Guideline of the European Central Bank of  14 July 2006  on certain preparations for the euro cash changeover and on frontloading and sub-frontloading of euro banknotes and coins outside the euro area  (ECB/2006/9)
Date: 2006-07-14
Institutions: European Central Bank
Subjects: central bank, euro, euro area, issuing of currency, paper money

28.7.2006

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Official Journal of the European Union

L 207/39

EUROPEAN CENTRAL BANK

GUIDELINE OF THE EUROPEAN CENTRAL BANK

of 14 July 2006

on certain preparations for the euro cash changeover and on frontloading and sub-frontloading of
euro banknotes and coins outside the euro area

(ECB/2006/9)

(2006/525/EC)

THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,

(4)

Having regard to the Treaty
Community, and in particular to Article 106(1) thereof,

establishing the European

Having regard to Article 16 and Article 26.4 of the Statute of
the European System of Central Banks and of the European
Central Bank,

Whereas:

(1)

(2)

(3)

Article 10 of Council Regulation (EC) No 974/98 of 3
May 1998 on the introduction of the euro (1) states that
‘with effect from the respective cash changeover dates,
the ECB and the central banks of
the participating
into circulation banknotes
Member States
denominated in euro in the participating Member States’.

shall put

To permit a smooth introduction of the euro in future
participating Member States, a legal framework to enable
the national central banks (NCBs) of these Member States
to borrow euro banknotes and coins from the Euro-
system for the purpose of frontloading and sub-front-
loading them prior to the cash changeover should be
established,
into account different possible
national cash changeover scenarios.

taking

Frontloading of euro banknotes and coins to eligible
counterparties,
and sub-frontloading to professional
third parties, would contribute to a smooth cash chan-
geover, alleviate the logistical burden of adopting the
euro and contribute to reducing the costs associated
with dual currency circulation.

(1) OJ L 139, 11.5.1998, p. 1. Regulation as last amended by Regu-

lation (EC) No 2169/2005 (OJ L 346, 29.12.2005, p. 1).

Frontloading and sub-frontloading of euro banknotes and
coins should not amount to putting such euro banknotes
and coins into circulation as they will not have the status
of legal tender in the future participating Member States
before the cash changeover date; consequently the
contractual arrangements for loans of euro banknotes
and coins should contain obligations to impose certain
restrictions on eligible counterparties and professional
third parties in order to avoid this happening.

Frontloading to eligible counterparties and sub-front-
third parties may only take
loading to professional
place if statutory provisions in the future participating
Member
or
contractual arrangements are established between the
euro
in relation to:
parties
banknotes and coins for frontloading; (ii) frontloading;
and (iii) sub-frontloading.

protection,

loans of

sufficient

involved,

provide

States

(i)

and

sub-frontloading;

This Guideline should: (i) set out the rules to be applied
for the contractual framework and conditions for front-
down the
loading
accounting and financial reporting requirements to be
observed in relation to frontloading and sub-front-
loading; and (iii) provide for appropriate arrangements
to
euro
and
banknotes and coins.

sub-frontloaded

frontloaded

insure

lay

(ii)

(5)

(6)

(7) While the primary competence for establishing the
regime for the issue of euro coins lies with the partici-
pating Member States, future Eurosystem NCBs play an
essential role in the distribution of euro coins. Therefore,
the provisions of this Guideline which relate to euro
coins
to be
applied by the NCBs within the framework for the
issue of euro coins to be set up by the competent
national authorities of the future participating Member
States.

should be viewed as

recommendations

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(8)

(9)

future Eurosystem NCBs with euro
Providing the
banknotes and coins for the purpose of
frontloading
entails certain financial risks. To cover these risks, the
future Eurosystem NCBs should commit to repay the
euro banknotes borrowed from the Eurosystem from
the future banknote production requirements allocated
to them. Furthermore,
frontloading should only be
permitted if eligible counterparties provide the relevant
future Eurosystem NCB with sufficient eligible collateral.

The Eurosystem NCB delivering euro banknotes and
coins for the purpose of
frontloading and the future
Eurosystem NCBs should conclude specific contractual
arrangements to adhere to the rules and procedures
laid down in this Guideline.

(10) Unless national statutory provisions in force in the future
participating Member States ensure that equivalent rules
and procedures apply, the conditions laid down in this
frontloading and subsequent sub-front-
Guideline for
loading must
contractual
arrangements between the future Eurosystem NCBs,
eligible counterparties and professional third parties.

incorporated

be

in

— ‘euro area’ means the territory of the participating Member

States;

— ‘cash changeover date’ means the date on which euro
banknotes and coins become legal tender in a given future
participating Member State;

— ‘participating Member State’ means a Member State that has

adopted the euro;

— ‘future participating Member State’ means a non-partici-
pating Member State that has fulfilled the conditions set
for the adoption of the euro and in relation to which a
decision on the abrogation of the derogation (pursuant to
Article 122(2) of the Treaty) has been taken;

— ‘non-participating Member State’ means a Member State that

has not adopted the euro;

— ‘Eurosystem’ means the NCBs of the participating Member

States and the ECB;

(11)

frontloading, should be
The ECB, as coordinator of
informed in advance of requests for frontloading, and
the future Eurosystem NCBs should inform the ECB of
any decisions to frontload,

— ‘eligible counterparty’ means an entity as defined in Article 5
which fulfils the requirements to receive euro banknotes and
coins for the purpose of frontloading;

HAS ADOPTED THIS GUIDELINE:

CHAPTER I

GENERAL PROVISIONS

Article 1

Definitions

For the purposes of this Guideline:

— ‘frontloading’ means the physical delivery of euro banknotes
and coins by a future Eurosystem NCB to eligible counter-
parties in the territory of a future participating Member
State during the frontloading/sub-frontloading period;

— ‘professional third parties’ means certain commercial target
groups, such as retailers, the cash-operated machine industry
and cash in transit companies which are located in the same
future participating Member State as an eligible coun-
terparty, and which the eligible counterparty considers to
have a legitimate need to be sub-frontloaded and to be
able to satisfy the requirements in relation to sub-front-
loading;

— ‘cash in transit

company’ means an entity providing
transport, storage and handling services of banknotes and
coins for credit institutions;

— ‘Eurosystem NCB’ means the NCB of a participating Member

State;

— ‘frontloading/sub-frontloading period’ means

the period
during which frontloading and sub-frontloading take place,
which shall commence no sooner than four months prior to
the cash changeover date and end at 00.00 (local time) on
the cash changeover date;

— ‘future Eurosystem NCB’ means the NCB of a future parti-

cipating Member State;

— ‘eligible collateral’ means collateral as defined in Article 8;

— ‘sub-frontloading’ means the delivery of frontloaded euro
banknotes and coins by an eligible counterparty to profes-
sional third parties in the territory of a future participating
Member State during the
frontloading/sub-frontloading
period;

— ‘delivering Eurosystem NCB’ means a Eurosystem NCB that
delivers to a future Eurosystem NCB euro banknotes and
coins for the purpose of frontloading, regardless of which
Eurosystem NCB is the legal owner of such banknotes and
coins;

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— ‘launch requirements’ means the quantity of euro banknotes
and coins that it is expected will be needed in a future
participating Member State on the cash changeover date
to cover demand for a period of one year;

A delivering Eurosystem NCB shall not request collateral

2.
from a receiving future Eurosystem NCB.

— ‘Eurosystem business day’ means a day on which the ECB or
one or more NCBs are open for business, on which
TARGET or the system replacing TARGET is open, and
which is a settlement day for euro money market and
foreign exchange transactions involving the euro;

— ‘TARGET’ means the Trans-European Automated Real-time

Gross settlement Express Transfer system;

— ‘credit institution’ means an institution as defined in Article
1(1)(a) 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);

— ‘legacy currency’ means the national currency unit of a
cash

participating Member

before

State

the

future
changeover date.

3.
The delivery of euro banknotes and coins by a Eurosystem
NCB to a future Eurosystem NCB shall not take place before the
delivering Eurosystem NCB and the receiving future Eurosystem
NCB have concluded contractual arrangements stipulating that
the conditions set out in this Guideline apply to the loan of
euro banknotes and coins to the future Eurosystem NCB, and
hence will be applied when establishing the arrangements for
frontloading and sub-frontloading.

4.
The delivery of euro banknotes and coins shall not
commence before a decision on the abrogation of the dero-
gation of a non-participating Member State has been adopted
pursuant to Article 122(2) of the Treaty.

5.
After having consulted the delivering Eurosystem NCB, the
ECB shall clearly specify the stocks from which the euro
banknotes and coins to be delivered will be taken, and the
name of the delivering Eurosystem NCB. The delivering Euro-
system NCB shall ensure that a decision concerning the replen-
ishment of such stocks has been taken.

Article 2

Article 4

Applicability of the provisions set out in this Guideline

The rules and procedures concerning frontloading and
1.
sub-frontloading laid down in this Guideline shall be applied
to frontloading and sub-frontloading arrangements regardless of
whether a future Eurosystem NCB: (i) borrows the banknotes
and coins to be frontloaded; or (ii) produces or procures them.

2.
This Guideline shall not apply to the physical delivery of
euro banknotes and coins from Eurosystem NCBs to NCBs of
non-participating Member States until the latter have the status
of future Eurosystem NCBs.

CHAPTER II

LOANS OF EURO BANKNOTES AND COINS FOR FRONT-
LOADING

Article 3

Delivery

Conditions

applicable to a

loan of euro banknotes

and coins

The conditions set out in this Article shall be specified in

1.
the contractual arrangements referred to in Article 3(3).

2.
The exact volume, broken down by denomination of euro
banknotes and coins to be delivered, and the time of delivery,
shall be specified in any contractual arrangements.

3.
Euro banknotes and coins shall be transported to a future
Eurosystem NCB for the purpose of frontloading and launch
requirements in accordance with the rules on security and
insurance that normally apply to bulk transfers of euro
banknotes and coins between the NCBs. The risk of destruction,
loss, theft and robbery of the delivered euro banknotes and
coins shall pass to the future Eurosystem NCB from the
moment when the euro banknotes and coins leave the vaults
of the delivering Eurosystem NCB.

1.
One or more Eurosystem NCBs, as the case may be, may
deliver euro banknotes and coins to a future Eurosystem NCB
for the purpose of frontloading and launch requirements.

(1) OJ L 126, 26.5.2000, p. 1.

4.
A future Eurosystem NCB shall pay the cost of trans-
porting euro banknotes and coins from a Eurosystem NCB to
it. The delivering Eurosystem NCB shall ensure that
the
transport is carried out efficiently.

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If a future Eurosystem NCB needs a bulk transfer of euro
5.
banknotes and coins from the Eurosystem within 12 months of
the cash changeover date, these requirements will be regarded as
part of the launch requirements and, as regards repayment, shall
be treated similarly to frontloaded euro banknotes and coins, as
provided for in paragraphs 6 to 8. In all other respects, the
fulfilment of such requirements shall be treated in the same way
as a bulk transfer.

6.
A future Eurosystem NCB shall observe the following
accounting and financial reporting obligations in relation to
delivering Eurosystem NCB(s):

(a) During the frontloading/sub-frontloading period, the future
Eurosystem NCB shall record the amount of euro banknotes
and coins delivered for the purpose of frontloading (and for
launch requirements) off-balance sheet at their face value.

(b) The future Eurosystem NCB shall report the amount of the
frontloaded and sub-frontloaded euro banknotes and coins
to the delivering Eurosystem NCB(s).

(c) The future Eurosystem NCB shall report the total amount
(broken down by denomination) of any frontloaded or sub-
frontloaded euro banknotes that entered into circulation
before the cash changeover date, as well as the date on
which it became aware that these banknotes had entered
into circulation.

7.
From the cash changeover date, a future Eurosystem NCB
shall observe the following accounting and financial reporting
obligations:

(a) Unless

they have already been recorded pursuant
frontloaded euro banknotes
items as at

to
shall be
cash
the

sheet

paragraph 10,
recorded as on balance
changeover date.

(b) The total amount of frontloaded euro banknotes, excluding
any banknotes that entered into circulation before the cash
changeover date reported under paragraph 6(c), shall be
recorded in the balance sheet of
the future Eurosystem
NCB within the ‘banknotes in circulation’ figure.

(c) The difference between the total amount of

frontloaded
euro banknotes and the amounts of
frontloaded euro
banknotes that have been debited in the accounts of front-
loaded eligible counterparties held with a future Eurosystem

NCB under the provisions of Article 15 shall be treated as a
collateralised, non-remunerated loan granted to the eligible
counterparties and to be repaid by them in accordance with
Article 15.

8.
A future Eurosystem NCB shall repay the euro banknotes
borrowed from a Eurosystem NCB for the purpose of front-
loading by delivering an equivalent number and quality of euro
banknotes that it produces or procures as a result of an allo-
cation to it in the Eurosystem’s euro banknote production for
one or more consecutive years immediately following the year
in addition to its
in which the cash changeover takes place,
normal share in the Eurosystem’s euro banknote production
allocation for
the
equivalent number and quality of banknotes to be repaid will
be decided by the Governing Council. The equivalent number
and quality of banknotes to be repaid for the euro second series
will be calculated as established by the Governing Council in
due time.

the years concerned. The calculation of

9.
A future Eurosystem NCB shall conduct frontloading in
accordance with the conditions set out in Chapters III and IV.
No delivery shall take place until the future Eurosystem NCB
and an eligible
concluded contractual
arrangements that incorporate such conditions, unless national
statutory provisions on frontloading ensure that equivalent
conditions to those set out in Chapters III and IV apply to all
eligible counterparties.

counterparty have

If

the

frontloaded euro banknotes enter

10.
into circulation
before the cash changeover date, a delivering Eurosystem NCB
shall record them as having been issued and being in circu-
lation. The delivering Eurosystem NCB shall record a claim
vis-à-vis
future Eurosystem NCB amounting to the
nominal value of the euro banknotes that entered into circu-
lation before the cash changeover date. The future Eurosystem
NCB shall pay to the delivering Eurosystem NCB remuneration
on that claim. The remuneration shall be payable from the date
when the future Eurosystem NCB became aware that these euro
banknotes entered into circulation until the first Eurosystem
business day following the cash changeover date. On that
date,
the future Eurosystem NCB and the
related remuneration shall be settled by TARGET or a system
replacing TARGET. The reference rate for the remuneration
shall be the latest available marginal interest rate used by the
Eurosystem in its tenders for main refinancing operations under
paragraph 3.1.2 of Annex I to Guideline ECB/2000/7 of 31
August 2000 on monetary policy instruments and procedures
of the Eurosystem (1). In the event that more than one Euro-
system NCB delivers euro banknotes to the future Eurosystem
NCB for
contractual
arrangements referred to in Article 3(3) shall specify the deli-
vering NCB which shall record the banknotes in circulation and
the claim vis-à-vis the future Eurosystem NCB.

the purpose of

the liability of

frontloading,

the

(1) OJ L 310, 11.12.2000, p. 1. Guideline as last amended by Guideline

ECB/2005/17 (OJ L 30, 2.2.2006, p. 26).

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A future Eurosystem NCB shall report the following to

11.
the ECB:

(b) ensure performance of the obligations set out in Article 10
to be included in the contractual arrangements between the
future Eurosystem NCB and the eligible counterparty.

(a)

the final total amount of frontloaded and sub-frontloaded
euro banknotes (broken down by denomination); and

(b) the final total amount of frontloaded and sub-frontloaded

euro coins (broken down by denomination).

2.
If collateral is realised to ensure the performance of the
obligations set out in Article 10, the eligible counterparty shall
provide the future Eurosystem NCB with additional collateral to
cover the full face value of frontloaded euro banknotes and
coins, as required under paragraph 1(a).

CHAPTER III

FRONTLOADING

Article 5

Eligible counterparties

3.
The collateral shall be provided to the future Eurosystem
NCB before it starts frontloading euro banknotes and coins, and
shall cover risks arising from the start of delivery for front-
loading.

Credit institutions established in a future participating Member
State (including branches of foreign credit institutions located in
the future participating Member State) and national post offices
that have an account with their future Eurosystem NCB shall be
considered eligible to receive euro banknotes and coins for the
frontloading once the contractual arrangements
purpose of
provided for in Article 4(9) have been established.

The future Eurosystem NCB shall ensure that the collateral
4.
is fully enforceable. For this purpose it shall mobilise the eligible
collateral by means of appropriate collateralisation procedures
in a manner set out in Annex I to Guideline ECB/2000/7.

Article 6

Delivery for frontloading

A future Eurosystem NCB may not start delivery of euro
front-

1.
banknotes
loading/sub-frontloading period has commenced.

frontloading before

and coins

the

for

2.
A future Eurosystem NCB may frontload euro banknotes
and coins in accordance with the provisions of this Guideline.
The frontloading of euro banknotes and coins
shall not
future Eurosystem NCB and the
commence before
concluded contractual
receiving eligible
arrangements that incorporate the conditions set out in this
Chapter and Chapter IV (unless equivalent rules and procedures
have been established by statutory provisions in the future
participating Member State in question).

counterparty have

the

Article 7

Provision of collateral

5.
A future Eurosystem NCB shall implement adequate risk
control measures to bear the risks relating to frontloading. It
shall consult the ECB prior to frontloading on the risk control
measures referred to in this Article. Where the market value of
the eligible collateral is adjusted to take into account the applied
the amount of collateral should be
risk control measures,
face
it always covers the full
adjusted accordingly so that
value of frontloaded euro banknotes and coins which has not
been debited on eligible counterparties’ accounts with the future
Eurosystem NCB that provided the frontloading euro banknotes
and coins.

the future Eurosystem NCB the right

6.
The contractual arrangements to be concluded before
frontloading shall provide that an eligible counterparty shall
grant
to realise the
collateral if the frontloaded eligible counterparty breaches any
of the obligations referred to in this Guideline as a precondition
to frontloading and specifically agreed on between the eligible
counterparty and the future Eurosystem NCB, and the front-
loaded eligible counterparty does not pay the contractual
penalties provided for in Article 10.

1.
Eligible counterparties that are to be frontloaded shall
provide their future Eurosystem NCB with eligible collateral,
as defined in Article 8, to:

Article 8

Eligible collateral

(a) cover the full face value of frontloaded euro banknotes and

coins; and

All

assets

eligible

1.
operations as defined in Annex I
shall be considered to be eligible collateral
purposes.

for Eurosystem monetary policy
to Guideline ECB/2000/7
for frontloading

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Assets denominated either in the legacy currencies of
2.
future participating Member States or in euro, which fulfil the
uniform criteria laid down in Annex I to Guideline ECB/2000/7
and are eligible for Eurosystem monetary policy operations
(with the exception of the criterion on the place of settlement
and currency of denomination), shall be considered to be
eligible collateral
for frontloading purposes. The assets shall
be held (settled) in the euro area, or in the future participating
Member State, with a domestic securities settlement system
(SSS) assessed against the ECB’s ‘Standards for the use of EU
Securities Settlement Systems in ESCB credit operations’.

Article 10

Commitments of an eligible counterparty regarding sub-
frontloading

the frontloaded eligible
Before sub-frontloading takes place,
counterparties shall undertake to carry out sub-frontloading
only in accordance with the rules and procedures laid down
in this Guideline, which shall be agreed upon between them-
selves and the professional third parties to be sub-frontloaded.
In particular, the following conditions shall be agreed before the
eligible counterparty may sub-frontload:

The following may also be provided as eligible collateral:
3.
(a) cash deposits denominated in a legacy currency; (b) cash
deposits in euro on a dedicated account, remunerated at the
same rate as applied for minimum reserves; or (c) deposits
denominated in a legacy currency or in euro and in another
form considered appropriate by the future Eurosystem NCB.

Article 9

Reporting

An eligible counterparty shall report to its future Euro-

1.
system NCB:

(a)

the final total amount of sub-frontloaded euro banknotes
(broken down by denomination); and

(b) the final

total amount of

sub-frontloaded euro coins

(broken down by denomination).

2.
Immediately upon sub-frontloading, a frontloaded eligible
counterparty shall provide its future Eurosystem NCB with
information on the identity of the professional third parties
that have been sub-frontloaded, as well as the amounts of
sub-frontloaded euro banknotes and coins per
individual
customer. The future Eurosystem NCB shall treat such infor-
mation as confidential and shall only use it to monitor how
third parties comply with their obligations
the professional
euro
avoidance of
relating to the
banknotes and coins, and for reporting pursuant
to Article
4(11).

circulation of

early

(a) The eligible counterparty shall ensure that the sub-front-
loaded euro banknotes and coins remain on the premises
of the sub-frontloaded professional third parties, where they
shall be stored separately from any other euro banknotes
and coins, other currency or other property, to avoid them
entering into circulation prior to the cash changeover date.
Such early circulation shall be subject to the payment of
appropriate contractual penalties.

(b) The eligible counterparty shall agree with the professional
third party to be sub-frontloaded that the latter will allow
the future Eurosystem NCB to carry out audits and
third
inspections
party’s premises in order to verify the presence of
the
sub-frontloaded euro banknotes and coins.

sub-frontloaded professional

the

at

(c) The eligible counterparty shall pay to the future Eurosystem
NCB contractual penalties in an amount proportional to any
damage suffered, however no less than 10 % of the sub-
frontloaded amount if: (i) the future Eurosystem NCB is not
given access to carry out the audit and inspections referred
to in paragraph (b); or (ii)
the sub-frontloaded euro
banknotes and coins are not stored on the premises of
the sub-frontloaded professional third party as set out in
this Article. A future Eurosystem NCB shall not impose
such contractual penalties:
its future participating
(i)
Member State has established a regulatory framework
providing for an equivalent level of protection; or (ii) to
the extent that a sub-frontloaded professional third party
has already paid penalties pursuant to Article 16(2)(f).

if

if

A frontloaded eligible counterparty shall

3.
immediately
inform the future Eurosystem NCB that frontloaded it (which
shall then inform the ECB thereof):

(a)

if there is any reason to believe that any frontloaded euro
banknotes or coins have entered into circulation before the
cash changeover date; and

Article 11

Statistical aspects

For the purposes of
the application of Regulation (EC) No
2423/2001 (ECB/2001/13) of 22 November 2001 concerning
the consolidated balance sheet of the monetary financial insti-
tutions sector (1), a future Eurosystem NCB shall ensure that
monetary financial
institutions within its Member State do
not record items and transactions relating to frontloaded euro
banknotes and coins on their balance sheet during the frontloa-
ding/sub-frontloading period.

(b) of the total amount (broken down by denomination) of
frontloaded banknotes, if any, that entered into circulation
before the cash changeover date.

(1) OJ L 333, 17.12.2001, p. 1. Regulation as last amended by Regu-
lation (EC) No 2181/2004 (ECB/2004/21) (OJ L 371, 18.12.2004,
p. 42).

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Article 12

Distribution to branches

A future Eurosystem NCB shall allow eligible counterparties to
distribute frontloaded euro banknotes and coins only to their
branches within the future participating Member State.

Article 13

Prohibition on early circulation

from disposing of

A future Eurosystem NCB shall prohibit eligible counter-
1.
the euro banknotes and coins
parties
delivered to them before 00:00 (local
time) on the cash
changeover date, unless otherwise provided for by this
Guideline.
the future Eurosystem NCB shall
require that eligible counterparties store the frontloaded euro
banknotes and coins in their vaults separately from any other
euro banknotes and coins, other currency or other property,
and safely in order to avoid destruction, theft, robbery or any
other cause of early circulation.

In particular,

2.
Eligible counterparties shall ensure that there is no circu-
lation of any frontloaded euro banknotes and coins prior to the
cash changeover date.

In order to verify the presence of the frontloaded euro
3.
banknotes and coins and the arrangements under which the
eligible counterparties carry out sub-frontloading, eligible coun-
terparties shall grant their future Eurosystem NCB the right to
audit and inspect their premises.

the obligations

4.
Eligible counterparties shall undertake to pay penalties to
the future Eurosystem NCB, in the event that the eligible coun-
terparty breaches
relating to frontloading,
including but not limited to putting, or acting in a way that
is conducive to putting, the frontloaded banknotes into circu-
lation before the cash changeover date, or refusing to allow
inspections. The future Eurosystem NCB shall
auditing or
ensure that
to contractual or
such breaches are subject
statutory penalties, as appropriate, payable in an amount
proportional to any damage suffered. The future Eurosystem
NCB shall not impose such penalties if the future participating
regulatory
Member State
framework providing for an equivalent level of protection.

in question has

established a

However, the future Eurosystem NCB and the eligible coun-
terparty shall agree that notwithstanding such insurance, the
provisions of Article 15 relating to immediate debiting of
frontloaded euro banknotes or coins that enter into circulation
early and related remuneration payments shall apply. Notwith-
standing the above, a future Eurosystem NCB and an eligible
counterparty may agree that the future Eurosystem NCB shall
take care of the practical arrangements relating to the transport
of euro banknotes and coins for the purpose of frontloading on
behalf of and at the risk of the eligible counterparty, or if the
future Eurosystem NCB so wishes, at the risk of the future
Eurosystem NCB.

Article 15

Debiting and crediting

1.
Euro banknotes and coins frontloaded to eligible counter-
parties shall be debited in those counterparties’ accounts with
their future Eurosystem NCB at their face value, in accordance
with the following ‘linear debiting model’: the total amount of
frontloaded euro banknotes and coins shall be debited in three
equal instalments, on the settlement date of the first, fourth and
fifth Eurosystem main refinancing operations following the cash
changeover date.

2.
If there are not enough funds available on a frontloaded
eligible counterparty’s account with the future Eurosystem NCB
that frontloaded it to debit the account as provided for in
paragraph 1, then the eligible counterparty shall be considered
to have breached its obligation to pay for the frontloaded euro
banknotes and coins.

3.
Euro banknotes and coins delivered to eligible counter-
parties on or after the cash changeover date shall be debited
in their respective accounts with future Eurosystem NCBs in
accordance with current Eurosystem practice. Euro banknotes
and coins returned by eligible counterparties on or after the
cash changeover date shall
likewise be credited to their
respective accounts with future Eurosystem NCBs.

4.
Banknotes and coins denominated in a legacy currency
and returned by eligible counterparties shall be credited to
their respective accounts with the future Eurosystem NCB in
accordance with current Eurosystem practice.

Article 14

Risk of destruction, loss, theft and robbery

loss,
Eligible counterparties shall bear the risk of destruction,
theft and robbery of
frontloaded euro banknotes and coins
from the moment when such banknotes and coins leave the
vaults of the future Eurosystem NCB. A future Eurosystem NCB
may require eligible counterparties to cover these risks by taking
out adequate insurance or by any other appropriate means.

5.
If euro banknotes or coins enter into circulation prior to
the cash changeover date then the amount of such banknotes or
coins shall be immediately charged to the frontloaded eligible
counterparty as foreign exchange. Any such euro banknotes
shall be recorded as being ‘in circulation’
in the accounts of
the Eurosystem NCB that delivered them to the future Euro-
system NCB for the purpose of frontloading. The recording shall
occur regardless of the reason for the banknotes entering into
circulation prior to the cash changeover date.

L 207/46

EN

Official Journal of the European Union

28.7.2006

CHAPTER IV

SUB-FRONTLOADING

Article 16

Conditions applying to delivery of euro banknotes and
coins for sub-frontloading

Sub-frontloading of professional

third parties may not
frontloading/sub-frontloading period has

the

1.
start before
commenced.

Before any sub-frontloading may start, the eligible coun-
shall conclude

2.
terparty and the professional
contractual arrangements that cover at least the following:

third parties

(a) Sub-frontloading shall take place at the full risk and respon-
sibility of the professional third party and subject to any
conditions agreed in accordance with this Guideline.

(b) The professional third party shall report all sub-frontloaded
euro banknotes and coins to the ECB via its future Euro-
system NCB.

(c) The professional third party shall store sub-frontloaded euro
banknotes and coins as required under Article 10(a), and
shall not dispose of them prior to 00:00 (local time) on the
cash changeover date.

(d) The professional

its future Euro-
third party shall grant
system NCB the right to audit and inspect its premises to
verify the presence of sub-frontloaded banknotes and coins.

(e) The professional third party shall report to the future Euro-
system NCB the total amount (broken down by denomi-
nation) of sub-frontloaded banknotes,
if any, that entered
into circulation before the cash changeover date.

(f) The professional third party shall undertake to pay penalties
to the future Eurosystem NCB in the event that the profes-
sional third party breaches the obligations relating to sub-
frontloading, including but not limited to a breach of the
obligation set out in paragraph (c) or a refusal to allow
auditing or inspections, as referred to in paragraph (d).
Such breaches shall be subject to contractual or statutory
penalties, as appropriate, payable in an amount proportional
to any damage suffered, however no less than 10 % of the
sub-frontloaded amount. The future Eurosystem NCB shall
not
the future participating
Member State in question has established a regulatory
framework providing for an equivalent level of protection.

impose such penalties

if

Article 17

Exclusion of the general public

1.
A future Eurosystem NCB shall prohibit eligible counter-
parties from sub-frontloading euro banknotes and coins to the
general public.

2.
Paragraph 1 of this Article does not prohibit the provision
to the general public of coin starter kits containing small
amounts of euro coins of different denominations, as specified
by the competent national authorities in some future partici-
pating Member States, as the case may be.

CHAPTER V

FINAL PROVISIONS

Article 18

Verification

Future Eurosystem NCBs shall forward to the ECB copies of any
legal instruments and measures adopted in their Member State
in relation to this Guideline at the latest three months prior to
commencement of
the frontloading/sub-frontloading period,
however not before any decision on abrogation of the dero-
gation has been taken in relation to such Member State.

Article 19

Euro coins

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

Article 20

Final provisions

1.

This Guideline shall enter into force on 19 July 2006.

This Guideline is addressed to the NCBs of participating

2.
Member States.

Done at Frankfurt am Main, 14 July 2006.

For the Governing Council of the ECB
The President of the ECB

Jean-Claude TRICHET