EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 16 July 2014 
on the competence for coin issuance 
(CON/2014/56) 
 
Introduction and legal basis 
On 20 May 2014, the European Central Bank (ECB) r eceived a request from the Minister of Finance of 
the Republic of Cyprus for an opinion on a draft la w amending the Central Bank of Cyprus Laws of 2002 
to 20141 (hereinafter the ‘draft law’).  
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the first and th ird indents of Article 2(1) of Council Decision 
98/415/EC2, as the draft law relates to currency matter s and the Central Bank of Cyprus (CBC). In 
accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 
Bank, the Governing Council has adopted this opinion. 
 1.  Purpose of the draft law 
1.1  The draft law aims to transfer the competence to issue euro coins from the CBC to the Government 
of the Republic of Cyprus (hereinafter the ‘Government’). At present, the CBC has the competence to issue euro coins in the Republic of Cyprus, including th e competence to issue euro 
commemorative and collector coins. This draft la w will give the CBC the co mpetence to issue euro 
coins on behalf of the Republic of Cy prus in its function as fiscal agent. 
1.2  The draft law also provides that on the day follow ing the entry into force of the draft law, the CBC 
will transfer the amount of the nominal value of  euro coins in circulation to the General 
Government Account, to the credit of the Consolidat ed Fund of the Republic of Cyprus (hereinafter 
the ‘Consolidated Fund’). In addition, every six mo nths, the amount of the nominal value of euro 
coins annually put in circulation by the CBC is to be transferred to the General Government 
Account, to the credit of the Consolidated Fund, after the amount of the nominal value of euro 
coins withdrawn from circulation during the same period is deducted. 
  
                                                 
1  Law 138(I)/2002. 
2  Council Decision 98/415/EC of 29 June 1998 on the consulta tion of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
ECB-PUBLIC  
2 2. General observations 
According to the Treaty, the right to issu e euro coins rests with the Member States3, but the actual issuer 
of the euro coins is not specified. In fourteen euro  area Member States issuance of euro coins is a state 
function4 and in five of those euro area Member States the national central banks (NCBs) act as agents for 
their treasuries with regard to minting euro  coins and putting them into circulation5. In those Member 
States where the NCBs act as agents for their treasuries, the NCBs are re imbursed in full for the cost of 
minting and/or putting euro coins into circulation. 
 3. Central bank independence and prohibition on monetary financing 3.1 Central bank independence  
3.1.1 Article 130 of the Treaty lays down that financia l independence is a key aspect of the principle of 
central bank independence for the members of th e European System of Central Banks. The ECB 
emphasises that any task undertaken by the CBC s hould be compatible with its institutional and 
financial independence, in order to safeguard th e proper performance of its tasks under the Treaty 
and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’) as well as its national tasks. The principle of central bank 
independence also requires, inter alia, that Me mber States do not put their NCBs in a position 
where they have insufficient financial resources and inadequate net equity to carry out their tasks. 
3.1.2 In this regard, the draft law provides that the CBC  will transfer the competence to issue coins to the 
Government and is to simultaneously transfer th e nominal value of euro coins in circulation
6 to the 
General Government Account, which is kept with the CBC. The CBC will thus exchange its 
liability towards the holders of euro coins with a liability towards the Government. The effect of 
the proposed transaction on the CBC’s balance sheet is neutral. However, the CBC will lose one of 
its operations that has generated revenue in the past7 thus it should take this factor into account in 
taking any decision on the allocation of its profits8 in order to safeguard its  financial independence. 
3.1.3 The ECB understands from the consulting author ity that the CBC is to be compensated for the 
services it provides as the agent of the Government in  relation to euro coin issuance. The annual fee 
to be received by the CBC is intended to cover the actual cost of issuing euro coins in the Republic 
of Cyprus and includes a service fee for the pe rformance of the CBC’s agency tasks. The ECB 
                                                 
3  See Article 128(2) of the Treaty. 
4  In Cyprus, Estonia, Latvia and Slovakia coin issuance is a competence of the respective national central bank. In Austria, 
the issuing authority for coins is the Austrian Mint, whic h is a wholly owned subsidia ry of the Oesterreichische 
Nationalbank. 
5  Greece, Finland, Ireland, Luxembourg and Malta. 
6  The nominal value of euro coins in circulation was EUR 99.1 million at 31 De cember 2013, compared with EUR 96.1 at 
31 December 2012. 
7   The seigniorage revenue from euro coins may be estimated as  the nominal value of coins in circulation multiplied by an 
indicative rate of return, such as the ECB main refinancing operations rate.  
8  In accordance with the Central Bank of Cyprus Laws of 2002 to 2014 (section 59), 80% of the net profit of the CBC is 
normally transferred into the Consolidated Fund of the General Government Account, unless the Board of the CBC 
decides an additional withhol ding of net profits due to exceptional circumstances. 
ECB-PUBLIC  
3 understands that in view of the current production needs of new euro coins in Cyprus and current 
production costs, according to estimates of the CBC, the provisionally agreed annual fee is 
expected to cover sufficiently, with a margin, th e estimated annual cost, in the foreseeable future. 
As regards the actual cost of issuing commemorativ e and collector coins including issue, transfer, 
insurance, storage, management and offer of co mmemorative and collector coins, the CBC is to be 
reimbursed through the proceeds of sale of such coin s. The price of the coins is to be exclusively 
determined by the CBC. Furthermore, the CBC is to  benefit from the net profit or assume the net 
loss arising from the sale of such collector and commemorative coins. 
3.1.4 The ECB encourages the consulting authority to ensure that the fee to be received by the CBC, 
when acting as agent of the Government in relation to euro coin issuance, will at all times be  
sufficient to compensate the CBC in full for all ex penses it will incur in performing the relevant 
tasks (see also paragraph 3.2.6 below). The agre ements and/or arrangements between the CBC and 
the Government should, therefore, clearly provide fo r the adjustment of the fe e, if the need arises. 
In this respect, and with a view to safeguarding th e CBC’s ability to carry out its tasks in the future 
in line with the principle of financial independen ce, the ECB encourages the consulting authority to 
insert a provision in the draft law expressly stati ng that the CBC will be compensated in full and in 
a timely manner for all expenses it will in cur in relation to eu ro coin issuance. 
3.2 Prohibition on monetary financing  
3.2.1  The monetary financing prohi bition is laid down in Article 123(1) of the Treaty, replicated in 
Article 21.1 of the Statute of the ESCB, and prohibits  overdraft facilities or any other type of credit 
facility with the ECB or the NCBs in favour of  Union institutions, bodies, offices or agencies, 
central governments, regional, local or other pub lic authorities, other bodies governed by public 
law, or public undertakings of Member States. Th e monetary financing prohibition also prohibits 
the purchase of debt instruments directly from su ch public sector entities by the ECB or NCBs. The 
precise scope of application of the monetary financing prohibition is further clarified by 
Regulation (EC) No 3603/93. 
3.2.2  Article 6 of Regulation (EC) 3603/93 provides that NCBs holding euro coins issued by the public 
sector and credited to the public sector are not rega rded as a credit facility within the meaning of 
Article 123 of the Treaty where the amount of these assets remains at less than 10% of the coins in 
circulation. Functions performed by NCBs when act ing as agents of the Government must be fully 
compliant with the monetary financing prohibition and such functions must not imply any form of 
overdraft facility to the public sector. 
3.2.3 The ECB understands that under the draft law, the CBC will not hold coins issued and credited to 
the public sector, in a way that would be contrary to the provisions of Article 6 of Regulation (EC) 
No 3603/93. Pursuant to the provisions of the draft law, the amount of the nominal value of coins that are put into circulation during a calendar year will be transferred to th e Government on 30 June 
and 31 December of that calendar year and this does not involve issuing any credit to the public sector.  
ECB-PUBLIC  
4 3.2.4 Furthermore, Article 123(1) of the Treaty, in  conjunction with Article 1(1)(b)(ii) and (iii) of 
Council Regulation (EC) No 3603/93, also prohi bits central banks from providing overdraft 
facilities or any other type of credit facility to the public sector, including any financing of the 
public sector’s obligations with regard to third parties or any transaction with the public sector 
resulting or likely to result in a claim against that sector. 
3.2.5 The effect of the provisions of the draft law is to transfer the assets a nd liabilities associated with 
the competence for coin issuan ce from the CBC to the Government. The ECB understands that the 
economic effect of the proposed transfer of the competence to issue coins to the Government will 
be that the Government will receive cash deposite d in the General Government Account with the 
CBC that it can start to use immediately. At the same time, the Government  will become liable to 
the holders of euro coins and such liability will ma terialise only when the coins are returned and to 
the extent they are returned, if ever9. As a result, the liquidity situation of the Government will be 
improved while its debt level will increase. As this transfer by the CBC does not appear to have the 
common characteristics of an overdraft facility or other type of credit facility, the ECB considers 
the draft law to be compliant on this point with  the monetary financing prohibition from a legal 
perspective.  The ECB will review any further tran sactions that might ensue from the transfer of the 
competence to issue coins from the CBC to the Government, in the context of its monitoring of the 
compliance of central banks with Articles 123 and 124 of the Treaty. 
3.2.6. Functions of the NCBs performed outside the scope of the Statute of the ESCB comply with the 
prohibition on monetary financing provided that th e NCBs act as agents and that such functions do 
not constitute central bank financing of public sector  obligations with regard to third parties or 
central bank crediting of the public sector outside the narrowly defined exceptions specified in 
Regulation (EC) No 3603/93. National legislati on should not require an NCB to finance the 
performance of tasks incumbent on the Government , without ensuring that the Government will 
compensate the NCB in full for the discharge of such  tasks. In this respect, the ECB reiterates that, 
in order to comply with the monetary financing pr ohibition, it should be ensured that the fee to be 
received by the CBC will at all times be sufficient to compensate the C BC in full for all expenses it will incur in performing the relevant tasks (s ee also paragraph 3.1.4 above). From this 
perspective, on the basis of the current estimates of the CBC (referred to in paragraph 3.1.3 above), 
the ECB understands that the provisionally agreed a nnual fee is expected to be sufficient, with a 
margin, in the foreseeable future and therefore  complies with the monetary financing prohibition. 
The ECB will review the adequacy of the fee on an annual basis, in the context of the monitoring of 
the compliance of central banks with Articles 123 and 124 of the Treaty.  
3.3 Commemorative  and collector coins  
 In accordance with section 2 of the draft law, the CBC will issue, as agent for the Government, 
coins to be circulated as legal tender in the Re public of Cyprus. The ECB understands that the CBC 
                                                 
9  In the future, the Government can write off all unreturned coins after a certain period once the coins cease to be legal 
tender and thereby make a profit equal to the unretur ned cash coins that ceased to be legal tender.  
ECB-PUBLIC  
5 will also issue, as agent for the Government, commemorative coins intended for circulation and 
collector coins that are not intended for circulati on. The ECB would, in this respect, invite the 
consulting authority to consider amending that speci fic section of the draft law in order to cater for 
the issuance by the CBC, as agent for the Govern ment, of collector coins which, although having 
the status of legal tender in the Republic of  Cyprus, are not intended for circulation. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 16 July 2014. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI