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Thursday 21st June 2007
Bank of England governor Mervyn King has criticised the lack of £5 notes made available to consumers.
In a Mansion House speech Mr King said Britain's central bank had an "ample supply" of new £5 notes waiting to be used, but suggested that the country's commercial banks were shunning them for cost reasons.
He told City bosses that it was "more economical" for banks to stock cash machines with £10 and £20 notes and lamented the fact that few ATMs distributed £5 notes.
As a result the Bank of England chief warned that the condition of £5 notes in existing circulation had been affected, with many more notes now "noticeably soiled and scruffy".
Mr King revealed that the average lifetime of a £5 note had doubled over the past decade.
Revealing his intention to seek discussions with Britain's banks over the issue, he argued: "There is a need for an adequate supply of low denomination notes that can be used for small transactions where cash is the predominant means of payment.
"Such mutual convenience is a public good, and may not correspond to the private interest of commercial banks," he added.
Mr King indicated that banks might need to be given different incentives to encourage them to accept different denomination notes from the Bank of England.
He also suggested that new arrangements could be sought to increase the availability of £5 notes to retailers and to improve the durability of them.
Responding to his comments the British Bankers Association (BBA) said that it would be happy to discuss the issue.
But BBA chief executive Angela Knight told BBC Radio Five Live that it was "safer" for banks to stock higher denomination notes because the average amount withdrawn from cash machines was £100.
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