Guideline of the European Central Bank of 13 September 2001 adopting certain provisions on the frontloading of euro banknotes outside the euro area (ECB/2001/8)
Date: 2001-09-13
Institutions: European Central Bank
Subjects: European Central Bank, credit institution, euro, paper money, third country

L 257/6

EN

Official Journal of the European Communities

26.9.2001

EUROPEAN CENTRAL BANK

GUIDELINE OF THE EUROPEAN CENTRAL BANK

of 13 September 2001

adopting certain provisions on the frontloading of euro banknotes outside the euro area

(ECB/2001/8)

(2001/703/EC)

THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL
BANK,

(4)

Having regard to the Treaty establishing the European
Community, and in particular to Article 106(1) thereof, and to
Article 16 of the Statute of the European System of Central
Banks and of the European Central Bank,

Whereas:

In addition, the existing distribution channels provided
by non-euro area credit institutions specialising in the
wholesale distribution of banknotes to other credit insti-
tutions could also be used for the cash changeover,
thereby contributing to the smooth changeover to euro
banknotes; therefore, frontloading to these institutions,
and their subsequent sub-frontloading to other credit
institutions outside the euro area, should be allowed
under certain conditions.

(1)

(2)

(3)

According to Article 10 of Council Regulation (EC) No
974/98 of 3 May 1998 on the introduction of the
euro (1), from 1 January 2002,
‘… the ECB and the
central banks of the participating Member States shall
put into circulation banknotes denominated in euro’.

Guideline ECB/2001/1 of 10 January 2001 adopting
certain provisions on the 2002 cash changeover (2)
allows frontloading of euro banknotes to credit institu-
tions that are eligible for monetary policy operations of
the Eurosystem under certain conditions. Furthermore,
the Guideline allows to a limited extent sub-frontloading
to (i) credit institutions which are located outside the
euro area and which are subsidiaries of credit institu-
tions whose main place of business is located inside the
euro area; and (ii) other credit institutions which have
neither their registered nor their head office inside the
euro area.

Frontloading to central banks outside the euro area
could contribute to the smooth changeover to euro
frontloading to central banks
banknotes;
outside
subsequent
their
area,
sub-frontloading operations to credit institutions in their
jurisdictions, should be allowed under certain condi-
tions.

therefore,
euro

and

the

(1) OJ L 139, 11.5.1998, p. 1.
(2) OJ L 55, 24.2.2001, p. 80.

(5)

(6)

(7)

and

974/98,

subsequent

frontloading,

In order to comply with Article 10 of Regulation (EC)
No
sub-
frontloading, should not result in anticipated circulation
of euro banknotes amongst the general public; thus the
conditions for frontloading to central banks outside the
euro area and non-euro area credit institutions specia-
lising in the wholesale distribution of banknotes to other
credit institutions must contain restrictions in order to
avoid euro banknotes being put into circulation before 1
January 2002.

Frontloading to central banks outside the euro area and
non-euro area credit
institutions specialising in the
wholesale distribution of banknotes to other credit insti-
tutions entails financial risk for the frontloading national
central banks (NCBs); consequently, both central banks
and specialised credit institutions must provide the rele-
vant frontloading NCB with collateral, which shall be
denominated in euro unless otherwise agreed.

Central banks outside the euro area and non-euro area
credit institutions specialising in the wholesale distribu-
tion of banknotes to other credit institutions are not
counterparties to Eurosystem operations and therefore
must settle the payment for the frontloaded amounts on
the first business day of 2002.

26.9.2001

EN

Official Journal of the European Communities

L 257/7

(8)

(9)

The conditions laid down in this Guideline regarding
frontloading and subsequent sub-frontloading must be
incorporated in NCBs'
legal documentation concluded
with the recipient central banks outside the euro-area
and non-euro area specialised credit
the
European Central Bank (ECB) should be informed ex ante
about
coordination
purposes.

frontloading

institutions;

requests

for

for

It is acknowledged that while the primary competence
for establishing the regime for the issue of euro coins
lies with the participating Member States, NCBs play an
essential role in the distribution of euro coins;
it is
recommended therefore that NCBs apply the provisions
of this Guideline to euro coins; this application is of a
supplementary nature and shall take place within the
framework set up by the competent national authorities;
it is worth mentioning in this respect that Regulation
(EC) No 974/98 and in particular Article 11 of it shall in
any case apply.

(10)

In accordance with Article 12.1 and Article 14.3 of the
Statute of the European System of Central Banks and of
the European Central Bank, ECB guidelines form an
integral part of Community law,

HAS ADOPTED THIS GUIDELINE:

Article 1

Definitions

For the purposes of this Guideline:

— ‘credit institutions’ shall mean the institutions as defined in
Article 1(1) of Directive 2000/12/EC of
the European
Parliament and of the Council of 20 March 2000 relating
to the taking up and pursuit of the business of credit
institutions (1), as amended by Directive 2000/28/EC (2),

— ‘non-euro area specialised credit institutions’ shall mean
credit institutions which (i) have neither their registered nor
their head office inside the euro area; and (ii) specialise in
the wholesale distribution of banknotes to other credit
institutions,

— ‘national central bank’ shall mean the NCB of a euro area

Member State,

— ‘euro area’ shall mean the territory of the participating

Member States,

(1) OJ L 126, 26.5.2000, p. 1.
(2) OJ L 275, 27.10.2000, p. 37.

— ‘central banks outside the euro area’ shall mean central
and monetary authorities of non-participating

banks
Member States, as well as of third countries,

— ‘frontloading’ shall mean the physical delivery of euro bank-
notes from NCBs to central banks outside the euro area, as
well as to non-euro area specialised credit
institutions
between 1 and 31 December 2001,

— ‘sub-frontloading’ shall mean the delivery of frontloaded
euro banknotes by central banks outside the euro area or
by non-euro area specialised credit institutions to credit
institutions between 1 and 31 December 2001.

Article 2

Frontloading to central banks outside the euro area

NCBs shall be entitled to frontload euro banknotes to central
banks outside the euro area provided that NCBs' contractual
arrangements with them contain the following conditions:

(a) central banks outside the euro area may only be fron-

tloaded from 1 December 2001;

(b) central banks outside the euro area shall not put the front-
loaded euro banknotes into circulation before 00.00 local
time on 1 January 2002;

(c) central banks outside the euro area shall store the front-
loaded euro banknotes which remain the property of the
relevant frontloading NCB safely in order to avoid theft,
robbery or damage and they shall cover, at least, such risks
by subscribing to appropriate insurance policies or by any
other appropriate means;

(d) central banks outside the euro area shall settle the payment
for the frontloaded euro banknotes on 2 January 2002;

(e) central banks outside the euro area shall provide NCBs with
adequate collateral from the time of frontloading and for
the amounts of frontloaded euro banknotes. Such collateral
shall be provided through repurchase or pledge arrange-
ments. It shall be denominated in euro unless otherwise
agreed. Cash in the form of a deposit or in another form
deemed appropriate by the NCBs can also be provided as
eligible collateral. Sufficient collateral shall be maintained
until the payment by the central banks outside the euro
area to the relevant NCB has been fully and properly
settled;

(f) central banks outside the euro area may only sub-frontload
euro banknotes to credit institutions having their head or
registered office in their jurisdictions. This sub-frontloading
shall take place under the following conditions:

— sub-frontloading shall only be possible

from 1

December 2001,

L 257/8

EN

Official Journal of the European Communities

26.9.2001

— the

credit

recipient

further
sub-frontload or otherwise dispose of sub-frontloaded
banknotes before 00.00 local time on 1 January 2002,

institutions

shall not

— the

credit

recipient

institutions

the
sub-frontloaded euro banknotes safely in order to avoid
theft, robbery or damage and they shall cover those
risks by subscribing to appropriate insurance policies or
by any other appropriate means,

store

shall

— central banks outside the euro area shall have the right
at any time to audit and inspect the sub-frontloaded
euro banknotes and also the fulfilment of
the two
conditions set forth herein concerning non-disposal and
safe storage of the euro banknotes,

— the recipient credit institutions shall apply appropriate
measures against money laundering in connection with
sub-frontloaded euro banknotes,

— the statutory or contractual arrangements of the central
banks outside the euro area with the recipient credit
institutions shall subject the latter to financial penalties
amounting to 10 % of the value of the sub-frontloaded
euro banknotes in the event of non-compliance by the
latter with one or more of the above obligations. The
said statutory or contractual arrangements shall specify
the destination of these financial penalties, which shall
be paid to the relevant sub-frontloading central bank
outside the euro area and shall be forwarded by the
latter to the relevant frontloading NCB;

(g) central banks outside the euro area shall be required to
provide frontloading NCBs upon request with information
on the identity of their sub-frontloaded customers, as well
as the amounts of sub-frontloaded banknotes per individual
customer. NCBs shall treat such information as confidential
and shall only use it to monitor compliance by central
banks outside the euro area with their contractual obliga-
tions with the relevant frontloading NCB;

(h) in any case central banks outside the euro area shall be
required to apply appropriate measures against money-
laundering in connection with frontloaded euro banknotes.

arrangements of the NCBs with them contain the following
minimum conditions:

(a) frontloading to non-euro area specialised credit institutions
shall only be possible from 1 December 2001; the said
specialised credit institutions shall not put the frontloaded
euro banknotes into circulation before 00.00 local time on
1 January 2002;

(b) non-euro area specialised credit institutions shall store the
frontloaded euro banknotes safely in order to avoid theft,
robbery or damage and they shall cover those risks at least,
by subscribing to appropriate insurance policies or by any
other appropriate means;

(c) non-euro area specialised credit institutions shall settle the
payment for the frontloaded euro banknotes on 2 January
2002;

from the time of

(d) non-euro area specialised credit institutions shall provide
NCBs with adequate collateral
front-
loading and for the amounts of frontloaded euro bank-
notes. Such collateral shall be provided through repurchase
or pledge arrangements. It shall be denominated in euro
unless otherwise agreed. Cash in the form of a deposit or in
another form deemed appropriate by the NCBs can also be
provided as eligible collateral. Sufficient collateral shall be
maintained until the payment by the relevant non-euro area
credit institution to the relevant NCB has been fully and
properly settled;

(e) non-euro area specialised credit

their

institutions

shall be
required to provide frontloading NCBs upon request with
information on the identity of
sub-frontloaded
customers, as well as the amounts of sub-frontloaded bank-
notes per individual customer. NCBs shall treat such infor-
mation as confidential and shall only use it to monitor the
compliance of non-euro area specialised credit institutions
with their contractual obligations with the relevant front-
loading NCB. In any case, non-euro area specialised credit
institutions shall also be required by the relevant front-
loading NCB to apply appropriate measures against money-
laundering in connection with frontloaded euro banknotes;

Article 3

Frontloading

to

non-euro

area

specialised

credit

institutions

NCBs shall be entitled to frontload euro banknotes to non-euro
area specialised credit institutions provided that the contractual

(f) non-euro area specialised credit institutions shall be subject
to penalties amounting to 10 % of the value of the front-
loaded euro banknotes in the event of their non-compli-
ance with one or more of the obligations set forth in this
Article as a result of their own non-compliance or of that
of the credit institutions that they sub-frontload in accord-
ance with g) following. These penalties will be due to the
relevant frontloading NCB;

(g) non-euro area specialised credit institutions shall be entitled
to sub-frontload euro banknotes to other credit institutions
outside the euro area under the following conditions:

— sub-frontloading
December 2001,

shall only be possible

from 1

26.9.2001

EN

Official Journal of the European Communities

L 257/9

— non euro-area specialised credit institutions shall ensure
that the euro banknotes frontloaded to them are not
put into circulation by the recipient credit institutions
to which they sub-frontload before 00.00 local time on
1 January 2002,

— the

credit

recipient

institutions

the
sub-frontloaded euro banknotes safely in order to avoid
theft, robbery or damage and they shall cover such
risks, at least by subscribing to appropriate insurance
policies or by any other appropriate means,

store

shall

— the recipient credit institutions outside the euro area
shall be required to apply appropriate measures against
money-laundering in connection with sub-frontloaded
euro banknotes,

— the contractual arrangements of non-euro area special-
ised credit institutions with the recipient credit institu-
to financial penalties
tions shall subject
amounting to 10 % of the value of the sub-frontloaded
euro banknotes in the event of the latter's non- compli-
ance with any of the above obligations,

the latter

— the relevant frontloading NCB shall have the right to
sub-

implementation of

and

audit
the
frontloading arrangements.

inspect

Article 4

Provision of information to the ECB and recommendation
concerning euro coins

NCBs shall inform the ECB of each individual request to
1.
frontload euro banknotes presented to them by central banks
outside the euro area, or by non-euro area specialised credit
institutions, and of their intention in connection with such a
request prior to taking any decision on it. NCBs shall subse-
quently inform the ECB of such a decision when it differs from
the information previously given to the ECB.

2.
It is recommended that NCBs apply the provisions of this
Guideline to euro coins unless otherwise provided for within
the framework set up by the competent national authorities.

Article 5

Final provisions

1.

2.

This Guideline shall enter into force on 1 October 2001.

This Guideline is addressed to the NCBs.

This Guideline shall be published in the Official Journal of

3.
the European Communities.

Done at Frankfurt am Main, 13 September 2001.

On behalf of the Governing Council of the
European Central Bank

Willem F. DUISENBERG