FedCash^® Services

Keeping "fit" in 2010

January 2010

As part of the Currency Recirculation Policy, the Federal Reserve Banks introduced a Currency Quality Program designed to ensure that the quality of $10 and $20 notes in circulation remains fit for commerce. The monitoring program includes monthly analysis of the quality of currency deposited at the Reserve Banks, an annual sample of currency in circulation and regular communication with depository institutions about their experiences with currency quality.

 

Analyzing currency quality

Monthly monitoring focuses on the number of notes shred for any reason and the number of notes shred because the front of the note is excessively soiled. The results of monitoring have so far indicated that currency quality remains stable and fit for commerce.

The annual sample compares the quality of notes regularly deposited at the Reserve Banks with currency collected from customer deposits to depository institutions that have not been fitness sorted. This comparison ensures the quality of Reserve Bank deposits continues to be a valid proxy for the quality of currency in circulation.

The first sample was conducted in 2007 and each sample has had the same results: Reserve Bank deposits are representative of the quality of circulating currency. In addition, the samples have shown that currency quality has remained stable since the first sample.

Customer feedback is encouraged

Communication with depository institutions has occurred through forums and other informal outreach channels. These discussions have helped the Reserve Banks better understand depository institutions’ cash handling practices and have given them an opportunity to express their opinions about and experiences with currency quality. In addition, complaints lodged with the Reserve Banks and the Customer Contact Centers (CCCs) are monitored every month and followed up on, as necessary.

Refinements help ensure fit currency

Although currency quality has remained stable and fit for commerce, the Reserve Banks make regular adjustments to their currency sorting practices to accommodate the introduction of new designs, such as the $5 note introduced in March 2008, and to refine sorting patterns for notes that have been in circulation for some time.

One such refinement was made for the new $20 design so that its sorting pattern would make finer distinctions among notes based on the amount of soiling on the front of the note. This sorting change allows the Reserve Banks to sort notes in a way that more accurately reflects the established wear patterns of the new $20 design.

In June 2009, the Reserve Banks adjusted the criteria used to determine which notes are considered unfit and are then shred. By using technical knowledge combined with customer feedback, the Reserve Banks determined which note characteristics the adjustment would focus on specifically. This adjustment should improve the average quality of currency paid by the Reserve Banks to depository institutions, which in turn influences the quality of currency in circulation.

The Reserve Banks will continue to monitor currency quality carefully and adjust their sorting practices as new notes are introduced. Because effective monitoring depends on customer feedback, institutions with currency quality complaints are encouraged to contact their local Reserve Bank or designated CCC to provide as much information as possible about the origin and condition of the problem currency.

Testing program for fitness sorting equipment

In addition to monitoring currency quality, the Reserve Banks offer depository institutions opportunities to test their fitness sorting equipment. After the test, the Reserve Banks will provide data that institutions can use to calibrate their equipment to the Reserve Banks’ fitness sorting guidelines. More information about this testing program can be obtained by contacting the Reserve Banks’ Cash Services representatives.

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