STEPHEN HILGER/BLOOMBERG NEWS
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- Key Insight: The central bank will accept pennies from banks and credit unions at all commercial distribution centers after ceasing to accept them at some sites beginning last fall.
- Expert Quote: “This important step directly addresses the concerns we previously raised and will help ensure banks are able to accept and process pennies during the transition away from new penny production.” — Rob Nichols, president and CEO of the ABA.
- What’s at stake: The penny shortage has complicated routine tasks for retailers and consumers such as cashing checks and providing exact change.
The Federal Reserve will restart penny circulation for commercial use at all coin distribution locations after pushback from the banking industry when some commercial coin distribution locations stopped accepting penny deposits late last year.
In mid-January, the central bank will resume accepting penny deposits from banks and credit unions, according to an announcement Thursday from Federal Reserve Financial Services, the Fed’s payment and settlement arm.
“Beginning Jan. 14, the Federal Reserve will resume accepting pennies from banks and credit unions at commercial coin distribution locations providing services under arrangements with the Federal Reserve that were previously suspended,” the agency said in a statement.
Federal Reserve Financial Services said it continues to support penny deposits, but local inventory constraints had limited activity at some coin distribution locations.
“Our monitoring of the flow of penny deposits from financial institutions as these changes take effect will determine whether some subsequent expansion of ordering options for pennies is feasible, given that penny production has ended,” the agency said.
Rob Nichols, president and CEO of the American Bankers Association, applauded the decision, saying it would “strengthen coin circulation nationwide.”
“This important step directly addresses the concerns we previously raised and will help ensure banks are able to accept and process pennies during the transition away from new penny production,” Nichols said in a statement. “By reopening these channels, the Fed is taking practical action that supports consumers, retailers and financial institutions alike.”
Meanwhile, the Federal Reserve also stopped redistributing existing pennies at coin terminals, creating logistical challenges for banks and retailers.
In early October, 41 of the Fed’s 165 coin terminals had stopped handling pennies. By Nov. 20, more than 100 terminals had suspended penny services, including in major cities like New York, Chicago, St. Louis, Dallas and San Francisco.
“Banks can’t get pennies, and that means they can’t supply them to their customers — the retailers — and that puts the retailers in a jam,” Steve Kenneally,…
Read More: Fed to reopen penny deposits after industry outcry
