EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 22 December 2008  
at the request of the Magyar Nemzeti Bank on dr aft regulations on the processing and distribution 
of banknotes and coins and on technical tasks rel ating to the protection of banknotes and coins 
against counterfeiting 
(CON/2008/90) 
 
Introduction and legal basis  
On 11 November 2008 the European Central Bank (E CB) received a request from the Magyar Nemzeti 
Bank (MNB) for an opinion on two draft MNB regula tions: one on the processing and distribution of 
banknotes and on technical tasks relating to their protection against counterfeiting (hereinafter the ‘draft 
banknote regulation’), and one on the processing and di stribution of coins and on technical tasks relating 
to their protection against counterfeiting (hereinafter  the ‘draft coin regulation’; the draft banknote 
regulation and the draft coins regulation are hereinaf ter referred to jointly as ‘the draft regulations’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the first and second indents of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions
1, as the draft regulation relates to currency matters and means of payment. 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 regulation 
By replacing MNB Regulations 13/ 2005 and 14/2005 with the draft regulations, the MNB aims to 
separate its regulations for banknotes from those for co ins. The draft regulations focus on ensuring high-
quality forint banknotes and coins and protecting the banknotes and coins against counterfeiting. The new 
legislative environment maintains the MNB’s central  role in protecting banknotes and coins. The MNB 
operates a recycling framework for forint banknotes similar to the Eurosystem’s Framework for the 
detection of counterfeits and fitness sorting by credit institutions and other professional cash handlers2 
(the ‘Banknote Recycling Framework’). In additio n, the MNB proposes new rules for the obligatory 
exchange of denominations. 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Available on the ECB’s website at www. ecb.europa.eu. Equivalent rules for euro coins are contained in the Commission 
Recommendation of 27 May 2005 concerning authentication of euro  coins and handling of euro coins unfit for circulation 
(OJ L 184, 15.7.2005, p. 60). 
 
2. General observations 
2.1 Since Hungary  is a Mem ber State with a de rogation, the E CB’s requirements regard ing the 
organisation of national cash recy cling i n Mem ber States that have adopted the euro do not a pply to 
the MNB. These requirements will apply to the MNB once Hungary  adopts the euro and the MNB  
beco mes a fu lly integrated member of t he Euro system. The ECB welco mes the MNB’s initiative to 
implem ent a framework for forint banknote r ecycling sim ilar to the Banknote Recy cling 
Fram ework and, in ad dition, t o lay down m andator y authenti city checks for euro ban knote s 
recycled by  cash distributors and processors.  
2.2 Under Article 10 6 of the Tr eaty, the EC B has the exclusive right to authorise the  issue of banknotes  
within the Community , whereas coins are issued by  euro area Mem ber States s ubject to the ECB’ s 
approval of  the volum e. Consequentl y, the ECB’ s regulator y com petence concerns onl y banknotes. 
In addition, i n respect of t he national central ba nks, which will beco me part of the Eurosy stem, the 
ECB support s the policy of keeping a clear and consistent separation between national rules 
relating to banknotes and rules relating to co ins. The ECB therefore welco mes th e draft 
regulations’ separation between rules o n banknotes and coins as it  facilitates th e legal convergence 
of the national legislative fram ework necessary  for Hungar y’s preparations for  full participation i n 
econom ic and m onetary  union. 
 
3. Specific obse rvations  
3.1 Under Article 4(2) of the draft bank note re gulation, forint ba nknotes may be dispensed via 
automated teller machines if they  are dul y checked for authenticit y and f itness by  banknot e 
handling m achines install ed inter alia  with the latest version of the updated authentication  
hardware and/or software. In the ECB’ s view, the current wording could be interpreted in such a 
way that in all cas es the  latest softwar e/hardw are version supplied by  the m achine manufacturer 
must be installed in t he banknote handli ng m achines used by  cash processors and distributors. This 
is a rather strict requirement and could im ply that technical adjustments must b e made to banknote 
handling  machines that are already  able to detect  all counterfeit or falsified banknotes, as used in  
the machine tests conducted by  the M NB with the manufacturers. The ECB considers th at this 
requirem ent could be refo rmulated as a reco mme ndation to users of bankn ote handling m achines . 
In this context, Article 11(1) requiring updates to be made to banknote handli ng machines which  
are in operation for ever y new ty pe of count erfeit fori nt bank note may be re-considered. 
3.2  Under Article 6(1) of the draft banknot e regul ation, the banknote handling m achines must be able 
to identif y the various categories of ba nknotes (i.e.  genuine, susp ect, not clearly authenticat ed and  
non-fori nt banknotes) and separate them accordingl y. The ECB draws the MNB’s attention to th e 
fact that, under the Banknote Recy cling Framework , the abilit y to phy sically sort each of these 
banknote categories into su ch different categori es is onl y required f or custom er-operated banknot e 
handling  machines and not for staff-oper ated mach ines. Staff-operated bankn ote handling  machines 
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are ty pically  able to identify  such  catego ries, but do n ot provi de for functions to physically  sort and  
separate e ach of them  into separate co mpartments. Accordingl y, the MNB may  consider r efining 
Article 6 of the draft bank note regulatio n. 
3.3 Table II in Annex 2 of the draft banknote regulat ion (‘Customer-operated machines’) should  
specify  whether suspect forint banknot es (under Ca tegor y 2) will be credited  to the customer’s  
account. 
 
This opini on will be publis hed on t he ECB’s website.  
 
 
Done at Frankfurt am  Main, 22  Decem ber 2008. 
 
[signed ] 
 
The President of the ECB 
Jean-Claude TRICHET 
 
 
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