Central Bank Study Debunks Myth of Illicit Cash Hoards

calendar iconFeb 1, 2021


Results from a study conducted by the Bundesbank—Germany’s central bank—confirm the idea that people hold cash as storage of value, out of concerns about the security of technical systems, and because ‘cash is one of the most common and simplest means of payment’.

The Bundesbank estimates that banknotes worth around €200 billion—some 20 percent of the total in circulation—are ‘hoarded’, meaning they are in long-term storage held by firms and households. In order to ascertain the whereabouts of these cash reserves, and how they were being used, the Bundesbank commissioned a research survey, the results of which were presented at a digital seminar last week.

According to the findings, in 2018, Germans kept an average of €1,364 in cash either at home, or in a safe deposit box at a bank, with the most favoured notes being €50. These cash reserves are significantly higher than the amount of cash people typically carried in their wallets (around €107), and varied by age and income, with older people, high earners and the self-employed storing the largest amounts.

The driving forces behind the decision to keep physical money were a lack of trust in the reliability and security of technical infrastructure, and the ease of use offered by cash.

The study concludes that, based on the available data, ‘the hypothesis that the German public keeps cash reserves primarily for legitimate purposes cannot be rejected’.

The factors that appear to play a role in the storage of cash are concerns about the security and reliability of technical systems as well as the fact that cash is one of the most common and simplest means of payment.
"Cash Use in GermanyDeutsche Bundesbank

Of the estimated €200 billion in banknotes being stored, the study suggests a large proportion—around €94 billion—can be attributed to households. Given information on these amounts was provided voluntarily, and ‘no links between attitudes towards tax and behaviour were established’, the Bundesbank believes households are likely to be holding cash for legitimate reasons.

As a result, this casts a critical light on suggestions that previously unexplained amounts of hoarded cash in Germany could be used to gauge the extent of tax evasion and criminal activity.
"Cash Use in GermanyDeutsche Bundesbank
Last Updated: Jan 31, 2021