EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
 of 6 September  2022  
on the replacement of banknotes and coins and on cash handlers  
(CON/20 22/31) 
 
Introduction and legal basis  
On 12 July 2022 the European Central Bank (ECB) received a request from Latvijas Banka  for an opinion 
on a draft regulation  on the submission, acceptance, identification and replacement of banknotes and 
coins at Latvijas Banka and on a draft regulation on the processing and recirculating of euro banknotes 
and coins (hereinafter collectively , the ‘draft regulations ’). 
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, third and fou rth indents of Article 2(1) of Council 
Decision 98/415/EC1, as the draft regulations relate to currency matters , Latvijas Banka and the 
collection, compilation and distribution of monetary, financial, banking, payment systems and balance of 
payments statistics . 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 regulations  
Both draft regulations pertain to the implementation of the new Law on Latvijas Banka, which will enter 
into force on 1 January 20232. The objective of both draft regulations is to regulate procedural aspects 
related to material law provisions contained in ECB and Union  legal acts with regard to the retrieval, 
replacement and recirculation of euro banknotes and coins.  
The draft regulation on the submission, acceptance, identification and replacement of banknotes and 
coins at Latvijas Banka regulates the replacement of damaged euro banknotes  and coins , the 
replacement of euro banknotes fit for circulation, and the handling of euro banknotes  and coins with sig ns 
of counterfeiting.  This draft regulation does  not govern all cash services provided by Latvijas Banka, i.e., it 
does  not cover services provided by Latvijas Banka that are governed by  private law (e.g. the sale of 
numismatic coins and replacement of non- cash means of payment with uncirculated euro 
commemorative coins where the transaction is carried out according to the distance contract concluded 
between Latvijas Banka and the person concerned on Latvijas  Banka's website).  
According to the explanatory memorandum accompanying it, the draft regulation on  the processing and 
recirculating of euro banknotes and coins replicates and elaborates on the requirements to be fulfilled by  
 
1  Council Decision 98/415/EC of 29  June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42). 
2        See Opinion CON/2021/9.  All ECB opinions are available  on EUR -Lex. 
ECB -PUBLIC  
2 cash handlers that are provide d for in Latvijas Banka regulation currently in force and in Union legislation 
binding on cash handlers. The ECB notes that  this draft regulation also contains  a number of new legal 
provisions aimed at clarifying the existing legal framework . Firstly,  the legal framework on the provision of 
statistics and protection of statistical data and information referred to in Section XI of the Law on Latvijas 
Banka is to be applicable to data submitted by cash handlers in relation  to the euro banknote and coin 
handli ng machines used as well as  the volume of euro banknotes and coins processed by those 
machines , and Latvijas Banka must  store such statistics permanently . Secondly,  this draft regulation 
specifies the cases  in which  the Commission for the Management of Banknotes and Coins  of Latvijas 
Banka  (hereinafter the ‘Commission’ ) may refuse to register a cash handler . Thirdly, this  draft regulation 
specifies the  information that the cash handler must  provide to the Commission before using the euro 
banknote or coin handling machine,  and provides for the  Commission’s  right to request from the cash 
handler information relating to cooperation with other cash handlers or delivery of euro banknotes and 
coins from the national central bank of the Member State which has adopted the euro. Fourthly, this draft 
regulation requires the cash handler to draw up and maintain written internal procedures and to establish 
the maintenance plan of the euro banknote and coin handling machine.  Fifthly,  this draft regulation 
requires statistical data on the euro banknote handling machines used in the previous half year and the 
volume of euro banknotes processed by these machines to  be encrypted and signed digitally by the cash 
handler in a manner agreed upon with the Commission. Finally,  this draft regulation provides  that the plan 
for on- site inspections on the premises of the cash handler or at its designated locations where euro 
banknotes and coins are processed must be prepared yearly and published on Latvijas Banka's website . 
 
2. General observations  
The ECB welcomes both draft regulations as they are in line with the relevant Union and ECB legal 
frameworks and contain useful procedural norms needed for the smooth application of these  frameworks.  
 
3. Specific observations regarding replacement of damaged  banknotes and coins   
3.1. The draft regulation on the submission, acceptance, identification and replacement of banknotes and 
coins at Latvijas Banka establishes that , where part of a damaged banknote that constitutes 50 % or less 
than 50  % of the original size of the banknote is submitted, the applicant must  submit evidence, if 
available,  that the missing part of the banknote  has been destroyed3. This draft regulation further 
determines4 that the Commission, based on the opinion by the competent authority, must  decide on the 
replacement or non- replacement of damaged banknotes  in cases where the submitted part of the 
damaged euro banknote is 50 % or less of t he original banknote size, without referring to the need to 
prove the destruction of the missing parts.  This could be interpreted to mean that the Commission may 
decide to replace a bankn ote that is unfit for circulation where  50 % or less  of the banknote  is presented 
without  the applicant having proven  that the missing part or  parts  has or  have been destroyed . In order to 
avoid any legal certainty concerns as regards the application of Article 3(1)  of Decision ECB/2013/10 of 
 
3  See paragraph 15.4.2.  of the draft regulation on the submission, acceptance, identification and replacement of 
banknotes and coins at Latvijas Banka.  
4  See paragraph 31 of the draft regulation on the submission, acceptance, identification and replacement of banknotes 
and coins at Latvijas Banka.  
ECB -PUBLIC  
3 the European Central Bank5, this draft regulation should be amended to clarify  that 50 % or less of a 
banknote that is unfit for circulation may only be replaced if the applicant proves that any  missing part has  
been destroyed.  
3.2. The draft regulation  on the submission, acceptance, identification and replacement of banknotes and 
coins at Latvijas Banka provides that the Commission decides  on the replacement or non- replacement of 
damaged banknotes, amongst others, in cases where the euro bank notes  have been deliberately 
damaged6. In order to avoid any concerns about legal certainty as regards the application of Article 3(3)  
of Decision ECB/2013/10, th is draft regulation should be redrafted with a view to clarify ing that 
intentionally damaged banknotes may not  be replaced unless Latvijas Banka know s or has  sufficient 
reason to believe that an applicant  is (or can prove that he is ) acting in good faith .  
 
 
This opinion will b e published on EUR -Lex. 
  Done at Frankfurt am Main, 6 September  2022.  
 [signed]  
 
The President of the ECB  
Christine  LAGARDE  
 
5  Decision ECB/2013/10 of the European Central Bank of 19 April 2013 on the denominations, specifications, 
reproduction, exchange and withdrawal of euro banknotes (OJ L 118, 30.4.2013, p. 37) . 
6  See paragraph 33 on the submission, acceptance, identification and replacement of banknotes and coins at Latvijas 
Banka   .