Opinion of the European Central Bank of 25 September 2007 at the request of the President of Narodowy Bank Polski on a draft ordinance on the method and procedure for counting, sorting, packaging and labelling packaging units of banknotes and coins, and in conducting activities related to the supply of banknotes and coins to banks (CON/2007/28)
Date: 2007-09-25
Institutions: European Central Bank
Subjects: Poland, monetary policy, money, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 25 September 2007 

at the request of the President of Narodowy Bank Polski  

on a draft ordinance on the method and procedure for counting, sorting, packaging and labelling 

packaging units of banknotes and coins, and in conducting activities related to the supply of 

banknotes and coins to banks 

(CON/2007/28) 

Introduction and legal basis 

On 24 July 2007 the European Central Bank (ECB) received a request from the President of Narodowy 

Bank  Polski  (NBP)  for  an  opinion  on  a  draft  ordinance  of  the  NBP’s  President  on  the  method  and 

procedure for counting, sorting, packaging and labelling packaging units of banknotes and coins, and in 

conducting  activities  related  to  the  supply  of  banknotes  and  coins  to  banks  (hereinafter  the  ‘draft 

ordinance’). 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European  Community  and 

the  first,  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  ordinance  relates  to  currency  matters, 

means of payment and to the NBP. 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 ordinance 

The  draft  ordinance  is  intended  to  replace  the  current  NBP  rules  concerning  commercial  banks’ 
obligations with respect to counting, sorting and packaging of banknotes and coins2. Particularly in view 

of  the  need  to  adjust  the  existing  legal  requirements  to  the  increased  automation  of  cash  handling 
procedures3,  the  draft  ordinance  introduces  the  following  key  modifications:  (i)  streamlining  regulatory 

1 
2  

3  

OJ L 189, 3.7.1998, p. 42.  
Ordinance No 8/2001 of NBP’s President of 27 June 2001 on the method and procedure for counting, sorting, packaging 
and labelling packaging units of banknotes and coins, and in conducting activities related to the supply of banknotes and 
coins to banks (Dz.Urz. NBP of 17 July 2001 No 10, Item 22, as amended). The statutory basis for the adoption of the 
draft  ordinance  is  contained  in  Article  68(2)  of  the  Law  of  29  August  1997  on  banking  (consolidated  text:  Dz.U.  of 
13 May 2002 No 72, Item 665, as amended; hereinafter: ‘Law on banking’). 
See the first paragraph of the explanatory memorandum accompanying the draft ordinance, and the second paragraph of 
the letter from NBP’s President of 18 July 2007 requesting the ECB’s opinion. 

 
 
 
 
                                                 
obligations  as  regards  the  manual  counting  and  sorting  of  banknotes4;  (ii)  modifying  relevant  technical 

standards, such as those related to packaging banknotes in packets (100 pieces), half-bundles (500 pieces) 
and  bundles  (1000  pieces)5;  and  (iii)  facilitating  a  decrease  in  stocks  of  banknotes  held  by  commercial 

banks,  inter  alia  by  allowing  packaged  banknotes  of  certain  denominations  to  be  lodged  with  NBP’s 
regional branches in half-bundles6.  

2.  General observations 

2.1  While  Poland  is  a  Member  State  with  a  derogation  and  the  ECB  requirements  regarding  the 

organisation of national cash cycles in Member States that have adopted the euro currently do not 

apply to NBP, these requirements will become applicable to NBP once Poland adopts the euro and 

NBP becomes a fully integrated part of the Eurosystem. As a general comment, the ECB notes that 

the NBP’s provisions on the handling of banknotes differ to some extent from Eurosystem practices 

and  that  these  provisions  will  have  to  be  aligned  with  the  Eurosystem  standards  before  Poland 

adopts the euro. The ECB understands that the main intention of the draft ordinance is to adapt the 

NBP’s legislation to the growing automisation of the cash handling operations. The ECB assumes 

that the draft ordinance may be an adequate legislative instrument to achieve this specific purpose. 

However, the ECB would have welcomed at the same time a more consistent approach to achieve a 

high  level  of  harmonisation  with  the  Eurosystem  standards.  The  ECB  also  considers  that  the 

explanatory memorandum to the draft NBP ordinance could include an appropriate reference to the 

necessary further evolution of NBP’s regulatory framework in view of the future adoption of euro. 

2.2  The ECB furthermore notes that the draft ordinance forms part of a wider body of the regulatory 

framework  containing  also  NBP’s  legislative  instruments  covering:  (i)  rules  on  withdrawal  from 
circulation  of  worn  or  damaged  banknotes  and  coins7;  and  (ii)  rules  on  seizure  of  suspected 
counterfeits8.  Legal certainty and clarity could be enhanced by consolidating all such Polish cash 

handling rules, in a single administrative instrument. The ECB notes that this is currently difficult 

to achieve due to the existence of separate statutory bases for the regulation of the various elements 

of  NBP’s  cash  handling  regulation.  While  greater  legal  coherence  may  currently  be  achieved  by 

way of introducing clear cross-references between the various existing provisions, a uniform cash 

4  
5  
6  
7  

8  

Paragraph 2(3) and paragraphs 6 to 9 of the draft ordinance. 
Paragraphs 10 to 16 of the draft ordinance. 
Paragraph 29(3) of the draft ordinance. 
Ordinance  No  1/2003  of  NBP’s  President  of  15  January  2003  laying  down  the  detailed  rules  of  exchange  of  currency 
items that due to their use or damage have ceased to be legal tender on the territory of the Republic of Poland (Dz.Urz. 
NBP of 17 January 2003 No 1, Item 1, as amended). The statutory basis for the adoption of this ordinance is contained in 
Article 34(2) of the Law on Narodowy Bank Polski of 29 August 1997 (consolidated text: Dz.U. of 1 April 2005 No 1, 
Item 2, as amended; hereinafter, the ‘NBP Statute’). 
Ordinance  of  NBP’s  President  of  31  August  1989  on  the  seizure  of  counterfeit  currency  (M.P.  of  27  September  1989 
No 32,  Item  255,  as  amended).  The  statutory  basis  for  the  adoption  of  this  ordinance  is  currently  contained  in 
Article 35(3) of the NBP Statute. Cf. resolution No 19/2004 of the NBP Management Board of 22 April 2004 amending 
the  resolution  on  the  introduction  of  the  Organisational  By-laws  of  Narodowy  Bank  Polski  (as  regards  creation  of  the 
National  Analysis  Centre,  the  Coin  National  Analysis  Centre  and  the  National  Counterfeit  Centre  within  NBP’s  Head 
Office.  The  penal  sanctions  for  currency  counterfeiting  are  contained  in  the  Chapter  XXXVII  of  the  Penal  Code  of 
6 June 1997 (Dz.U. of 2 August 1997 No 88, Item 553, as amended). 

2 

 
                                                 
handling regulation should be introduced in view of the future adoption of euro, on the basis of a 

single  statutory  delegation.  Moreover,  as  regards  the  euro  banknotes  and  coins  such  framework 

needs to comply with the directly applicable provisions of Council Regulation (EC) No 1339/2001 

of  28  June  2001  extending  the  effects  of  Regulation  (EC)  No  1338/2001  laying  down  measures 

necessary for the protection of the euro against counterfeiting to those Member States which have 
not adopted the euro as their single currency (this ECB opinion does not assess such compliance)9. 

2.3  Under  Article  106  of  the  EC  Treaty,  the  ECB  has  the  exclusive  right  to  authorise  the  issue  of 

banknotes  within  the  Community,  whereas  the  coins  are  issued  by  the  Member  States  subject  to 

approval  by  the  ECB  of  the  volume  of  the  issue.  Consequently,  as  a  general  principle,  the 

Eurosystem’s regulatory competence concerns only banknotes. Hence, in view of the accession of 

national  central  banks  (NCBs)  to  the  Eurosystem,  the  ECB  supports  a  clear  and  consistent 

separation  between  national  rules  relating  to  banknotes  and  rules  relating  to  coins.  Also  the  draft 

ordinance,  and  more  generally  the  NBP’s  overall  cash  handling  framework,  would  benefit  from 

introducing  such  consistent  internal  separation  between  rules  concerning  banknotes  and  coins, 
respectively10.  This  would  in  time  facilitate  the  legal  convergence  of  the  Polish  legislative 

framework, necessary to become a full participant in economic and monetary union. 

3. 

Alignment with the Eurosystem’s Banknote Recycling Framework 

3.1  The  draft  ordinance  regulates,  among  others,  the  detection  of  counterfeits  and  fitness  sorting  of 

banknotes  ensuring  that  worn  or  defective  banknotes  that  are  unfit  for  circulation,  and  banknotes 

where  there  is  sufficient  reason  to  believe  that  they  are  counterfeit,  are  duly  withdrawn  from 
circulation11. In the view of Poland’s future adoption of euro and the related general obligation to 
align Polish law with the law of the Eurosystem12, the ECB would welcome already establishing in 

the  draft  ordinance  a  legal  framework  at  the  national  level  that  is  consistent  with  the  ECB’s 

‘Framework  for  the  detection  of  counterfeits  and  fitness  sorting  by  credit  institutions  and  other 

professional  cash  handlers’ 
‘Framework’)13.  

(hereinafter 

the 

‘Banknote  Recycling  Framework’  or 

the 

3.2  The  Banknote  Recycling  Framework  aims  to  implement  a  common  policy  for  the  recycling  of 

banknotes  by  credit  institutions  and  other  professional  cash  handlers,  so  as  to  contribute  to 

9  

10  

11  

12  
13  

OJ  L  181,  4.7.2001,  p.  11.  The  provisions  of  Regulation  (EC)  No  1339/2001  are  currently  reflected  in  the  Polish  law 
provisions specified in footnote 8 above. 
Currently  the  draft  ordinance  separates  banknote  and  coin  rules  only  to  a  certain  extent.  As  an  example,  in  Section  II 
(‘Polish  currency’)  of  the  draft  ordinance  separate  chapters  cover  packaging  and  labelling  in  relation  to  banknotes 
(Chapters 2-3) and in relation to coins (Chapters 4-5), while the provisions relating to counting and sorting, as well as to 
cash lodging and cash discrepancies cover, for the most part, both banknotes and coins (see Chapter 1 and 6 to 7). 
Paragraphs 2, 6 to 9 and 35 to 39 of the draft ordinance. The draft ordinance provides in the case of detecting a banknote 
in  relation  to  which  there  is  sufficient  reason  to  believe  that  it  is  counterfeit  that  the  relevant  organisational  unit  of  a 
commercial bank is obliged to act in accordance with the principles set in the draft ordinance and in separate provisions, 
i.e. the Ordinance on the seizure of counterfeit currency (see footnote 8 above). 
See Article 121(1) of the Treaty. 
Document  available  on  the  ECB’s  website.  The  equivalent  rules  for  euro  coins  are  contained  in  the  Commission’s 
Recommendation of 27 May 2005 concerning authentication of euro coins and handling of euro coins unfit for circulation 
(C(2005)1540 final). 

3 

 
                                                 
maintaining the quality and authenticity of euro banknotes in circulation. As issuing authorities, the 

ECB  and  the  NCBs  of  the  Member  States  that  have  adopted  the  euro  consider  it  to  be  of  utmost 

importance  for  euro  banknotes  in  circulation  to  be  in  good  physical  condition  so  that  the  general 

public, as well as professional cash handlers, can check their authenticity in a reliable and proper 

manner and separate authentic banknotes from counterfeits or suspected counterfeits. 

3.3  Under  the  Banknote  Recycling  Framework14,  credit  institutions  and  other  professional  cash 

handlers  may  re-issue  euro  banknotes  to  customers  only  if  these  banknotes  are  duly  checked  for 

authenticity and fitness. As a general rule, the authenticity and fitness checks of the banknotes to be 

recycled can be performed either by banknote handling machines successfully tested by NCBs, or 

by  trained  staff  members.  However,  the  banknotes  may  only  be  returned  to  circulation  via 

automated teller machines (ATM) or other customer-operated devices if they have been checked for 

both  authenticity  and  fitness  by  banknote  handling  machines  successfully  tested  by  an  NCB. 

Banknotes  which  have  been  checked  for  authenticity  by  trained  staff  members  of  a  cash  handler 

without  the  use  of  successfully  tested  banknote  handling  equipment,  e.g.  manually,  may  not  be 

returned  to  circulation  via  ATMs  or  other  customer-operated  devices,  but  may  only  be  re-issued 

over the counter after being checked for fitness. 

3.4  Under  the  draft  ordinance  the  definition  of  ‘counting  of  banknotes’  includes  verification  of  their 

authenticity,  and  ‘sorting  of  banknotes’  consists  in  separating  banknotes  fit  for  circulation  from 
those unfit for circulation due to wear or tear damage15. Both counting and sorting of banknotes can 
be effected manually or with the use of sorting machines16. The draft ordinance does not, however, 

include  any  provisions  corresponding  to  the  Framework’s  requirements  that  would  provide  that 

only the banknotes checked by banknote handling machines for both authenticity and fitness may 

be returned to circulation via ATMs or other customer-operated devices. 

3.5  Moreover,  the  ECB  notes  that  the  draft  ordinance  contains  a  definition  of  ‘banknotes  unfit  for 

circulation’,  which  covers,  among  others,  banknotes  which  are  tattered,  torn  partially  or  entirely, 
backed  with  an  adhesive,  excessively  soiled,  stained  or  damaged  in  any  other  way17.  The  above 

description  does  not  correspond  with  the  Eurosystem’s  minimum  standards  for  manual  and 

automated  fitness  sorting  of  euro  banknotes  by  credit  institutions  and  other  professional  cash 
handlers that are contained in the Annex to the Banknote Recycling Framework18. Further, the ECB 

notes that the draft ordinance’s criteria for qualifying banknotes as unfit for circulation are without 

prejudice  to  the  separate  NBP’s  provisions  relating  to  the  exchange  of  worn  or  damaged 
banknotes19. In view of preparations for the future adoption of the euro by Poland, the ECB invites 

14  
15  
16  
17  
18  

19  

See points 2.1.2. and 2.1.3. of the Banknote Recycling Framework. 
Paragraph 6(1) to (2) of the draft ordinance. 
Paragraph 7 of the draft ordinance. 
Paragraph 6(4) of the draft ordinance. 
See  Annex to the  Banknote  Recycling  Framework  ‘Minimum  standards  for  fitness  sorting  of  euro  banknotes  by credit 
institutions and other professional cash handlers’, available on request from the ECB. 
See Ordinance No 1/2003 referred to in footnote 7 above. 

4 

                                                 
the NBP to already consider the overall alignment of such NBP’s standards for fitness sorting with 

the Banknote Recycling Framework and its Annex. 

3.6  The  ECB  notes  that  the  draft  ordinance  applies  only  to  domestic  banks,  branches  of  European 
Union credit institutions and branches of foreign (i.e. non-EU) banks20 as well as to NBP itself21, 

whereas  the  Banknote  Recycling  Framework  applies  to  all  professional  cash  handlers,  i.e.  both 

credit institutions and other professional cash handlers. The ECB understands that under Polish law 
the NBP has no powers to regulate non-bank entities22, such as non-bank cash handlers. Taking into 
account  the  potentially  increasing  role  of  non-bank  cash  handlers23  in  the  Polish  cash  cycle,  the 

ECB therefore recommends taking appropriate steps to ensure uniform application of Eurosystem 

standards  contained  in  the  Banknote  Recycling  Framework  to  all  relevant  categories  of  cash 

handling  entities.  Hence,  in  addition  to  fully  aligning  with  the  Framework  of  the  NBP’s  own 

legislative instruments directed to banks, which would be an important first step, other appropriate 

legislative  or  contractual  instruments  may  need  to  be  introduced  for  the  remaining  categories  of 

cash handlers. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 25 September 2007. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

20  

21  
22  

23  

The term  ‘credit  institutions’  under  Polish  law  only  relates  to EU  credit  institutions  from  outside  Poland.  Polish  credit 
institutions are legally referred to as ‘banks’ (this definition does not cover the Polish variety of credit unions, operating 
on the basis of the Law of 14 December 1995 on cooperative savings and loan associations (Dz.U. of 4 January 1996 
No 1, Item 2, as amended)). Non-EU banks are referred to as ‘foreign banks’ (Article 2 and Article 4(1)(17) to (20) of the 
Law on banking). 
Paragraph 1(2) of the draft ordinance. 
See Article 68(2) of the Law on banking in conjunction with Article 92 of the Constitution of the Republic of Poland of 
2 April  1997  (Dz.U.  of  16  July  1997  No  78,  Item  483,  as  amended);  cf.  judgment  of  the  Constitutional  Tribunal  of 
28 June 2000 in Case K25/99 (Dz.U. of 7 July 2000 No 53, Item 648). 
Including, among others, specialised cash handling service providers, bureaux de change, retailers, etc. Operations in the 
area of banknotes counting, sorting and packaging may be outsourced by banks to other entities, subject to supervisory 
clearance  under  Article  6a(1)(2)  in  conjunction  with  Article  6d  of  the  Law  on  banking;  cf.  point  II  of  the  NBP’s 
explanatory note NB-BPN-I-022-70/04 of 3 August 2004 on the  application of certain provisions related to outsourcing.  

5