supervisory regime, firms involved in the purchasing and taking delivery of new notes/coin; sorting, storing and circulation of notes/coin; and withdrawal of unfit notes/coin from circulation. will be expected to share information with the Bank at regular intervals, as well as on an ad-hoc basis

In addition, should a systemic entity emerge in the wholesale cash distribution market, it will be subject to a prudential supervisory regime, similar to the one that currently applies to systemic payment systems.