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. Last Updated: 07/27/2016

Fee for Dollar Change Called Justified

Addressing concerns that the introduction of a new $100 bill will lead to Russian banks gouging customers swapping old notes, a U.S. Embassy official Wednesday said banks would be justified in charging a small commission to cover costs associated with the changeover.


Officials also announced the intensification of a publicity campaign surrounding the impending launch of the new bill, and said imports of $50 bills are on the rise as banks seek to minimize any possible currency chaos


"The question we've seen in the press is 'Is this fee justified?'" said William Murden, U.S. Treasury representative at the American Embassy, referring to a 2 percent maximum commission agreed by a group of leading Russian banks. "Our conclusion is yes," he told a press conference.


A Treasury Department statement calls a 1 to 2 percent commission "reasonable" to cover bank fees, transportation, security and training costs, plus a small profit, on shipments of the new $100 notes into Russia. These costs are currently reflected in the approximate 1 percent spread between dollar buying and selling rates at exchange points, Murden said.


Murden gave no date for the launch of the new note. Bills will arrive sometime in February or March, he said, with two weeks warning before their official introduction.


Such an effort is in response to widespread fears among Russians, burned by past experiences with devalued rubles, that the new note will lose its value. U.S. officials have repeatedly stressed that the old notes will forever remain legal tender.


Despite such assurances, Russian banks seem to be hedging their bets.


Imports of $50 bills into Russia increased two to three times between November -- when a change in importing habits was first noticed -- and December 1995, Murden told The Moscow Times. About $100 million a night is thought to be flown into the country.


Overall, $50 bills make up between 9 to 10 percent of Russia's total dollar mass, said Murden. According to Central Bank estimates, Russians hold between $15 and $20 billion -- the vast majority in $100 bills.


As the changeover draws near, it is still unclear whether banks will start charging commissions for converting the old notes into rubles.


Sergei Ababkov, a spokesman for Most-Bank, said Wednesday the bank would probably charge a 1.5 percent commission on ruble exchanges involving old notes to cover transaction costs. Tveruniversalbank, though, has decided that no commission will be charged on ruble exchanges with old dollar bills, said spokesman Pyotr Rushailo. "There's no need to," he said.


To stave off a popular frenzy over the bills, the U.S. Treasury has undertaken a massive education program in Russia, the largest holder of dollar bills outside the United States.


The $1 million program will include a national advertising campaign, an information center, videos for Central Bank training courses and millions of pieces of educational literature to be distributed nationwide. Weekly press briefings will start Feb. 13.


The program is funded by earnings on securities held by the U.S. Federal Reserve, and not with taxpayer money, Murden said.


Calls to the Treasury Information Center -- set up to field questions on the new bills -- have averaged 150 per day since the center's opening in mid-January, Murden said. Most calls have been from Moscow, but Murden said the center has also received calls from as far afield as Vladivostok. The treasury also plans to set up information telephone numbers in a series of regional towns.


For its part, the Central Bank has pledged to distribute educational material, agree with banks on standards for handling the bills and work towards eliminating or reducing the current 0.15 percent customs fee on banknote shipments.