Martin Schlegel: Introductory remarks, Swiss National news conference

Introductory remarks by Mr Martin Schlegel, Vice Chairman of the Governing Board of the Swiss National Bank, at the Media News Conference of the Swiss National Bank, Berne, 15 December 2022.

Central bank speech  | 
19 December 2022
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I am pleased to give you an assessment of current developments with regard to cash. Since June, after many years of strong growth, we have seen a significant decline in banknote circulation. To contextualise this decline of approximately 10%, let me first say a few words about the above-average growth in recent years.

In the period since the 2008 financial crisis, the value of banknotes in circulation grew, on average, more than twice as fast as in the two preceding decades – by around 6% instead of 2.5% per year (cf. chart 1). Between mid-2008 and June 2022, the value of banknotes in circulation more than doubled overall, from around CHF 41 billion to CHF 91 billion. This sharp increase was driven in particular by the desire of companies and private individuals to hold cash as a store of value. There was particularly strong demand for the large denominations, such as the 1000-franc and 200-franc notes (cf. chart 2).

We see two reasons for the increased demand for cash as a store of value over the last 15 years or so. First, there were multiple periods of high uncertainty, notably the financial crisis and the coronavirus pandemic. Cash tends to be popular as a secure store of value during such times. Second, the general decline in interest rates – and negative interest rates in particular – also contributed to the increased demand for cash. When interest rates are low or negative, it is relatively attractive to hold cash (as opposed to bank deposits, for example) as a store of value.