Coin Shortage Linked to Supply Chain Disruption

Marshfield (OnFocus) – Effective June 15, 2020, the Federal Reserve issued a temporary coin order allocation in all Reserve Bank offices and Federal Reserve coin distribution locations.

Locally, businesses including big box stores such as Wal-Mart, have been experiencing a coin shortage.

“Coins aren’t gone, but lobbies are closed so coin traffic isn’t taking place because there hasn’t been a safe way to take coin,” explained David Murphy, VP of Finance & Risk at MMCCU. “This is something that we’ve been thinking about as a financial institution.” 

The Federal Reserve issued a statement about the coin shortage in June.

“The COVID‐19 pandemic has significantly disrupted the supply chain and normal circulation patterns for U.S. coin,” they said in the statement. “In the past few months, coin deposits from depository institutions to the Federal Reserve have declined significantly and the U.S. Mint’s production of coin also decreased due to measures put in place to protect its employees.”

Federal Reserve coin orders from depository institutions have begun to increase as regions reopen, resulting in the Federal Reserve’s coin inventory being reduced to below normal levels.

“While the U.S. Mint is the issuing authority for coin, the Federal Reserve manages coin inventory and its distribution to depository institutions (including commercial banks, community banks, credit unions and thrifts) through Reserve Bank cash operations and offsite locations across the country operated by Federal Reserve vendors,” they added.

The Federal Reserve is working on several fronts to mitigate the effects of low coin inventories. This includes managing the allocation of existing Fed inventories, working with the Mint, as issuing authority, to minimize coin supply constraints and maximize coin production capacity, and encouraging depository institutions to order only the coin they need to meet near‐term customer demand.

Depository institutions also can help replenish inventories by removing barriers to consumer deposits of loose and rolled coins.

“Although the Federal Reserve is confident that the coin inventory issues will resolve once the economy opens more broadly and the coin supply chain returns to normal circulation patterns, we recognize that these measures alone will not be enough to resolve near‐term issues,” they said.

Therefore, to ensure a fair and equitable distribution of existing coin inventory to all depository institutions, effective June 15, the Federal Reserve Banks and their coin distribution locations began to allocate available supplies of pennies, nickels, dimes, and quarters to depository institutions as a temporary measure.

“The temporary coin allocation methodology is based on historical order volume by coin denomination and depository institution endpoint, and current U.S. Mint production levels,” they said. “Order limits are unique by coin denomination and are the same across all Federal Reserve coin distribution locations. Limits will be reviewed and potentially revised based on national receipt levels, inventories, and Mint production.”

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