In the early days of the COVID-19 pandemic, frenzied demand for items such as toilet paper, hand sanitizer and even yeast caused shortages. But there was another item that was quietly being stockpiled in Canadian households: $50 bank notes.

Because of this run on $50s, the Bank of Canada confirmed to BNN Bloomberg that there is a shortage of notes in that denomination at some Canadian bank branches.

A recent staff discussion paper examining the impact of COVID-19 on demand for cash describes how in early March the central bank “became concerned that the bank note supply channel could become compromised during the pandemic.” It increased its note reserves across the Bank Note Distribution System (BNDS), which through its 10 regional centres provide cash to financial institutions across the country.

The Bank of Canada dipped into its own reserves to fill BNDS inventory from 60 per cent capacity to 90 per cent at the onset of the pandemic. By late April, that capacity was down to 70 per cent. The central bank's analysis shows that net note withdrawals from financial institutions in March and April were among the largest since 1998, in terms of frequency, absolute amounts and percentage compared with previous years.

There were several drivers of this increased demand for polymer bills and requests from consumers were one of the most significant. Other factors include financial institutions bulking up inventory to guard against cash delivery disruptions, as well as drawing more from the Bank of Canada to make up for a decrease in cash deposits from retailers affected by lockdown restrictions.

The Canadian Bankers Association declined to comment on the rush on $50s, choosing instead to direct BNN Bloomberg to the Bank of Canada. Representatives for Royal Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia also referred BNN Bloomberg to the central bank when asked how the situation is affecting their clients. Spokespeople for Bank of Montreal and CIBC did not comment for the purposes of this story.   

According to the Bank of Canada’s data, withdrawals were concentrated in major cities: Toronto, Montreal, Calgary and Vancouver. A relatively small number (seven per cent) of Canadians reported difficulties accessing cash during the pandemic, according to the central bank’s 2020 Cash Alternative Survey. The mean withdrawal value from an automated banking machine in 2020 was $195, compared with $140 in 2017.

The reason for pulling out cash wasn’t necessarily to spend it. Most Canadians reported decreasing their cash use and 12 per cent said that a merchant refused to accept cash in a transaction. 

During the lockdown, Metro grocery stores in Ontario and Quebec, Loblaws and Tim Hortons encouraged customers to use contactless payments but stopped short of refusing cash. Meanwhile, cashiers at Longos, Best Buy, Indigo and The Shoe Company refused cash citing safety concerns.

“During the early days of the pandemic, there was so much unknown and an unprecedented amount of fear and uncertainty not just in the economy but the world that people reacted like it was a zombie apocalypse,” said Melissa Leong, author of Happy Go Money. “There was distrust of everything including institutions and that resulted in behaviour such as hoarding cash which is a tangible symbol of safety and security.”

In the U.S., the coronavirus crisis caused a nationwide coin shortage, raising concerns about the availability of pennies, nickels, dimes and quarters. The Federal Reserve issued a statement on June 11 saying that “the COVID-19 pandemic has significantly disrupted the supply chain and normal circulation patterns for U.S. coin.” It goes on to say that in the past few months, coin deposits to the Fed have “declined significantly” as the Mint’s production of coin decreased “due to measures put in place to protect its employees.”

In an email to BNN Bloomberg, Bank of Canada spokesperson Amélie Ferron-Craig described the $50 note shortage as “temporary.” She said new notes will be produced as part of “regular stock replenishment” which is expected by the end of the summer.