Banks that hold physical currency can return it in exchange for a deposit in their account at the Reserve Bank. This liability is the sum of the ‘physical cash’ on issue. Before COVID-19, currency in circulation was around $ billion. ii)  Settlement accounts  As the bank to the banking system, we hold deposits from settlement banks.
Settlement balances in these accounts are a liability as banks can draw on this cash to make inter-bank payments to each other through a trusted intermediary – the Reserve Bank. There are currently 13 settlement banks in New Zealand out of the 27 banks registered here.4 These deposits with us can be thought of as ‘electronic money’ rather than physical currency.