Latvian central bank plans to battle loose change

Take note – story published 1 year and 2 months ago

Every year, Latvian residents lose several million coins of one and two cents. They are dropped on the streets and lying around in drawers and pockets, and sucked up in vacuum cleaners. For this reason, the Latvian central bank (Bank of Latvia) intends to reduce the circulation of these nominals, Latvian Radio reported April 5.

The Bank of Latvia intends to encouragelawmakers to restrict the circulation of one and two cents coins. Zita Zariņa, a council member of the Bank of Latvia, said the bank issues several million one-and-two-cent coins annually.

“10 million one-cent coins and another eight million two-cent coins, which is a huge volume and adds up every year. This means that we lose about that number of coins in Latvia as a whole. We lose track of these coins, or they “sit in” pockets or old purses. This means that this money is not in circulation. It's disappearing somewhere,” Zariņa said.

This is why the Bank of Latvia considers that it is time to reduce the number of coins of one and two cents in circulation

Zariņa said one of the options would be to remove one-and-two-cent coins from circulation altogether, but it could only be done in the whole euro area together. However, the European Commission has not yet come to a common solution. This means that countries can limit this nominal movement by rounding prices at the national level, and some countries have already done so.

“What we now think very seriously at the Bank of Latvia is that we want to offer the legislator to introduce the rounding-up of the final amount of the purchase as a mandatory regulatory provision,” said Zariņa.

This would only apply to cash purchases and the rounding of the final amount would be both up and down.

“For example, if the total purchase amount was EUR 4.97, then rounding would be 4.95,” Zariņa said.

Asked when such a provision could be introduced, the Bank of Latvia spokeswoman said: “It would depend on the legislature and how they would look at it, and how long it would be to approve it, because the amendments would be needed in several laws and regulations, but we ourselves have an initial plan to start this introduction from the middle next year. Perhaps with a transitional period, as there would be a number of technical things to be sorted out.”

Henrik Danusēvičs, Chairman of the Board of the Latvian Traders Association, is skeptical about the Bank of Latvia's intention, saying that the circulation of one and two-cent coins does not currently cause headaches for traders.

"It would be difficult, from an accounting point of view, because accounting programs will result in a loss of precision [..] because the rounding of the goods will result in a price change. This creates additional problems. These talks have been held at the Bank of Latvia for almost decades. In my opinion, either the bank has nothing to do, [..] or if there is a need to take something out of circulation, it must be a uniform requirement in the euro area” Danusēvičs said.

Assessing the impact of lost coins on the environment, Chairman of the board of Zaļā josta (Green Belt) Jānis Lapsa estimated that there is no big threat.

“Of course, the fact that these coins are covered with copper coatings could be harmful in high concentrations, but if we take into account that we have copper heating and drinking water pipes, and we use them every day, then [the benefit] would be more for people, from the point of view of saving and losing, and not so much from an environmental point of view. [..] In addition, we have enough people who use metal detectors to search for coins. But those coins that have disappeared at home, [..] can be considered a testimony to future generations,” said Lapsa.

The Bank of Latvia said that the volume of one and two-cent coins lost each year is measured at tens of tonnes.

The portal has a public initiative on the removal of these coins from circulation since 2020 but just over 500 people have signed it instead of the required 10,000.

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