Opinion of the European Central Bank of 17 December 2013 on the processing and distribution of banknotes, and their protection against counterfeiting in Hungary (CON/2013/89)
Date: 2013-12-17
Institutions: European Central Bank
Subjects: Hungary, counterfeiting, fight against crime, issuing of currency, money, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 17 December 2013  

on the processing and distribution of banknotes, and their protection against counterfeiting in 

Hungary 

(CON/2013/89) 

Introduction and legal basis 

On 25 November 2013, the European Central Bank (ECB) received a request from the Magyar Nemzeti 

Bank (MNB) for an opinion on a draft decree amending the MNB decree regulating the processing and 

distribution  of  banknotes  and  on  the  technical  tasks  relating  to  the  protection  of  banknotes  against 

counterfeiting (hereinafter referred to as the ‘draft decree’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union and the second indent 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  decree  relates  to  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 decree 

1.1  The  MNB  has  reviewed  the  operational  risk  of  the  Hungarian  automated  teller  machine  (ATM) 

network  with  regard  to  the  methods  ensuring  business  continuity  in  case  of  a  cash-in-transit 

company’s failure. The review focused on ATMs located in credit institutions and the offices of the 

postal  services,  as  in  a  critical  situation  the  continued  operation  of  the  off-site  ATMs  is  highly 

unlikely. Pursuant to the explanatory memorandum attached to the draft decree, the review carried 

out by the MNB found that credit institutions have outsourced their tasks related to the refilling of 

ATMs to cash-in-transit companies to such an extent that this outsourcing carries a systemic risk. 

The mitigation of this risk therefore requires intervention by the MNB as the competent authority 

adopting legislation on this subject matter.  

1.2  The Hungarian Financial Supervisory Authority was dissolved and its functions and responsibilities 

were transferred to the MNB on 1 October 2013. This change in the institutional setup required the 
adoption  of  a  new  Law  on  the  Magyar  Nemzeti  Bank2,  which,  inter  alia,  regulates  the  MNB’s 

competence in issuing banknotes and coins, as well as its competence in providing for protection of 

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2  

OJ L 189, 3.7.1998, p. 42. 
Law CXXXIX of 2013 on the Magyar Nemzeti Bank. 

 
 
 
 
                                                 
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the Hungarian currency and currency denominated in euro against counterfeiting. An amendment 

to  the  MNB  decree  regulating  the  processing  and  distribution  of  banknotes  and  protection  of 
banknotes against counterfeiting3 (hereinafter referred to as ‘the MNB Decree’) therefore became 

necessary to update the references to and  implement the Articles of the new Law on  the Magyar 

Nemzeti Bank, on the one hand, and to reflect the relevant Union legislation in  this field, on the 

other hand. 

1.3  Apart from providing updated references to the Law on the Magyar Nemzeti Bank in this field, the 

draft  decree  also  provides  new  requirements  that  credit  institutions  and  postal  services  have  to 

adhere to in order to ensure that the ATMs continue to operate if critical events occur that expose 

ATMs to risk. With a view to improving business continuity, the draft decree, inter alia, requires 

the entities affected by the draft decree to set up a business contingency plan. 

2. 

General observations  

2.1  Since  Hungary  is  a  Member  State  with  a  derogation  pursuant  to  Article  139  of  the  Treaty,  the 

ECB’s  requirements  regarding  the  recirculation  of  euro  banknotes  in  Member  States  that  have 
adopted the euro do not apply to the MNB4. These requirements will apply once Hungary adopts 

the euro and the MNB becomes a fully integrated member of the Eurosystem. 

2.2  The  ECB  welcomes  that  the  draft  decree  imposes  requirements  on  credit  institutions  and  postal 

services  to  develop  a  business  contingency  plan  in  relation  to  cash  distribution  disruptions  and 

acknowledges that such a provision would address specific issues, as well as mitigate relevant risks 

to the national cash distribution cycle for the purpose of ensuring its continuity. 

2.3  Furthermore, based on correspondence with the Hungarian authorities, the ECB understands that an 

amendment to the Law on the Magyar Nemzeti Bank is expected in the near future. In this respect, 
the ECB reiterates its earlier observations as regards the MNB’s currency-issuing operations5, most 

of which were not taken into consideration when the draft Law on the Magyar Nemzeti Bank was 

finalised,  and  urges  the  Hungarian  legislator  to  consider  those  observations  with  regard  to  any 

forthcoming  amendments  to  the  Law  on the  Magyar Nemzeti  Bank.  It  is  also important that  any 

future  amendments  to  the  Law  on  the  Magyar  Nemzeti  Bank  are  comprehensive  and  address  all 

outstanding  points  with  regard  to  the  MNB  identified  by  the  ECB  in  past  opinions  and  its 
Convergence  Report6,  with  a  view  to  avoiding  frequent  changes  to  Hungarian  legislation  on  the 
MNB7. 

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4 

5 
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MNB Decree 11/2011 (IX. 26.). 
See  Opinions  CON/2008/90  and  CON/2011/59.  All  ECB  opinions  are  published  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
See paragraph 3.2.5 of Opinion CON/2013/56. 
See Opinions CON/2013/56 and CON/2013/71, as well as the ECB’s Convergence Report of May 2012, p. 243-248. 
See,  for  example,  Opinions  CON/2007/14,  CON2008/83,  CON/2010/91,  CON/2011/104,  CON/2012/43  and 
CON/2013/56. 

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3. 

Specific observations 

3.1  The draft decree amends  the provision  on the scope of the MNB Decree8. While recognising the 

technical character of this amendment, the ECB highlights that the amended provision sets out the 

instances where specific provisions of the MNB Decree applies to the processing and distribution 
of  foreign  banknotes,  including  euro  banknotes.  In  this  respect,  Decision  ECB/2010/149 

specifically regulates any issue relating to cash handlers automatically or manually processing euro 

banknotes  and  putting  those  banknotes  into  circulation.  Since  Decision  ECB/2010/14  applies  to 
cash handlers by virtue of Article 6(1) of Council Regulation (EC) No 1338/200110, which refers to 

procedures defined by the ECB for checking euro banknotes, there is no strict need to implement 
Decision ECB/2010/14 into Hungarian law11. In general, the ECB considers it essential for the draft 

decree and the MNB Decree to only deviate from Decision ECB/2010/14 where the Decision has 

expressly allowed such deviations. To ensure consistency, the ECB recommends including direct 

references in the  MNB  Decree to the relevant provisions of Decision ECB/2010/14, including its 
technical annexes12. In this respect, the ECB understands that Annex 2 to the MNB Decree defines 

banknote  handling  machine  types  for  processing  forint  banknotes  without  prejudice  to  the 

application  in  Hungary  of  the  technical  annexes  to  Decision ECB/2010/14  regulating  similar 

aspects in the context of handling euro banknotes. 

3.2  The ECB understands that the new definition of fit euro banknotes in the draft decree recognises 

the requirement for them to be checked for authenticity in accordance with Decision ECB/2010/14 

based  on  the  provision  of  Article  3(4)  and  7(1)  of  the  MNB  Decree.  However,  the  definition  of 

unfit euro banknotes set out in the draft decree would benefit from aligning with the corresponding 

definition laid down in Decision ECB/2010/14, thereby ensuring the consistency of this definition 

with the implementation approach recommended under paragraph 3.1 above. 

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12 

See Article 4(1) of the draft decree amending Article 1(b) of the MNB Decree on the on processing and distribution of 
banknotes and on the technical tasks relating to the protection of banknotes against counterfeiting. 
Decision ECB/2010/14 of 16 December 2010 on the authenticity and fitness checking and recirculation of euro banknotes 
(OJ L 267, 9.10.2010, p. 1). 
Council Regulation (EC) No 1338/2001 of 28 June 2001 laying down measures necessary for the protection of the euro 
against counterfeiting (OJ L 181, 4.7.2001, p. 6). The effects of this Regulation, in particular of the second subparagraph 
of Article 6(1) thereof, have been extended to Member States that have not adopted the euro as their single currency by 
way 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 (OJ L 181, 4.7.2001, p. 11). 
See paragraph 2.1 of Opinion CON/2011/19. 
See paragraph 3.1 of Opinion CON/2011/78. 

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3.3  Finally,  the  ECB  draws  the  attention  of  the  Hungarian  authorities  to  a  recent  amendment  to 
Decision ECB/2010/1413,  which  has  abolished  the  transitional  period  referred  to  in  Article  13(2) 

thereof.  To  this  end,  the  ECB  recommends  amending  Article  7(3)  of  the  MNB  Decree  in  its 

upcoming recast, which was announced by the MNB in the explanatory memorandum attached to 

the consultation request. 

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

Done at Frankfurt am Main, 17 December 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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Decision  ECB/2012/19  amending  Decision  ECB/2010/14  on  the  authenticity  and  fitness  checking  and  recirculation  of 
euro banknotes (OJ L 253, 20.9.2012, p. 19). 

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