Opinion of the European Central Bank of 22 December 2008 at the request of the Magyar Nemzeti Bank on draft regulations on the processing and distribution of banknotes and coins and on technical tasks relating to the protection of banknotes and coins against counterfeiting (CON/2008/90)
Date: 2008-12-22
Institutions: European Central Bank
Subjects: Hungary, counterfeiting, issuing of currency, money

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 22 December 2008  

at the request of the Magyar Nemzeti Bank on draft regulations on the processing and distribution 

of banknotes and coins and on technical tasks relating to the protection of banknotes and coins 

against counterfeiting 

(CON/2008/90) 

Introduction and legal basis 

On 11 November 2008 the European Central Bank (ECB) received a request from the Magyar Nemzeti 

Bank  (MNB)  for  an  opinion  on  two  draft  MNB  regulations:  one  on  the  processing  and  distribution  of 

banknotes and on technical tasks relating to their protection against counterfeiting (hereinafter the ‘draft 

banknote regulation’), and one on the processing and distribution of coins and on technical tasks relating 

to  their  protection  against  counterfeiting  (hereinafter  the  ‘draft  coin  regulation’;  the  draft  banknote 

regulation and the draft coins regulation are hereinafter referred to jointly as ‘the draft regulations’). 

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

European Community and the first and second 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  relates  to  currency  matters  and  means  of  payment.  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 regulation 

By  replacing  MNB  Regulations  13/2005  and  14/2005  with  the  draft  regulations,  the  MNB  aims  to 

separate its regulations for banknotes from those for coins. The draft regulations focus on ensuring high-

quality forint banknotes and coins and protecting the banknotes and coins against counterfeiting. The new 

legislative environment maintains the MNB’s central role in protecting banknotes and coins. The MNB 

operates  a  recycling  framework  for  forint  banknotes  similar  to  the  Eurosystem’s  Framework  for  the 
detection of counterfeits and fitness sorting by credit institutions and other professional cash handlers2 

(the  ‘Banknote  Recycling  Framework’).  In  addition,  the  MNB  proposes  new  rules  for  the  obligatory 

exchange of denominations. 

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2  

OJ L 189, 3.7.1998, p. 42.  
Available on the ECB’s website at www.ecb.europa.eu. Equivalent rules for euro coins are contained in the Commission 
Recommendation of 27 May 2005 concerning authentication of euro coins and handling of euro coins unfit for circulation 
(OJ L 184, 15.7.2005, p. 60). 

 
 
 
 
                                                 
2. 

General observations 

2.1  Since  Hungary  is  a  Member  State  with  a  derogation,  the  ECB’s  requirements  regarding  the 

organisation of national cash recycling in Member States that have adopted the euro do not apply to 

the MNB. These requirements will apply to the MNB once Hungary adopts the euro and the MNB 

becomes a fully integrated member of the Eurosystem. The ECB welcomes the MNB’s initiative to 

implement  a  framework  for  forint  banknote  recycling  similar  to  the  Banknote  Recycling 

Framework  and,  in  addition,  to  lay  down  mandatory  authenticity  checks  for  euro  banknotes 

recycled by cash distributors and processors.  

2.2  Under Article 106 of the Treaty, the ECB has the exclusive right to authorise the issue of banknotes 

within the Community, whereas coins are issued by euro area Member States subject to the ECB’s 

approval of the volume. Consequently, the ECB’s regulatory competence concerns only banknotes. 

In addition, in respect of the national central banks, which will become part of the Eurosystem, the 

ECB  supports  the  policy  of  keeping  a  clear  and  consistent  separation  between  national  rules 

relating  to  banknotes  and  rules  relating  to  coins.  The  ECB  therefore  welcomes  the  draft 

regulations’ separation between rules on banknotes and coins as it facilitates the legal convergence 

of the national legislative framework necessary for Hungary’s preparations for full participation in 

economic and monetary union. 

3. 

Specific observations  

3.1  Under  Article  4(2)  of  the  draft  banknote  regulation,  forint  banknotes  may  be  dispensed  via 

automated  teller  machines  if  they  are  duly  checked  for  authenticity  and  fitness  by  banknote 

handling  machines  installed  inter  alia  with  the  latest  version  of  the  updated  authentication 

hardware and/or software. In the ECB’s view, the current wording could be interpreted in such a 

way  that  in  all  cases  the  latest  software/hardware  version  supplied  by  the  machine  manufacturer 

must be installed in the banknote handling machines used by cash processors and distributors. This 

is a rather strict requirement and could imply that technical adjustments must be made to banknote 

handling machines that are already able to detect all counterfeit or falsified banknotes, as used in 

the  machine  tests  conducted  by  the  MNB  with  the  manufacturers.  The  ECB  considers  that  this 

requirement could be reformulated as a recommendation to users of banknote handling machines. 

In this context, Article 11(1) requiring updates to be made to banknote handling machines which 

are in operation for every new type of counterfeit forint banknote may be re-considered. 

3.2   Under Article 6(1) of the draft banknote regulation, the banknote handling machines must be able 

to identify the various categories of banknotes (i.e. genuine, suspect, not clearly authenticated and 

non-forint banknotes) and separate them accordingly. The ECB draws the MNB’s attention to the 

fact  that,  under  the  Banknote  Recycling  Framework,  the  ability  to  physically  sort  each  of  these 

banknote categories into such different categories is only required for customer-operated banknote 

handling machines and not for staff-operated machines. Staff-operated banknote handling machines 

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are typically able to identify such categories, but do not provide for functions to physically sort and 

separate  each  of  them  into  separate  compartments.  Accordingly,  the  MNB  may  consider  refining 

Article 6 of the draft banknote regulation. 

3.3  Table  II  in  Annex  2  of  the  draft  banknote  regulation  (‘Customer-operated  machines’)  should 

specify  whether  suspect  forint  banknotes  (under  Category  2)  will  be  credited  to  the  customer’s 

account. 

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

Done at Frankfurt am Main, 22 December 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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