Recommendation 18

Once printed, the Bank holds contingency stocks of all notes at its premises to avoid shortages. The Bank sets its minimum contingency stock level by considering potential supply and demand shocks, and benchmarks itself against the practice of other major central banks.45 During 2020 the Bank’s stocks of notes have been nearly double its minimum contingency levels. At the end of March, it held contingency stocks with a value of £39 billion, against its minimum guidance levels of £20.5 billion, and at the end of July, 39 C&AG’s Report, para 4 40 C&AG’s Report, para 3.19 and Figure 12 41 Qq 52, 53; C&AG’s Report, para 3.21 42 Q 51; C&AG’s Report, Figure 12 43 Q 51 44 Qq 52, 53; C&AG’s Report, para 3.20 45 C&AG’s Report, para 3.29 The production and distribution of cash 13 contingency stocks were at £30.4 billion, against minimum levels of £15.6 billion. The cost of producing the stocks held at March 2020 above the minimum contingency levels was around £35 million, before taking account of any fixed costs, such as depreciation of machinery.46