Introduction of New Denominations | The Coining of a Denomination  
Withdrawal and Demonetization  |  Currency Design | Legal Tender

Just over thirty years ago when the decimalization of the island's currency was effected, the resultant denomination structure was the exact conversion equivalent of the existing sterling denomination range.

The underlying factor in this approach was to simplify the decimalization process and make assimilation by the public easier. However, it was also envisaged that the denomination range would be reviewed on a regular basis and rationalized as current trends warrant.

The Bank of Jamaica recognizes that the country needs an appropriate and balanced denominational structure to ensure a currency that is convenient for the public to use and is efficient for the issuing authority. To determine the relevance and appropriateness of the currency structure, the central bank takes into consideration the relative balance of the denominations vis-à-vis the level of prices and expenditure in the economy.

But the central bank does not simply make an arbitrary decision to issue a high denomination note or to issue a coin instead of a note. When the Bank decides to replace a note with a coin or to introduce new denominations, the decision is taken after careful analysis of all pertinent facts.

Replacement policy is critical, as high quality bank notes not only facilitate more efficient handling, but render the passing of counterfeit currency more difficult.

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The Bank of Jamaica subscribes to the internationally accepted principle that the highest value denomination should not represent more than sixty per cent of the value of notes in circulation. This benchmark prevents an over-reliance on a single denomination and ensure the cost-effectiveness of a given denominational structure. It also provides the technical justification for the introduction of a higher denomination banknote. In addition, higher denominations have a slower rate of circulation, longer useful lives and are therefore replaced less frequently than lower denominations.

The $1000 note, which was introduced in 2000, is at present the highest denomination note in circulation in Jamaica.

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Whenever a banknote ceases to be cost-effective relative to the face value of the denomination, the Bank will consider replacing it with a coin of similar face value. In its analysis of the cost-effectiveness of the note, the Bank takes account of both the cost of production and the average useful life of the note relative to the coin.

When the ratio of the annualized cost of issuing a note to that of issuing a coin is greater than 10:1, consideration is given to substituting the coin for a note. This has happened many times over the years since decimalization; the first time being in 1976, when the 50 cent coin replaced the 50 cent note, in 1990 when the $1 coin was introduced and in 1999 when the $10 note was coined.

A note may also be replaced with a coin of similar value when the bank is realigning its denomination structure after the introduction of an higher value note as happened in 1994 when the $5 coin replaced the $5 note following the introduction of the $500 note.

With regard to the design, it is the Bank's policy to use the same subject on the coin as it did on the note it replaces. Any departure from this policy would only occur under exceptional circumstances and with the appropriate justification.

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Sometimes there are denominations of coins, which are not popular with members of the public and this results in very low usage of the particular coin. When this happens or when a coin ceases to be cost-effective, the Bank will consider withdrawing it from circulation.

In determining whether a denomination should be withdrawn, the Bank of Jamaica examines the following indicators:

• Where the demand for the denomination is extremely low, thereby suggesting that it has ceased to be functional, and
• Where the useful life of the denomination becomes extremely short, for example, in the case of a coin a useful life of three years or less in uneconomical. Here the term 'useful life 'refers to the period of time the unit of currency is in active circulation.

However, the one-cent coin will continue to be an exception to this policy as its inclusion in our denominational structure is a legal requirement and it is the base unit for the entire currency structure.

Whenever the central bank withdraws or replaces any denominations of notes or coins, they will normally retain their legal status for at least twelve months. After this period has ended, they will cease to be legal tender; that is, they cannot be used to transact business, and may only be exchanged at the counters of the central bank.

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The legal tender limit for each denomination is specified in the Bank of Jamaica Act, Section 15 (1). Legal tender limit refers to the maximum quantity of each denomination that can be accepted for payment. The Bank conducts periodic reviews as to the appropriateness of the amounts of the various denominations specified by law and recommends changes where it is determined that the current provision is no longer appropriate.

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