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50
I
notes in circulation;
and these funds of course provide a
source of revenue for the governments concerned from the interest
earned on the securities that constitute the funds. However, the basis on which numismatic coins have been marketed through the US companies, ie, with royalty payments representing a relatively low proportion of face value, virtually precludes
any attempt to provide substantial backing in these cases.
Those territories for which the discrepancy between face value and royalty receipts is largest are the most prolific suppliers of the coin market so far as our survey is concerned. Had the number (and value) of coins been relatively low it might have been possible to provide adequate cover by pooling the royalty receipts and funds transferred from, say, the ordinary
operating profits of the issuing authority (in those cases
where such an institution exists); but it would be an incongruous
and unsatisfactory use of separate funds to divert them for such
a purpose.
Further, in all but Tuvalu, Belize and Falkland
Islands the shortfall between royalty receipts and the face
value liability is now almost certainly too large for the
diversion of assets from elsewhere to form an adequate backing fund unless this was achieved over an unsatisfactorily long
period. Moreover, the setting aside of even the royalty
payments, let alone additional funds, even though they may
earn interest, may be argued to defeat the object of the
numismatic issues, namely to maximise revenue for the issuing
authority concerned.
The adoption of this course for the future (contractual ties
would in most cases prevent it happening quickly) would imply a
movement to the "Royal Mint" type of contract (see Section 8.4).
This would involve probably both lower royalties (in an
absolute sense) and lower incomes because most or all of the
royalty would have to be invested to constitute the backing
fund. Subject to this, several dependencies would have to
amend their legislation or introduce new legislation in order to comply: in the former category would be Bermuda and the
Solomons, in the latter BVI, the Turks and Caicos and
Gibraltar.
(5) Provide for some cover against redemption, but less than 100%.
This course relies on an assessment of acceptable risk. We
do not have enough evidence from actual redemptions, nor can we