Opinion of the European Central Bank of 25 January 2016 on safeguarding the redemption of coins by the Austrian Mint (CON/2016/4)
Date: 2016-01-25
Institutions: European Central Bank
Subjects: Austria, euro, issuing of currency, money

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 25 January 2016 

on safeguarding the redemption of coins by the Austrian Mint 

(CON/2016/4) 

Introduction and legal basis 

On 23 December 2015 the European Central Bank (ECB) received a request from the Austrian Ministry of 

Finance for an opinion on a draft law amending the Federal Act of 1988 on coinage and the Federal Act 

on the upper limit of the State guarantee (hereinafter the ‘draft law’). 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 on the first, second and third indents of Article 2(1) of Council Decision 98/415/EC 1, as the draft law 

relates to currency matters, means of payment and a national central bank (NCB). 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 law 

1.1  Under the Act on coinage, only the Austrian Mint is entitled to mint and issue euro and cent coins in 

Austria.  The  Mint  was  established  as  a  wholly-owned  subsidiary  of  the  Oesterreichische 

Nationalbank  (OeNB)  in  1989.  The  Mint  emerged  from  the  conversion  by  the  State  of  the  former 

Austrian Principal Mint Authority, which formed part of the State, into the Mint against payment of 

ATS (Austrian schilling) 8 billion by the OeNB. This structure was chosen to put the entire monetary 

policy, including the mint policy, in the OeNB’s hands. 

1.2  The Mint is obliged to take back coins, convert them into banknotes, withdraw them if required by 

the  Council  pursuant  to  Article  128(2)  of  the  Treaty,  and  replace  damaged  coins  with  new  ones 

(hereinafter ‘redemption obligations’, based on Sections 8(4), 10, 11 and 14 of the Act on coinage). 

To date, the Mint has established revenue reserves of approximately EUR 437 million to be able to 

fulfil these redemption obligations.  

1.3  An amendment to the Act on coinage in 2014, on which the ECB was not consulted, extended an 

existing prohibition on the Mint establishing provisions regarding its redemption obligations. It also 

limited  the  Mint’s  ability  to  establish  revenue  reserves  to  30%  of  the  value  of  coins  in  circulation. 

It furthermore  required  the  Mint  to  distribute  90%  of  its  profits  to  its  sole  shareholder,  the  OeNB. 

1  

Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authori-
ties regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

 
 
 
 
                                                 
ECB-PUBLIC 

The  ECB  notes  that  due  to  this  amendment  the  Mint  was  only  allowed  to  account  for  revenue 

reserves  of  EUR  417.2  million,  instead  of  EUR  510.6  million,  for  the  financial  year  2014,  which 

would  have  been  the  appropriate  reserves  according  to  an  expert  opinion.  Hence,  there  was  an 

underfunding  in  the  euro  coin  sector  of  the  Mint  amounting  to  EUR  93.4  million  as  at 
31 December 20142. 

1.4  The  draft  law  adds  a  prohibition  on  establishing  provisions  regarding  the  obligations  pursuant  to 

Section 14 of the  Act on coinage. It  also prohibits the Mint from establishing revenue reserves to 

meet  its  redemption  obligations.  Furthermore,  it  requires  the  liquidation  of  the  existing  revenue 

reserves.  Thus,  it  is  expected  that  the  Mint’s  existing  revenue  reserves  will  be  dissolved  and 

distributed to the OeNB. According to the explanatory memorandum to the draft law, this approach 

of  prohibiting  and  liquidating  revenue  reserves  for  redemption  obligations  is  aimed  at  avoiding 

excessive committed funds and associated investment risks within the Mint. The ECB understands 

that after the Mint has distributed these funds to the  OeNB, the latter  will include  them in its own 

annual  accounts  and  distribute  any  profit  in  accordance  with  the  National  Bank  Act  1984 

(hereinafter the ‘NBG’). In accordance with Section 69 of the NBG, after deducting certain earnings 

and allocating up to 10% of the remaining annual profit to the pension reserve until it is adequately 

funded, the State shall receive 90% of the OeNB’s remaining profit. The rest may be partly paid out 

as a dividend and partly as decided by the General Meeting of the OeNB. The ECB understands 

that,  in  connection  with  producing  its  annual  accounts,  the  OeNB  needs  to  take  into  account 

potential financial risks, in particular its obligation to exchange banknotes against fractional coins, 

fractional  coins  against  other  fractional  coins  and  fractional  coins  against  banknotes  (see 

Section 62(3) of the NBG). 

1.5  To  safeguard  the  satisfaction  of  redemption  obligations  in  the  future,  the  State  will  indemnify  the 

Mint for relevant payments made by it provided they cannot be covered from the Mint’s revenues 

relating to the issuance of coins, taking into account the minting expenses and the proceeds from 

melting down the coins.  According to the  draft Section 3a(1) of the Act on coinage, the State  will 

indemnify  the  Mint  for  redeeming  all  kinds  of  euro  coins,  whether  issued  by  the  Mint  or  another 

Member State. In this respect, the draft law limits the amount of indemnification to the value of the 

amount of coins in circulation that were minted by the Mint. The ECB understands that the Mint will 

request indemnification once a year after the end of the previous calendar year. For this purpose, 

the draft law requires the Mint and the Minister of Finance to conclude an agreement within three 

months after the publication of the adopted law in the Official Gazette.  

1.6  The  draft  law  also  authorises  the  Minister  of  Finance  to  make  payments  to  the  Mint  up  to  a  total 

amount of 30% of the value of coins in circulation during the year, if redemptions would otherwise 

demonstrably endanger the Mint’s existence. This provision only authorises the Minister of Finance 

to make such payments, but does not oblige the Minister to do so. Furthermore, this possibility is 

subject to the necessary authorisation of the Minister of Finance in the Act on Federal financing. To 

incorporate this new State guarantee into the State’s liability framework, the draft law increases the 

2  

See the Annual Report 2014 of the Mint, p. 76. 

2 

                                                 
State’s overall liability amount by EUR 2 billion in the Act on the upper limit of the State guarantee.  

ECB-PUBLIC 

2. 

General observations 

2.1  According  to  Article  128(2)  of  the  Treaty,  the  right  to  issue  euro  coins  rests  with  the  Member 

States. Therefore, it is up to each euro area Member State to specify the legal issuer of the euro 

coins. In most euro area Member States issuance of euro coins is undertaken by the State. In five 

of those States the NCBs act as agents for their treasuries with regard to minting euro coins and 
putting them into circulation3. In five euro area Member States 4 coin issuance is a competence of 

the NCB.  

2.2  The  Austrian  situation  is  unique  insofar  as  the  issuing  authority  for  coins  is  the  Mint,  a  wholly 

owned  subsidiary  of  the  OeNB.  In  this  respect,  the  concept  of  central  bank  independence,  in 

particular  financial  independence,  and  the  prohibition  on  monetary  financing,  as  applicable  to  the 

OeNB, are also relevant as far as the Mint is concerned. Therefore, it has to be assessed whether 

any third party is able to exercise direct or indirect influence not only over an NCB’s tasks but also 
over  its  ability  to  fulfil  its  mandate  in  terms  of  having  appropriate  financial  resources5.  In  this 

respect, the ECB understands that the draft law’s indemnification scheme aims at ensuring that the 

Mint is adequately protected against the risk arising from the Mint’s redemption obligations.   

2.3 

In  connection  with  the  prohibition  on  the  Mint  establishing  provisions  relating  to  the  obligations 

pursuant to Sections 8(4), 10, 11 and 14 of the Act on coinage, the ECB notes that, according to 

generally accepted accounting principles, an entity is required to establish provisions in respect of 

obligations of uncertain timing or amount. 

2.4  The ECB understands that the OeNB needs to conduct a valuation of its participating interest in the 

Mint  following  the  liquidation  of  the  Mint’s  revenue  reserves  and  the  transfer  of  its  profit  to  the 

OeNB. 

2.5  Furthermore, 

the  ECB  notes 

that 

the  retroactive  application  of 

the  draft 

law  as  of 

31 December 2015  would  have  considerable  implications  for  both  the  Mint’s  and  the  OeNB’s 

annual accounts. 

3. 

Central bank independence and the prohibition on monetary financing 

3.1   Central bank independence  

3.1.1  Article 130 of the Treaty lays down that financial independence is a key aspect of the principle of 

central bank independence for the members of the European System of Central Banks. The ECB 

emphasises  that  any  task  undertaken  by  the  OeNB,  including  by  the  Mint  as  the  OeNB’s  wholly-

3 

4 
5 

Greece,  Finland,  Ireland,  Luxembourg  and  Malta.  In  the  Member  States  where  the  NCBs  act  as  agents  for  their 
treasuries, the NCBs are reimbursed in full for the cost of minting and/or putting euro coins into circulation. 
Cyprus, Estonia, Latvia, Lithuania and Slovakia. 
See the ECB’s 2014 Convergence Report, p. 26, available on the ECB’s website at www.ecb.europa.eu. 

3 

 
 
                                                 
ECB-PUBLIC 

owned subsidiary, must be compatible with the OeNB’s institutional and financial independence, to 

safeguard  the  proper  performance  of  its  tasks  under  the  Treaty  and  the  Statute  of  the  European 

System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), 

as  well  as  its  national  tasks.  The  principle  of  central  bank  independence  also  requires,  inter  alia, 

that  Member  States  do  not  put  their  NCBs,  including  their  subsidiaries,  in  a  position  where  they 
have insufficient financial resources and inadequate net equity to carry out their tasks6. 

3.1.2  While the draft law prohibits the Mint from establishing provisions and revenue reserves to meet its 

redemption  obligations  and  requires  the  liquidation  of  the  existing  revenue  reserves,  the  ECB 

understands that the transfer of the liquidated revenue reserve via the OeNB to the State as part of 

the OeNB’s profit distribution will be subject to the rules on profit allocation laid down in the NBG. 

The  ECB  also  understands  that  the  above-mentioned  prohibitions  are  without  prejudice  to  the 

OeNB’s ability to independently create and build up adequate financial buffers commensurate with 

the  level  of  risks  arising  from  its  activities,  including  those  performed  through  a  wholly-owned 

subsidiary.  

3.1.3  While the draft law provides that the State will indemnify the Mint for relevant payments made by it, 

provided  they  cannot  be  covered  by  the  Mint’s  revenues  relating  to  the  issuance  of  coins,  and 

taking into account the minting expenses and the proceeds from melting down the coins, the ECB 

emphasises 

that  any 

indemnification  scheme  has 

to  ensure 

that 

the  OeNB’s 

financial 

independence  is  not  compromised. The  OeNB  must have  at  all  times  sufficient  means  to fulfil  its 

tasks  and,  hence,  any  limitation  of  the  indemnification  must  not  lead  to  a  situation  in  which  the 

OeNB does not have sufficient means to fulfil its obligations. In this respect, the ECB understands 

that the draft law’s indemnification scheme aims at  ensuring that the Mint is adequately protected 

against  the  risk  arising  from  the  Mint’s  redemption  obligations  by  extending  the  amount  of 

indemnification to the value of the amount of coins brought into circulation that were minted by the 

Mint.  

3.1.4  While  –  additionally  and  without  prejudice  to  the  Minster  of  Finance’s  obligation  to  indemnify  the 

Mint – the draft law enables the Minister of Finance to make immediate payments (up to a limited 

amount) to the Mint if redemption payments would otherwise endanger the Mint’s existence, it does 

not require the Minister to make such payments, which also depend on the necessary authorisation 

of  the  Minister  in  the  Act  on  Federal  financing.  Accordingly,  it  is  uncertain  whether  the  Mint  will 

receive the necessary financial support from the State if needed. Also in this context, the OeNB’s 

financial  independence  has  to  be  preserved.  In  this  respect,  the  ECB  acknowledges  that  the 

indemnification  arrangements  under  the  draft  law,  including  the  increase  in  the  State’s  overall 

liability amount by EUR 2 billion, aim at supporting the financial position of the Mint and, thereby, 

the OeNB.  

6  

See Opinion CON/2014/56. All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 

4 

 
                                                 
ECB-PUBLIC 

3.2  Prohibition on monetary financing 

3.2.1  The  monetary  financing  prohibition  is  laid  down  in  Article  123(1)  of  the  Treaty  and  replicated  in 

Article 21.1 of the Statute of the ESCB, and prohibits overdraft facilities or any other type of credit 

facility with the ECB or the NCBs in favour of Union institutions, bodies, offices or agencies, central 

governments,  regional,  local  or  other  public  authorities,  other  bodies  governed  by  public  law,  or 

public undertakings of Member States. The precise scope of application of the monetary financing 
prohibition is further clarified by Council Regulation (EC) No 3603/937.  

3.2.2  Against  the  specific  historic  background  of  the  Mint,  the  issuance  of  euro  coins  by  it  has  to  be 

considered  a  State  task  for  the  purpose  of  assessing  compliance  with  the  monetary  financing 

prohibition.  The  OeNB  must  be  fully  covered  against  any  potential  losses  arising  from  the 

discharge of such a task. The ECB welcomes the fact that the Mint is entitled to keep the revenues 

related to the issuance of coins. However, the ECB understands that there is a risk of a loss by the 

Mint connected to its redemption obligations regarding all euro coins and not only those issued by 

the  Mint.  In  view  of  the  understanding  that  the  Mint  will  request  indemnification  once  a  year,  the 

agreement  to  be  concluded  between  the  Mint  and  the  Ministry  of  Finance  should  provide  for  the 

indemnification  to  be  paid  in  a  timely  manner  and  promptly  after  the  establishment  of  a  loss  to 

ensure compliance with the monetary financing prohibition. The ECB understands that the possible 

immediate payments by the Government in cases where the Mint’s existence would otherwise be 

endangered aim at avoiding that any central bank money is used to cover any losses arising from 

the redemption obligations. 

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

Done at Frankfurt am Main, 25 January 2016. 

[signed] 

The President of the ECB 

Mario DRAGHI 

7  

Council  Regulation  (EC)  No  3603/93  of  13  December  1993  specifying  definitions  for  the  application  of  the 
prohibitions  referred  to  in  Articles  104  and  104b  (1)  of  the  Treaty  (OJ  L  332,  31.12.1993,  p.  1).  See  also  Opinion 
CON/2014/56. 

5