Opinion of the European Central Bank of 9 February 2005 at the request of Magyar Nemzeti Bank on a draft regulation on the processing and distribution of forint banknotes and coins (CON/2005/3)
Date: 2005-02-09
Institutions: European Central Bank
Subjects: Hungary, counterfeiting, financial stability, money, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 9 February 2005 

at the request of Magyar Nemzeti Bank on a draft 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 provisions1 as the draft regulation 

contains  provisions  concerning  means  of  payment  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  the  existing  legal  framework  for  cash  recycling  of 

forint banknotes and coins in order to improve the 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 requirements for the circulation fitness of banknotes 

and  coins.  Moreover,  cash-in-transit  companies  will  be  obliged  to  provide  in  their  internal 

regulations a detailed description of the general requirements for handling cash, detailed rules on 

work processes, the basic concepts (such as genuineness, fitness, banknote bundling, etc.) relating 

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2  

3  

4  

OJ L 189, 3.7.1998, p. 42. 
Cash-in-transit  companies  are  defined  as institutions  entitled to  carry  out cash  processing  activities  in  accordance  with 
Article 3(2)(c) of Law CXII of 1996 on credit institutions and financial enterprises (hereinafter the ‘Credit Institutions 
Law’). 
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 well as exchange of denominations (but not qualifying as cash 
processing  or  bureaux  de  change);  and  (c) institutions  providing  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 amendment to the law, institutions 
carrying out foreign exchange activities. 
In accordance with Article 3(2)(a) of the Credit Institutions Law. 

 
 
 
                                                 
to  cash  processing  foreseen  in  the  draft  regulation,  as  well  as  concepts  related  to  sorting 

requirements. The same detailed descriptions and rules 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  provides  that  cash  processing  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 for 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 Regulation 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 setting requirements for and regulating the activities 

of  entities  engaged  in  cash  recycling  which  will  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 institutions carrying out foreign exchange activities 

as the ECB understands that thereafter all entities currently 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 June 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  out  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 fight against euro counterfeiting. These procedures as 

well  as  other  Eurosystem  rules  and  procedures  related  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  comment  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  

6  
7  

The  existing  law  already  provides  that  when  processing  cash,  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.  
OJ L 181, 4.7.2001, p. 6. 
Framework for the detection of counterfeits and fitness sorting by credit institutions and other professional cash handlers; 
published on the ECB web page: http://www.ecb.int/press/pr/date/2005/html/pr050106.en.html. 

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7.  Moreover, the draft law requires that cash processing and cash-in-transit companies include in their 

internal  rules  a  detailed  description  of  the  basic  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 concepts 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 regards the definition of such concepts by entities 

engaged  in  cash  recycling  is  not  possible  within  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 

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