The fact is that the 1000-franc note is hardly used as a daily means of payment in Switzerland, where the average amount of a transaction is around 60 francs. In our survey, only three percent of respondents reported that they currently have at least a one-thousand-francs-note in their wallet. The low adoption and frequency of use of the one thousand note is also confirmed by a SNB survey. According to the assessment of the respondents, only around five percent regularly withdraw 1000-franc notes and over 98 percent never or rarely use them in their daily activities – even though 35 percent of payments over 1000 francs are still paid in cash.

With increasing age and income, the probability of having a 1000-franc note rises. Their adopters are also more often male and from the Ticino. The 1000-franc note is mainly obtained at bank or post office counters, where it is mainly used for paying bills and for purchases in general. It is often used to buy cars (31% of respondents who use the 1,000-franc note to pay for purchases), electrical appliances (23%) or furnishings and furniture (17%).

In addition to its supposed purpose as an everyday means of payment, it is likely that the 1000-note is primarily used as a store of value. The declining circulation speed of cash for years is an indication of the increased hoarding of cash. However, only 37% of respondents in the SNB survey stated that they store cash at home or in a safe deposit box. Of these people, three-quarters keep less than 1,000 francs and around one-fifth between 1,001 and 5,000 francs. The 1000-franc note is thereby rarely mentioned to be used as a means of storing value (5% of respondents). Consequently, the 1000-franc note plays a marginal role for individuals as a means of preserving value and as a means of payment. But how can their macroeconomic popularity be explained?

On the one hand, it should be noted that the SNB’s figures are based on personal interviews, which do not allow for anonymity and accentuate the problem of social desirability. It must be assumed that the results on the use of cash as a store of value are not truthful and are at a conservative level. There is statistical evidence that the 1000-franc note is used to avoid taxes, although according to the current distribution of wealth this hardly pays off financially for most people. The demand for 1000- franc notes regularly rises sharply in December and falls again in January. According to one study, this is consistent with the observation that Swiss hoard more 1000-franc notes than immigrants do. However, the former are on average older and wealthier than the latter. On the other hand, another study concludes that at the end of 2015 just over 70 percent of the 1000-franc notes were used exclusively for hoarding. This share rose from around 30 percent in the late 1990s to around 60 percent at the turn of the millennium, before rising to over 70 percent after the financial crisis.

As a result, the bulk of the 1,000-franc banknote stock must be hoarded either by (Swiss) institutions – i.e. no private individuals – and/or abroad as a store of value. The former is supported by the fact that they can easily circumvent the SNB’s current negative interest rates thanks to cash hoarding using 1000-franc notes, while the latter is supported by the fact that, according to a study conducted in 1996, around 77 percent of the total Swiss franc holdings were held abroad. This is because we are well aware that the underlying currency is extremely value-preserving over the longer term – i.e. stable in terms of purchasing power – and ultimately resistant to crises.

In summary, the 1000-franc note thus meets different needs for different stakeholders, but its role as a store of value abroad and institutional financial intermediaries are probably the biggest demand drivers. The relaunch of the note will likely be beneficial for these.

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Dr. Tobias Trütsch Managing Director


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