EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 9 February 2005 
at the request of Magyar Nemzeti Bank on a dra ft regulation on the processing and distribution of 
forint banknotes and coins 
(CON/2005/3) 
 
1. On 23 November 2004, the European Central Bank (ECB) received a request from Magyar 
Nemzeti Bank (MNB) for an opinion on a draft legislative proposal concerning the processing and distribution of forint banknotes and coins (hereinafter the ‘draft regulation’).  
2. The ECB’s competence to deliver an opinion is based on the second and third 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 
contains provisions concerning means of paymen t and the Hungarian national central bank. 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. 
3. The draft regulation is intended to streamline th e existing legal framework for cash recycling of 
forint banknotes and coins in order to improve th e quality of banknotes and coins in circulation and 
to contribute to the fight against counterfeiting.  It is addressed to ‘ cash-in-transit companies’2 and 
‘cash distribution institutions’3, extending  the scope of the latter to ‘institutions carrying out foreign 
exchange activities’4. The draft regulation introduces rules and procedures on cash processing and 
distribution. For instance, it contains detailed re quirements for the circulation fitness of banknotes 
and coins. Moreover, cash-in-transit companies w ill be obliged to provide in their internal 
regulations a detailed description of the genera l requirements for handling cash, detailed rules on 
work processes, the basic concep ts (such as genuineness, fitness, banknote bundling, etc.) relating 
                                                 
1  OJ L 189, 3.7.1998, p. 42. 
2  Cash-in-transit companies are defined as institutions entitle d to carry out cash processing activities in accordance with 
Article 3(2)(c) of Law CXII of 1996 on credit institutions and fi nancial enterprises (hereinafter the ‘Credit Institutions 
Law’). 
3  Cash distribution institutions are defined – with reference to the Credit Institutions Law) as (a) entities providing cash 
transfer services (without having to open a bank account) in licensed premises; and (b) credit institutions operating a 
counter to perform cash receiving and cash dispensing, as we ll as exchange of denominations (but not qualifying as cash 
processing or bureaux de change); and (c) institutions provi ding postal cash transfer services in accordance with 
Article 4(1)(d)  of Law CI of 2003 on the post office; and (d) the MNB, and (e) after amendm ent to the law, institutions 
carrying out foreign exchange activities. 
4  In accordance with Article 3(2) (a) of the Credit Institutions Law. 
 
2 to cash processing foreseen in the draft regula tion, as well as concepts related to sorting 
requirements. The same detailed descriptions and rule s must also be reflected in the regulations on 
processing and handling cash within the framework of  daily transactions at the counters of cash 
distributions institutions. The draft regulation pr ovides that cash processi ng by cash-in-transit 
companies must be carried out either manually or by various kinds of processing devices with 
suitable sensor configuration, without, however , specifying suitability in any more detail. 
Moreover, as regards examining banknotes and coins,  cash distributing institutions will be obliged 
to use relevant devices and accessories required fo r cash processing (such as ultraviolet lamps) in 
line with the size of their cash turnover5. The draft regulation also provides that suspected 
counterfeits found during the required checking must  be handled in accordance with the Magyar 
Nemzeti Bank Law and the Magyar Nemzeti Bank Re gulation on technical and other tasks related 
to the protection against counterfeiting of  Hungarian and foreign legal tender.  
4. The ECB generally welcomes this approach to se tting requirements for and regulating the activities 
of entities engaged in cash recycling which w ill improve the quality of banknotes and coins in 
circulation and contribute to the fight against counterfeiting. The ECB also generally welcomes the 
extension of the provisions on cash handling to in stitutions carrying out foreign exchange activities 
as the ECB understands that thereafter all entities cu rrently distributing cash to the public will be 
bound by the MNB Regulation setting requirements for the quality and genuineness of cash in 
circulation. The ECB also understands that this framework does not apply as such to foreign legal 
tender such as euro banknotes and coins and that any measures necessary to implement Article 6 of 
Council Regulation (EC) No 1338/2001 of 28 Ju ne 2001 laying down measures necessary for the 
protection of the euro against counterfeiting6 will be taken by Hungary within the coming months. 
5. In this context, the ECB would like to point ou t that the Eurosystem has established its own 
framework for recycling euro banknotes7 in order to improve the quality of euro banknotes and 
coins in circulation and to contribute to the fi ght against euro counterfeiting. These procedures as 
well as other Eurosystem rules and procedures rela ted to issuing euro banknotes, including e.g. 
their handling and processing and the relevant security  measures, will have to be taken into account 
when a Member State adopts the euro as its currency.  
6. More specifically, the ECB would like to commen t on the draft law’s consistency. As Articles 4 
and 5 of the draft regulation not only apply to cash distributing institutions but also to cash-in-
transit companies, the respective sub-heading ‘requirements for banknotes and coins in cash 
distribution’ could be extended beyond ‘cash distribution’. Similarly, the title of Annex 2 of the draft regulation could refer not only to Article 6 but also to Article 13 of the draft regulation. 
                                                 
5  The existing law already provides that when processing cas h, cash-in-transit companies need to use tools to examine 
genuineness and fitness of banknotes and coins (setting out examples such as ultraviolet lamps) without, however, 
referring to their turnover.  
6  OJ L 181, 4.7.2001, p. 6. 
7  Framework for the detection of counte rfeits and fitness sorting by credit institu tions and other professional cash handlers; 
published on the ECB web page: http://www.ecb .int/press/pr/date/2005/ht ml/pr050106.en.html. 
 
3 7. Moreover, the draft law requires that cash processi ng and cash-in-transit companies include in their 
internal rules a detailed description of the basi c concepts relating to cash processing and sorting 
requirements. To the extent that the draft law does not contain definitions (such as for 
‘genuineness’), the ECB understands that such conc epts will be defined by other MNB regulations 
or other national legislation. The ECB considers it advisable to clarify this point in the draft law. In any case the ECB points out that discretion as regard s the definition of such concepts by entities 
engaged in cash recycling is not possible with in the Eurosystem. As regards the requirements 
concerning devices and accessories needed for fitness sorting and banknote and coin 
authentication, the ECB notes that the Eurosystem  rules and procedures do not specify which type 
of devices should be used, but rather provides that cash recycling is possible only by machines that 
have been successfully tested in the Eurosystem test procedures. 
8. This opinion will be published on the ECB’s website. 
  Done at Frankfurt am Main, 9 February 2005.  
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET