By NEIL HARTNELL
Tribune Business Editor
The Central Bank yesterday pledged to work with the government's consumer protection agencies to determine if the Bahamian one-cent coin's phase-out will spark more regulations.
John Rolle, its governor, said it had already "alerted" the relevant entities to the issue of whether detailed rules are required for the "rounding" that will be necessary with cash-based transactions after the one-cent ceases to be legal tender come year-end 2020.
For cash transactions that do not end in a zero or five, the Central Bank is proposing a mechanism whereby the value is "rounded" up or down to one of these three figures in the absence of the one-cent. Electronic transactions will not be impacted by this.
Mr Rolle, in launching the public education campaign surrounding the Central Bank's plans to end the one-cent coin's use as legal tender by end-2020, said it had yet to receive any "indicative feedback" from the Government's consumer protection agencies on whether a regulatory regime stipulating a "harmonised approach" to "rounding" is necessary.
Pointing out that any regulations would have to be enacted before year-end 2020, the Central Bank governor said: "We will be working with the minister responsible for consumer affairs [Dion Foulkes] as to whether any regulations are needed around the harmonised approach businesses should take around rounding.
"We've alerted them to the process. The way we've planned it, we're going to look at, first, whether it's necessary. We've alerted them to that possibility and, if they're required, they have to be in place before the end of 2020.
"We've not got any feedback indicative of how they view the process. We don't anticipate any issues there. It's The Bahamas looking at how the process takes place in other countries, and the extent to which we may need other legal guidelines."
The two most relevant government agencies will be the Price Control Commission and Consumer Protection Commission, both of which come under Mr Foulkes's ministry and are touched by the fall-out for both Bahamian businesses and consumers from the one-cent's end.
The Central Bank's current "rounding" guidelines for cash payments, where a consumer bill does not end in zero or five cents, stipulate that transactions ending in the digits one or two will be rounded to zero; those ending in three, four, six and seven will be rounded to five; and those ending in eight or nine rounded up to 10.
Mr Rolle again reiterated that the one-cent coin's end, and the Central Bank's "rounding" approach, will not result in price increases. "We don't anticipate at any level that removing the penny from circulation will result in higher prices. That's not the result," he said.
He added that "the Central Bank has begun the process of removing the one-cent coin from circulation" by stopping its production, with its issuance to the commercial banks set to cease by end-January 2020. That date coincides with when it begins to withdraw the 54 year-old one cent from circulation.
Mr Rolle said a notice in the Government Gazette, stating that one-cent coins were no longer legal tender, would be published prior to this taking effect by end-December 2020. Consumers will be able to redeem their one-cent coins until end-June 2021.
The Central Bank governor said "businesses can decide at any point when to stop accepting pennies", although they have to develop "appropriate in-store signage" to show when this will take effect and how "rounding" works. The "rounding" should take place on the total bill, with existing price points staying the same, while the amount of VAT levied is also not impacted.
"There are lots of reasons this process is being embarked upon," Mr Rolle said. "The key one is that it is not economically or financially viable to keep producing the coin."
He pointed out that the costs of producing the one-cent coin were 4 percent greater than its "face value", and totalled nearly $500,000 per year. "That's material if you look at it over a five to 10-year period," the Central Bank governor said.
With 700 million one-cent coins, worth a collective $7m, having been issued since 1966, Mr Rolle added: "At least half the coins we issued cumulatively over the years, we don't expect anyone knows where they are. We believe half of those can no longer be found. They are already lost.
"On a daily basis persons discard the pennies they receive. Eight percent of those coins are discarded immediately that they are received at the cash register." Persons seeking to redeem their one-cent coins before end-June 2021 can do so at banks and credit unions, and through Post Office branches in the Family Islands.
So-called "redemption machines" will also be placed in grocery stores and other "high-trafficked" locations in New Providence and Grand Bahama, where consumers can deposit their coins, see them sorted and receive a credit for Bahamian currency "only".
Mr Rolle emphasised that foreign coins are not part of the redemption process, and said he expected the circulation of one cent US coins to also phase out alongside the local changes.
He added that the one-cent's end as legal tender had no association with the Central Bank's drive to encourage Bahamians to move to electronic payments as their primary transaction method.
"There's no deliberate effort to use this to get Bahamians to move to electronic banking," Mr Rolle said. "This is a reform that would be sensible even if we remain a very high cash-based economy or went more in the direction of using cash."
The one-cent's end as legal tender while likely cause something of a culture shock, especially among elder Bahamians accustomed to using it. Mr Rolle said he "did not expect" the Central Bank's consultation paper on the issue, already released, to have "gained the level of attention" it had done.
The main concerns had surrounded the impact on prices, but Mr Rolle did not anticipate this would create any "universal" ripples through society. He added that the Central Bank would "most likely find some other benefit from the metal" in withdrawn one-cent coins, with recycling and even the material's export from The Bahamas among the possibilities.
While he would "not rule out" the potential issuance of $1 and $2 coins, the Central Bank governor said the durability of bills such as the $1 had "doubled" as a result of recent changes.