Opinion of the European Central Bank of 6 September 2022 on the replacement of banknotes and coins and on cash handlers (CON/2022/31)
Date: 2022-09-06
Institutions: European Central Bank
Subjects: money

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

 of 6 September 2022  

on the replacement of banknotes and coins and on cash handlers 

(CON/2022/31) 

Introduction and legal basis 

On 12 July 2022 the European Central Bank (ECB) received a request from Latvijas Banka for an opinion 
on  a  draft  regulation  on  the  submission,  acceptance,  identification  and  replacement  of  banknotes  and 

coins at Latvijas Banka and on a draft regulation on the processing and recirculating of euro banknotes 

and coins (hereinafter collectively, the ‘draft regulations’). 

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  first,  third  and  fourth  indents  of  Article 2(1)  of  Council 

Decision  98/415/EC 1,  as  the  draft  regulations  relate  to  currency  matters,  Latvijas  Banka  and  the 

collection, compilation and distribution of monetary, financial, banking, payment systems and balance of 

payments statistics. 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 regulations 

Both draft regulations pertain to  the implementation  of the new  Law on Latvijas Banka, which  will enter 

into  force  on  1  January  20232.  The  objective  of  both  draft  regulations  is  to  regulate  procedural  aspects 

related  to  material  law  provisions  contained  in  ECB  and  Union  legal  acts  with  regard  to  the  retrieval, 

replacement and recirculation of euro banknotes and coins. 

The  draft  regulation  on  the  submission,  acceptance,  identification  and  replacement  of  banknotes  and 

coins  at  Latvijas  Banka  regulates  the  replacement  of  damaged  euro  banknotes  and  coins,  the 

replacement of euro banknotes fit for circulation, and the handling of euro banknotes and coins with signs 

of counterfeiting. This draft regulation does not govern all cash services provided by Latvijas Banka, i.e., it 

does  not  cover  services  provided  by  Latvijas  Banka  that  are  governed  by  private  law  (e.g.  the  sale  of 

numismatic  coins  and 

replacement  of  non-cash  means  of  payment  with  uncirculated  euro 

commemorative coins where the transaction is carried out according to the distance contract concluded 

between Latvijas Banka and the person concerned on Latvijas Banka's website). 

According to the explanatory memorandum accompanying it, the draft regulation on the processing and 

recirculating of euro banknotes and coins replicates and elaborates on the requirements to be fulfilled by 

1  

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

2  

      See Opinion CON/2021/9. All ECB opinions are available on EUR-Lex. 

 
 
 
 
 
ECB-PUBLIC 

cash handlers that are provided for in Latvijas Banka regulation currently in force and in Union legislation 

binding on cash handlers. The ECB notes that this draft regulation also contains a number of new legal 

provisions aimed at clarifying the existing legal framework. Firstly, the legal framework on the provision of 

statistics and protection of statistical data and information referred to in Section XI of the Law on Latvijas 

Banka is to be applicable to data submitted by cash  handlers in relation to the  euro banknote and coin 

handling  machines  used  as  well  as  the  volume  of  euro  banknotes  and  coins  processed  by  those 

machines, and Latvijas Banka must store such statistics permanently. Secondly, this 

draft 

regulation 

specifies  the  cases  in  which  the  Commission  for  the  Management  of  Banknotes  and  Coins  of  Latvijas 

Banka (hereinafter the ‘Commission’) may refuse to register a cash handler. Thirdly, this draft regulation 

specifies  the    information  that  the  cash  handler  must  provide  to  the  Commission  before  using  the  euro 

banknote  or  coin  handling  machine,  and  provides  for  the  Commission’s  right  to  request  from  the  cash 

handler  information  relating  to  cooperation  with  other  cash  handlers  or  delivery  of  euro  banknotes  and 

coins from the national central bank of the Member State which has adopted the euro. Fourthly, this  draft 

regulation requires the cash handler to draw up and maintain written internal procedures and to establish 

the maintenance plan of the euro banknote and coin handling machine. Fifthly, this 

draft 

regulation 

requires statistical data on the euro banknote handling machines used in the previous half year and the 

volume of euro banknotes processed by these machines to be encrypted and signed digitally by the cash 

handler in a manner agreed upon with the Commission. Finally, this draft regulation provides that the plan 

for  on-site  inspections  on  the  premises  of  the  cash  handler  or  at  its  designated  locations  where  euro 

banknotes and coins are processed must be prepared yearly and published on Latvijas Banka's website. 

2. 

General observations  

The  ECB  welcomes  both  draft  regulations  as  they  are  in  line  with  the  relevant  Union  and  ECB  legal 

frameworks and contain useful procedural norms needed for the smooth application of these frameworks.  

3. 

Specific observations regarding replacement of damaged banknotes and coins   

3.1. The draft regulation on the submission, acceptance, identification and replacement of banknotes and 

coins at Latvijas Banka establishes that, where part of a damaged banknote that constitutes 50 % or less 

than  50  %  of  the  original  size  of  the  banknote  is  submitted,  the  applicant  must  submit  evidence,  if 

available,  that  the  missing  part  of  the  banknote  has  been  destroyed 3.  This  draft  regulation  further 

determines 4 that the Commission, based on the opinion by the competent authority, must decide on the 

replacement  or  non-replacement  of  damaged  banknotes  in  cases  where  the  submitted  part  of  the 

damaged  euro  banknote  is  50  %  or  less  of  the  original  banknote  size,  without  referring  to  the  need  to 

prove the destruction of the missing parts. This could be interpreted to mean that the Commission  may 

decide to replace a banknote that is unfit for circulation where 50 % or less of the banknote is presented 

without the applicant having proven that the missing part or parts has or have been destroyed. In order to 

avoid any legal certainty concerns as regards the application of Article 3(1) of Decision ECB/2013/10 of 

3   See  paragraph  15.4.2.  of  the  draft  regulation  on  the  submission,  acceptance,  identification  and  replacement  of 

banknotes and coins at Latvijas Banka. 

4   See  paragraph  31  of  the  draft  regulation  on  the  submission,  acceptance,  identification  and  replacement  of  banknotes 

and coins at Latvijas Banka. 

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ECB-PUBLIC 

the  European  Central  Bank5,  this  draft  regulation  should  be  amended  to  clarify  that  50  %  or  less  of  a 

banknote that is unfit for circulation may only be replaced if the applicant proves that any missing part has 

been destroyed.  

3.2. The draft regulation  on the submission, acceptance, identification and replacement of banknotes and 

coins at Latvijas Banka provides that the Commission decides on the replacement or non-replacement of 

damaged  banknotes,  amongst  others,  in  cases  where  the  euro  banknotes  have  been  deliberately 

damaged6. In order to avoid any concerns about legal certainty as regards the application of Article 3(3) 

of  Decision  ECB/2013/10,  this  draft  regulation  should  be  redrafted  with  a  view  to  clarifying  that 

intentionally  damaged  banknotes  may  not  be  replaced  unless  Latvijas  Banka  knows  or  has  sufficient 

reason to believe that an applicant is (or can prove that he is) acting in good faith.  

This opinion will be published on EUR-Lex. 

Done at Frankfurt am Main, 6 September 2022. 

[signed] 

The President of the ECB 

Christine LAGARDE 

5   Decision  ECB/2013/10  of  the  European  Central  Bank  of  19  April  2013  on  the  denominations,  specifications, 

reproduction, exchange and withdrawal of euro banknotes (OJ L 118, 30.4.2013, p. 37). 

6   See  paragraph  33  on  the  submission,  acceptance,  identification  and  replacement  of  banknotes  and  coins  at  Latvijas 

Banka   . 

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