title: Opinion of the European Central Bank of 11 January 2024 on a constitutional law on cash as legal tender and access to cash (CON/2024/1)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 11 January 2024 on a constitutional law on cash as legal tender and access to cash (

text: ) Introduction and legal basis

text: On 15 June 2023 the National Council of the Slovak Republic adopted Constitutional Law No 241/2023 Coll. which supplements the Constitution of the Slovak Republic No 460/1992 (hereinafter the ‘Constitutional Law’). The European Central Bank (ECB) has not been consulted by the Slovak authorities on the Constitutional Law. The ECB has decided to deliver an own initiative opinion on the Constitutional 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 the second indent of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the Constitutional Law 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.

text: 1. Purpose of the draft law

text: 1.1 The Constitutional Law supplements the Constitution of the Slovak Republic (the ‘Constitution’) by inserting a new

text: Article 39

text: a in Section Five of Title Two of the Constitution dealing with economic, social and cultural rights. 1.2 The aim of the new provision is to guarantee the issuance of cash as legal tender, which the Constitutional Law now expressly establishes in the Constitution . The amendment to the Constitution introduced by the Constitutional Law further specifies that everyone has the right to make a payment for the purchase of goods and the provision of services using cash as legal tender, and that the acceptance of such payment may only be refused for reasonable or generally applicable reasons . The right to perform a cash transaction in a bank or a branch of a foreign bank is guaranteed . Finally, the Constitution, as amended by the Constitutional Law, specifies that the conditions and limitations for the use of cash as specified in

text: Article 39

text: a(2) of the Constitution will be established by law .

text: Ústavný zákon č. 241/2023 Z. z. z 15. júna 2023, ktorým sa dopĺňa Ústava Slovenskej republiky č. 460/1992 Zb. v znení neskorších predpisov.

text: 2 Council Decision 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).

text: Article 39

text: a(1) of the Constitution.

text: 4 First sentence of

text: Article 39

text: a(2) of the Constitution.

text: 5 Second sentence of

text: Article 39

text: a(2) of the Constitution.

text: Article 39

text: a(3) of the Constitution. 1.3 While the explanatory memorandum to the original draft of the Constitutional Law (hereinafter the ‘first explanatory memorandum’) acknowledges that the existing legislation and experience of the tax authorities show that mandatory cashless payments above certain limits in the Slovak legal order could be viewed as a measure to limit tax fraud and to combat money laundering, corruption, criminal activities and terrorist financing, it also expresses the opinion that everyone should have a right to pay in cash if they so wish. The first explanatory memorandum expresses the conviction that the right to pay in cash is a key right that everyone has in their commercial relationships, noting various recent initiatives introducing gradual restrictions on the right to use cash by various acts of general application. Thus, the first explanatory memorandum views the enshrining in the Constitution of the right to make payments in cash as necessary to deal with the various attempts to severely restrict or even ultimately eliminate the right to pay in cash, as well as the related right to privacy. The first explanatory memorandum also expresses the view that a departure from cash could further endanger the right to privacy and lead to further development of cryptocurrencies. It also opines that the full abolition of cash payments in the future would endanger low-income people as well as civil associations which finance their charitable activities by fundraising in cash. In addition, the preservation of the right to pay in cash is considered to contribute to financial literacy among young people. More generally, the right to pay in cash is viewed in the first explanatory memorandum in the context of the freedom of choice. 1.4 The Constitutional Law was adopted by the National Council of the Slovak Republic with one amendment compared to the original draft of the Constitutional Law. As set out in the explanatory memorandum accompanying the amendment to the original draft of the Constitutional Law (hereinafter the ‘second explanatory memorandum’), the right to pay in cash as legal tender could be open to abuse if accompanied by a requirement for acceptance of such payment without further limitations. The second explanatory memorandum envisages that there may be reasonable reasons to refuse cash payments, such as security concerns (e.g. the risk of robbery or theft) or technical reasons (e.g. a payee’s automated vending machine not being equipped to accept cash). Therefore, the original draft of the Constitutional Law was amended to provide payees with the right to refuse cash payments for reasonable or generally applicable reasons. Furthermore, based on the understanding expressed in the second explanatory memorandum that the right to cash is almost inseparably linked to the right to conduct cash banking operations, the original draft of the Constitutional Law was also amended to guarantee the right to conduct cash transactions at a bank or a branch of a foreign bank without the restrictions that apply to other payment recipients. The second explanatory memorandum expresses the view that if banks did not dispense cash, for example through ATMs, cash would gradually disappear, thus undermining the proposed constitutional right to cash.

text: 7 It is noted that the first explanatory memorandum uses the term ‘citizens’, while the text of the Constitutional Law uses the term ‘everyone’. This opinion assumes that the first explanatory memorandum means to refer to everyone when using the term ‘citizens’.

text: 2. General observations

text: 2.1 Although electronic payment instruments are increasingly used for retail payments in a number of Member States, cash continues to play an important role in society and is still widely used throughout the entire population. The ability to pay in cash remains particularly important for those who, for various legitimate reasons, prefer to use physical money rather than other payment instruments, or do not have access to the banking system and electronic means of payment. These groups include not only elderly people but also people with disabilities, immigrants, socially vulnerable people, minors and others with limited or no access to digital payment services . Cash is generally also useful as a payment instrument because it is widely accepted, fast and facilitates control over the payer’s spending. Moreover, it is currently the only payment instrument that allows everyone to settle a payment transaction in central bank money, which is also settled instantly while, importantly, ensuring privacy. Furthermore, cash could play an important role in the event of a disturbance in the 9 10 payment system and it is robust against cyber-crime . Against this backdrop, the ECB welcomes that the Constitutional Law aimed at strengthening the availability of cash in Slovakia. 2.2 The ECB has the exclusive right to authorise the issue of euro banknotes within the Union, and the euro banknotes issued by the ECB and the national central banks of the euro area are the only banknotes with legal tender status within the euro area . The legal tender status of euro coins is provided for in secondary Union law . 2.3 The concept of ‘legal tender’ as a means of payment denominated in a currency unit has been considered by the Court of Justice of the European Union. In particular, the Court has clarified that the concept of ‘legal tender’ signifies that this specific means of payment cannot generally be refused in settlement of a debt denominated in the same currency unit, at its full face value, with the effect of discharging the debt. In clarifying the concept of ‘legal tender’ under Union law, the Court has taken into consideration

text: Commission Recommendation 2010/191/EU

text: , which provides useful guidance for the interpretation of the relevant provisions of Union law. Point 1 of Recommendation

text: states that, where a payment obligation exists, the legal tender of euro banknotes and coins should imply (a) mandatory acceptance of those banknotes and coins; (b) their acceptance at full face value; and (c) their power to discharge from payment obligations. According to the Court,

text: 8 See, for example, paragraph 2.4 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 9.2.1 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 7.2.1 of Opinion

text: , paragraph 2.1 of

text: , paragraph 2.1 of Opinion

text: and paragraph 1.7 of Opinion

text: 9 See, for example, paragraph 2.1 of Opinion

text: , paragraph 9.2.1 of Opinion

text: and paragraph 2.3 of Opinion

text: 10 See paragraph 2.2 of Opinion

text: 11 First and third sentences of Article 128(1) of the Treaty and first and third sentence of Article 16 of the Statute of the European System of Central Banks and of the European Central Bank.

text: Article 11 of Council Regulation (EC) No 974/98 of 3 May 1998

text: on the introduction of the euro (OJ L 139, 11.5.1998, p. 1).

text: Commission Recommendation 2010/191/EU of 22 March 2010

text: on the scope and effects of legal tender of euro banknotes and coins (OJ L 83, 30.3.2010, p. 70). this shows that the concept of ‘legal tender’ encompasses, inter alia, an obligation in principle to accept banknotes and coins denominated in euro for payment purposes . 2.4 The Court has clarified that the concept of ‘legal tender’ is a concept of Union law that must be given an autonomous and uniform interpretation throughout the Union . Insofar as it allows the Union legislature to lay down the measures necessary for the use of the euro as the single currency, the Court clarified that Article 133 of the Treaty empowers the Union legislature alone to specify the legal rules governing the status of legal tender accorded to banknotes and coins denominated in euro, insofar as that is necessary for the use of the euro as the single currency. Furthermore, the Union legislature’s exclusive competence precludes any competence on the part of the Member States in the matter, unless they have been empowered by the Union to do so or for the implementation of Union acts . In this respect, the ECB notes that, on 28 June 2023, the Commission published a proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins (hereinafter the ‘proposed regulation on the legal tender of euro cash’), which will establish rules on the legal tender of euro banknotes and coins in binding Union secondary law . The explanatory memorandum of the proposed regulation on the legal tender of euro cash states that discussions within the Euro Legal Tender Expert Group (ELTEG) confirmed the existence of uncertainty and important differences regarding the practical application of the concept of legal tender across the euro area . These differences would justify establishing rules on the legal tender of euro cash in a regulation adopted under Article 133 of the Treaty.

text: 3. Specific observations

text: 3.1 Constitutional guarantee of the issuance of cash as legal tender

text: Article 39

text: a(1) of the Constitution, introduced by the Constitutional Law, guarantees the issuance of cash as legal tender. It thus establishes legal rules governing the status of legal tender accorded to banknotes and coins in a Member State which has adopted the euro. This is a competence that has been exclusively given to the Union legislature. Therefore, the ECB respectfully suggests that the provision of

text: Article 39

text: a(1) of the Constitution is outside of the competence of a Member State whose currency is the euro. By specifically guaranteeing the issuance of cash as legal tender,

text: Article 39

text: a(1) of the Constitution is, furthermore, not in line with Article 128 of the Treaty, pursuant to which, among

text: 14 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk,

text: and

text: , EU:C:2021:63, paragraphs 46 to 49.

text: 15 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk,

text: and

text: , EU:C:2021:63, paragraph 45.

text: 16 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk,

text: and

text: , EU:C:2021:63, paragraphs 50 to 52.

text: 17 COM(2023) 364 final. See also Opinion

text: 18 See section 3, page 4 of the explanatory memorandum of the proposed regulation on the legal tender of euro cash and the final report of the Euro Legal Tender Expert Group (ELTEG) of 6 July 2022, available on the Commission’s website at www.ec.europa.eu. See also Opinion

text: . others, the issue of euro banknotes by the ECB and national central banks is subject to the ECB’s exercise of its exclusive competence to authorise the issue of banknotes within the Union. 3.2 Constitutional right to make payments in cash 3.2.1 The first sentence of

text: Article 39

text: a(2) of the Constitution, introduced by the Constitutional Law, specifies that everyone has the right to make a payment for the purchase of goods and the provision of services using cash as legal tender, and that the acceptance of such payment may only be refused for reasonable or generally applicable reasons. 3.2.2 In this respect, the Court of Justice has held that the status as legal tender calls only for acceptance in principle of banknotes denominated in euro as a means of payment, not for absolute acceptance . The Court of Justice held that the Union’s exclusive competence in matters of monetary policy is without prejudice to the competence of the Member States whose currency is the euro in the exercise of their own powers, to regulate the procedures for settling pecuniary obligations, whether under public law or private law, provided, in particular, that the legislation does not affect the principle that, as a general rule, it must be possible to discharge a payment obligation in cash . The Court has also held that one must assess the objective and content of a national law measure that provides for an obligation to accept euro cash to determine whether that has been adopted within the framework of the Member States’ own competences . 3.2.3 It must therefore be considered whether

text: Article 39

text: a(2) of the Constitution, in the light of its objective and content, establishes legal rules governing the status of legal tender of euro banknotes, an area of exclusive competence of the Union under Article 133 of the Treaty, or is a measure taken in the exercise of a competence of the Member States. 3.2.4 The first sentence of

text: Article 39

text: a(2) of the Constitution sets out a general principle of mandatory acceptance and a framework for exemptions, which are to be further specified by law. In this regard, this general principle is connected with the constitutional enshrinement of the issuance of legal tender under

text: Article 39

text: a(1) of the Constitution. This can be seen from the wording of the provision , from the first explanatory memorandum , and from the fact that this right is recognised in respect of everyone. It therefore appears that the content and objective of the first sentence of

text: Article 39

text: a(2) of the Constitution, as also specified in the first explanatory memorandum, is to ensure the acceptance of cash as legal tender as a right of general application, with the exemptions phrased only on the basis of general principles of reasonableness and generally applicable reasons. The ECB thus understands that

text: Article 39

text: a(2) of the Constitution, in the light of its objective and content, does not

text: 19 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk,

text: and

text: , EU:C:2021:63, paragraph 55.

text: 20 It is noted that Member States may introduce stricter rules in the exercise of their own powers.

text: 21 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk,

text: and

text: , EU:C:2021:63, paragraphs 56 to 58.

text: Article 39

text: a(2) expressly mentions the right to pay using cash as legal tender.

text: 23 The explanatory memorandum explains that the proposal enshrines the right to make payments for the purchase of goods and the provision of services in cash as legal tender in subpart five of Title two of the Constitution, which covers economic, social, and cultural rights as part of fundamental rights and freedoms. It is proposed that a constitutional guarantee should be given to the issuance of cash as legal tender, which will ensure the practical implementation of this right in the abovementioned financial transactions. regulate the procedures for settling pecuniary obligations in the exercise of national powers but rather appears to regulate the status of euro cash as legal tender. 3.3 Direct applicability of provisions of Union law 3.3.1 The ECB underlines that the reproduction in national law of a provision of Union law that is directly applicable in the legal order of the Member State may create uncertainty both as to the legal nature of the applicable provision and as to the date of its entry into force. This would not align with the uniform application and interpretation of Union law throughout the Union . 3.3.2 Furthermore, the ECB also underlines that the incorporation of some elements of Union law into national law is warranted only in exceptional circumstances for the sake of coherence and to make them comprehensible to the persons to whom they apply . If such exceptional circumstances do exist, the reproduction of elements of directly applicable provisions of Union law should be done precisely, by incorporation or reference , and only to the extent warranted by the exceptional circumstances. However, such exceptional circumstances do not exist if the directly applicable provisions of Union law are sufficiently coherent and comprehensive, making it unnecessary to repeat or reflect them in national law . 3.3.3

text: Article 39

text: a(1) of the Constitution can be said to reiterate provisions of Union law, namely Article 128 of the Treaty and

text: Article 11 of Regulation (EC) No 974/98

text: . It does this, however, in an inaccurate manner, as explained in paragraph 3.1.

text: Article 39

text: a(2) establishes the right for everyone to make payments in cash. It accordingly appears to regulate the status of euro cash as legal tender, as explained in paragraph 3.2.4. However, the mandatory acceptance of euro banknotes and coins, which the right to make payments in cash seems to protect, is laid down in significantly different terms than those used in Union law. According to Recommendation

text: , on which the Court of Justice relied when interpreting Article 128(1) of the Treaty and

text: Article 11 of Regulation (EC) No 974/98

text: , the first defining element of the concept of legal tender is the mandatory acceptance of euro banknotes and coins where a payment obligation exists . In the same vein, the proposed regulation

text: 24 See paragraph 3.2.2 of this Opinion.

text: 25 See judgment of the Court of Justice of 7 February 1973, Commission v Italy,

text: , EU:C:1973:13, paragraphs 16 and 17; judgment of the Court of Justice of 10 October 1973, Variola,

text: , EU:C:1973:101, paragraphs 9 to 11; and judgment of the Court of Justice of 2 February 1977, Amsterdam Bulb,

text: , EU:C:1977:13, paragraphs 5 to 8. See also paragraph 12 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 2.4 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 2.2 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 2.3 of Opinion

text: and paragraph 2.2.5 of Opinion

text: 26 See paragraph 12 of Opinion

text: with reference to the judgment of the Court of Justice of 28 March 1985, Commission v Italian Republic,

text: , EU:C:1985:147, paragraph 2.4 of Opinion

text: and paragraph 2.2.6 of Opinion

text: . See a contrario also paragraph 2.2 of Opinion

text: 27 See paragraph 2.2 (footnote 6) of Opinion

text: , paragraph 2.4 of Opinion

text: and paragraph 2.2.6 of Opinion

text: 28 See paragraph 13 of Opinion

text: , paragraphs 2.2 and 3.2 of Opinion

text: , paragraph 2.4 of Opinion

text: and paragraph 2.2.6 of Opinion

text: 29 In Joined Cases C-422-19 and

text: the Court established that the concept of legal tender is a concept of Union law that must be given autonomous and uniform interpretation throughout the Union. When referring to the concept of legal tender the Court considered Recommendation

text: . The Court recalled that, although recommendations are not intended to be binding, they are among the legal acts of the Union and the Court may therefore take them into consideration where they provide useful guidance for the interpretation of the relevant provisions of Union law. See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk,

text: and

text: , EU:C:2021:63, paragraphs 45 and 48.

text: 30 See point 1(a) of

text: on the scope and effects of legal tender of euro banknotes and coins (OJ L 83, 30.3.2010, p. 70). on the legal tender of euro cash, which is currently being negotiated by the co-legislators, states that the mandatory acceptance of euro banknotes and coins is one of the key elements of the legal tender status of euro banknotes and coins . Thus, to the extent that

text: Article 39

text: a(1) and (2) of the Constitution use wording different from their legal sources in Union law they potentially create regulatory content of their own, which would not be in line with the Union’s exclusive competence in matters of monetary policy for the Member States whose currency is the euro . In the light of the above, the ECB recommends that the provisions of

text: Article 39

text: a(1) and (2) of the Constitution guaranteeing the issuance of cash as legal tender and the right to make a payments in cash should either be deleted or, alternatively, amended to merely refer to the relevant provisions of Union law. 3.4 Constitutional right to perform cash transactions at a bank 3.4.1 The second sentence of

text: Article 39

text: a(2) of the Constitution provides for a more targeted obligation of banks and branches of foreign banks to ensure that they perform cash transactions. The explanatory memorandum justifies this obligation inter alia based on the need to ensure access to cash as a precondition to be able to use cash as a means of payment . 3.4.2 The ECB welcomes that the Constitutional Law aims to strengthen the availability of cash in Slovakia. Sufficient and effective access to cash is necessary to preserve the effectiveness of the legal tender status of cash. If there is neither sufficient nor effective access to cash, it will not be available as a means of payment. In this regard, the proposed regulation on the legal tender of euro cash includes an obligation for Member States to ensure sufficient and effective access to cash throughout their territory . 3.4.3 However, the ECB is of the view that the scope and extent of the strengthened constitutional protection of the right to perform cash transactions at banks and branches of foreign banks should be further clarified. For example, it is not fully clear which operations would fall under the scope of the cash transactions, whether under the new constitutional regime banks have to perform cash transactions for anyone or for their clients only, or whether there are further conditions and limitations on the right to perform cash transactions in a bank or branch of a foreign bank . The ECB therefore recommends that the laws adopted pursuant to

text: Article 39

text: a(3) of the Constitution clearly specify the

text: 32 See paragraph 2.4 of Opinion

text: , paragraph 2.3 of Opinion

text: and paragraph 2.2.6 of Opinion

text: . See also principle 16 of the final report of the Euro Legal Tender Expert Group (ELTEG) of 6 July 2022: ‘The Member States should check thoroughly their national legislation for references to legal tender and repeal them or else, make sure that they are a) purely declaratory, referring to the applicable Union provisions as the applicable legal source, b) make no change to the wording of

text: Article 128(1)

text: TFEU or of other applicable EU provisions on the legal tender status of euro cash.’

text: 33 The second sentence of

text: Article 39

text: a(2) states as follows: ‘The right to perform a financial transaction using cash in a bank or branch of a foreign bank is guaranteed.’

text: 34 The second explanatory memorandum states as follows: ‘Given that the right to cash is almost inseparably linked to the right to conduct cash banking operations, the amending proposal further guarantees the right to conduct cash transactions at a bank or a branch of a foreign bank without restrictions that apply to other payment recipients. If banks did not dispense cash, for example, through ATMs, cash would gradually disappear, undermining the proposed constitutional right to cash.’

text: 35 The ECB has consistently welcomed legislative proposals aimed at ensuring access to cash in euro area Membe r States. See, for example, Opinion

text: and Opinion

text: . See also paragraph 1.2 of Opinion

text: , in which the ECB particularly welcomes the measures laid down in the proposed regulation on the legal tender of euro cash regarding the need for Member States whose currency is the euro to ensure sufficient and effective access to cash.

text: 36 See also, in this respect, paragraphs 2.5 to 2.7 of Opinion

text: . conditions and limitations applicable to the right to perform cash transactions in a bank or branch of a foreign bank. This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 11 January 2023. [signed] The President of the ECB Christine LAGARDE


publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 12 January 2024 on the phasing out of the 1 000 Danish kroner banknote and the lowering of the cash prohibition limit (CON/2024/2)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 12 January 2024 on the phasing out of the 1 000 Danish kroner banknote and the lowering of the cash prohibition limit (

text: ) Introduction and legal basis

type: rubrik

text: On 1 December 2023, the European Central Bank (ECB) received two requests from the Danish Ministry of Business (Erhvervsministeriet) for an opinion on a draft executive order on Danmarks Nationalbank’s withdrawal of certain banknotes (hereinafter the ‘draft executive order’) and a draft law amending the Law on measures to prevent money laundering and the financing of terrorism (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 the second and third indents of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft executive order and the draft law relate to Danmarks Nationalbank 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.

type: stycke

text: 1. Purpose of the draft executive order and the draft law

text: 1.1. The purpose of the draft executive order is to phase out and withdraw old Danish kroner (DKK) banknotes issued from 23 July 1945 until 23 May 2011 from the 1944, 1952, 1972 and 1997 series, together with the 1 000 DKK banknote from the 2009 series, all of which will cease to have legal tender status after 31 May 2025 . After the withdrawal of these banknotes, they may still be redeemed by Danmarks Nationalbank for an additional year, up until and including 31 May 2026. After this date, Danmarks Nationalbank may redeem the banknotes where circumstances justify it . The draft executive order enters into force on 1 January 2024. 1.2 The phasing out and withdrawal of the old DKK banknote series is done with a view to issuing a new future banknote series based on state-of-the-art technologies to prevent counterfeits . In this respect, all existing Danish banknote denominations (500 DKK, 200 DKK, 100 DDK and 50 DKK) will be part

text: 1 Bekendtgørelse om Danmarks Nationalbanks indkaldelse af visse pengesedler, BEK nr. 1706 af 11/12/2023.

text: 2 Forslag til lov om ændring af hvidvaskloven.

text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: 5 See Section 2(1) and(2) of the executive order. See also Section 8(3) of the Law on Danmarks Nationalbank (Lov om Danmarks Nationalbank, Lov nr. 116 af 7.4.1936), which likewise regulates an additional redemption period of 12 months after the period where a withdrawn banknote loses its status as legal tender. Subsequent to this additional 12 month period, Danmarks Nationalbank may still redeem banknotes which are no longer legal tender ‘if circumstances justify it’.

text: 6 See Danmarks Nationalbank’s report ‘The role of cash in a society with low usage of cash’, November 2023, page 43. of the new series except for the 1 000 DKK banknote, which is currently the highest denomination banknote in Denmark. According to the explanatory notes to the draft law , which also include explanations to the draft executive order (hereinafter the ‘explanatory notes’), Danmarks Nationalbank has, based on the Law on Danmarks Nationalbank and with the permission of the Minister for Business, decided to phase out the 1 000 DKK banknote with a view to withdrawing it altogether. In this respect, Danmarks Nationalbank is of the view that the 1 000 DKK banknote is not necessary for Danish citizens and businesses to carry out safe and efficient payments. This is inter alia reflected by the generally reduced use of cash in Denmark, with the vast majority of cash payments amounting to less than 500 DKK. According to the explanatory notes, this is also based on the fact that the 1 000 DKK banknote, to a higher degree than other Danish banknotes, represents an increased risk of being used for criminal purposes . 1.3 The purpose of the draft law is to lower the existing threshold for certain cash payments to professionals from a maximum of 20 000 DKK to 15 000 DKK. The draft law enters into force on 1 March 2024. 1.4 The lowering of the threshold for certain cash payments applies to professionals who are not covered by the scope of application of the Law on measures to prevent money laundering and financing of terrorism (hereinafter the ‘Law on money laundering’) when receiving cash, and therefore only to this specific group of business-to-business and customer-to-business payments. According to the explanatory notes , all businesses receiving cash will, until the phasing out of the 1 000 DKK banknote, be extraordinarily exposed to an increased risk of being misused for money laundering purposes . However, the enhanced restriction on the cash limitation prohibition applies to all cash payments, and not only payments in connection with the withdrawal of the 1 000 DKK note . According to the explanatory notes, while the lowering of the threshold is seen to generally have a positive effect for the fight against money laundering , the lowering of the threshold may also entail certain impediments for persons with legitimate cash holdings wanting to use their holdings of withdrawn notes in retail trades . 1.5 According to the explanatory notes , the cash prohibition limit complies with Directive (EU) 2015 2015/849 of the European Parliament and of the Council , according to which Member States may make additional general limitations to the use of cash.

text: 7 See point 1 of the general comments to the draft law.

text: 8 According to Section 8(3) of the Law on Danmarks Nationalbank, where the Minister of Business gives his permission, notes may be withdrawn and shall then cease to be legal tender from the date which might be fixed by ordinance from the Minister for Business. After the expiration of twelve months from this date, the withdrawn notes shall lose validity as against Danmarks Nationalbank, provided that Danmarks Nationalbank shall have the right to redeem the notes also after this time, if circumstances justify it.

text: 9 See point 1 of the general comments to the draft law and Danmarks Nationalbank’s report ‘The future of Danish cash’, November 2023, page 4.

text: 10 Lov om forebyggende foranstaltninger mod hvidvask og finansiering af terrorisme, lovbekendtgørelse nr. 316 af 11. marts 2022, som senere ændret.

text: 11 See points 1 and 1.1.2 of the general comments to the draft law.

text: 12 See point 1 of the general comments to the draft law.

text: 13 See number 1 of the specific comments to the draft law.

text: 14 See points 1 and 1.1.2 of the general comments to the draft law.

text: 15 See point 5 of the general comments to the draft law.

text: 16 See point 8 of the general comments to the draft law.

text: 17 See

text: recital 6

text: of

text: Directive (EU) 2015/849

text: of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending

text: Regulation (EU) No 648/2012

text: of the European Parliament and of the Council, and repealing Directive

text: of the European parliament and of the Council and

text: Commission Directive 2006/70/EC

text: (OJ, L 141, 5.6.2015, p.73).

text: 2. General observations

text: 2.1 Denmark is exempted from participating in the third stage of the Economic and Monetary Union, pursuant to the Protocol (No 16) of the Treaty on the Functioning of the European Union (TFEU) on certain provisions relating to Denmark. As for any abrogation of the exemption, the procedure set out in

text: Article 140

text: TFEU will only be initiated at Denmark’s request . Therefore, in accordance with Protocol (No 16) and

text: Articles 139(2)

text: , point (d) TFEU,

text: Article 128

text: TFEU, which states that the euro banknotes issued by the ECB and the national central banks (NCBs) shall be the only such notes to have status of legal tender within the Union, is not applicable to Denmark . Against this specific institutional backdrop, the ECB has prepared an assessment of the relevant provisions of the draft executive order and the draft law against relevant practices in the euro area, in particular the legal requirements for the euro and the legal tender status of euro banknotes. 2.2 The ECB understands that the draft executive order and the draft law have been influenced by a recent report of Danmarks Nationalbank on the role of cash in a society with low usage of cash. In this context, Danmarks Nationalbank notes that cash in recent decades has played a decreasing role for Danish citizens and business . The relative decline in cash usage for payments and savings is seen by Danmarks Nationalbank as a natural development in the light of Danes’ willingness to embrace new digital payment solutions combined with, at the same time, the digitisation of Danish society. This is also the case for numerous public and private initiatives to accelerate digitalisation. According to Danmarks Nationalbank, the decline in the use of cash has meant a general decline in the demand for cash, and the development in cash usage for payments also suggests that more people will live without cash in the future. This is seen by Danmarks Nationalbank to have consequences for the role of cash in Danish society, and has already resulted in major changes to the cash infrastructure and the need to continually adopt legislation on the use of cash for payments . 2.3 In terms of the decline in cash usage more specifically, the total value of cash payments in Denmark has decreased from approximately 10 % of the total value of all payments in 2021 to less than 8 % in 2023 . Moreover, in physical trade, the proportion of payments made with cash was 11 % of the total amount of payments in 2023, which is understood to be equivalent to the level in 2021. However, the ECB understands that this should be seen in the context of physical trade in Denmark, which accounts for an increasingly small share of the total number of payments due to the shift towards more online trade and ever more in-app payments on mobile phones. Moreover, it is noted that the total value of DKK banknotes and coins in circulation has remained stable since 2017, and even increased by around 10 % at the onset of the coronavirus (COVID-19) pandemic in 2020 . To the ECB, this points to the relevance of physical central bank money, notably banknotes, during situations of financial stress, but also for in-person payments at the point of sale.

text: 18 See paragraph 2 of Protocol (No 16) of the TFEU on certain provisions relating to Denmark.

text: 19 See paragraph 3.2 of Opinion

text: . All ECB opinions are published on EUR-Lex.

text: 20 See Danmarks Nationalbank, ‘The role of cash in a society with low usage of cash’, November 2023, p. 4.

text: 21 See Danmarks Nationalbank, ‘The role of cash in a society with low usage of cash’, November 2023, p. 6.

text: 22 See Danmarks Nationalbank, ‘The role of cash in a society with low usage of cash’, November 2023, p. 6.

text: 23 See Danmarks Nationalbank, ‘The role of cash in a society with low usage of cash’, p. 14, Chart 8. 2.4 The statements on the role of cash in Danish society, as expressed in the explanatory notes, contrast with the ECB’s views on the role of cash in society. The ECB considers that cash continues to play an important role in society irrespective of the fact that electronic payment instruments are increasingly used for retail payments in Member States, including Denmark . Cash is generally appreciated as a payment instrument because it is widely accepted, fast and facilitates control over the payer’s spending. It is currently the only payment instrument that allows citizens to settle a transaction in central bank money, which is also settled instantly , while, importantly, ensuring privacy. Moreover, it does not carry the legal possibility of imposing a fee for the use thereof. Cash can play an important role in the event of contingencies, such as Hurricane Katrina in the U.S. in 2005, where alternative means of payment are temporarily not functioning and it is robust against cyber-crime , since cash payments do not require a functional technical infrastructure or related investment but are always available. Furthermore, cash payments are not subject to daily or weekly payment limits set by entities providing underlying payment services . In addition, cash payments also facilitate the inclusion of the entire population in the economy by allowing citizens to settle a wide range of payment transactions in this way, thus ensuring freedom of choice as to the method of payment for all citizens .The ability to pay in cash remains particularly important for all those citizens who, for various legitimate reasons, prefer to use cash due to its unique features, rather than other payment instruments. Also, cash remains important especially for those who do not have access to the banking system and electronic means of payments. These groups include not only elderly people, but also some disabled citizens, immigrants, socially vulnerable citizens, minors and others with limited or no access to digital payment services . The ECB surveys biennially the payment habits in the euro area which revealed that around 60 % of the euro area citizens want to have the freedom to also use cash at the point of sale. Finally, a critical mass of cash in circulation is necessary to maintain the business case for third parties involved in the cash cycle. Thus, any further cash payment limitation or suppression of a denomination could lead to a situation where the unit costs of cash deter third parties from supplying cash any longer and, as a consequence, endanger the contingency feature of cash, if the cash infrastructure and suppliers were to disappear altogether or would be insufficient to cater for an unexpected surge in cash demand. 2.5 These characteristics of cash are also acknowledged by the European Commission in its Retail Payments Strategy which, while promoting the emergence of digital payments to offer more options

text: 24 See paragraph 2.4 of Opinion

text: and paragraph 2.4 of Opinion

text: 25 See paragraph 2.4 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 9.2.1 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 7.2.1 of Opinion

text: , paragraph 2.1 of

text: , paragraph 2.1 of Opinion

text: , paragraph 2.1 of Opinion

text: and paragraph 2.1 of Opinion

text: 26 See paragraph 2.1 of Opinion

text: , paragraph 9.2.1 of Opinion

text: , paragraph 7.2.1 of Opinion

text: , paragraph 2.3 of Opinion

text: and paragraph 2.1 of Opinion

text: 27 See paragraph 2.2 of Opinion

text: , paragraph 2.1.1 of Opinion

text: and paragraph 2.1 of Opinion

text: 28 See paragraph 2.1 of Opinion

text: 29 See paragraphs 2.4 and 3.1 of Opinion

text: , paragraph 2.7 of Opinion

text: , paragraph 2.6 of Opinion

text: , paragraphs 2.1 to 2.3 of Opinion

text: , paragraph 7.2.1 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 2.1 of Opinion

text: and paragraph 2.1 of Opinion

text: 30 See paragraph 1.5 of Opinion

text: and paragraph 2.1 of Opinion

text: . to consumers, will continue to safeguard the legal tender of euro cash and the availability of central bank money . 2.6 Against this backdrop, the ECB closely monitors any national law developments that aim to limit cash payment possibilities and thereby interfere with citizens’ right to pay in cash.

text: 3. Specific observations

text: Phasing out of the 1 000 DDK banknote

text: 3.1 The 1 000 DKK banknote, which is currently the highest denomination banknote in Denmark, has an approximate value equivalent to 134 EUR . From 1 June 2026, when the 1 000 DKK banknote has been phased out and withdrawn and, therefore, no longer has legal tender status, the highest denomination banknote in Denmark will be the 500 DKK banknote, which has an approximate value equivalent to 67 EUR. 3.2 In the euro area, the first series of euro banknotes was originally issued in 2002, when the euro was introduced. It comprises seven different denominations: €5, €10, €20, €50, €100, €200 and €500. In May 2016, the ECB concluded a review of the denominational structure of the second series, also known as the Europa series, of euro banknotes. The ECB has decided to permanently stop producing the €500 banknote and to exclude it from the Europa series. In view of the important circulation of this denomination and its store of value function, also at the international level, and to safeguard trust in euro banknotes, the €500 banknote will remain legal tender and can therefore continue to be used as a means of payment and store of value. The €500 banknote, like the other denominations of euro banknotes, will always retain its value and can be exchanged at the Eurosystem NCBs for an unlimited period of time. Credit institutions, bureaux de change and other professional cash handlers may recirculate the €500 banknotes . 3.3 In the euro area, the three higher denominations of banknotes remain available as a means of payment. The ECB highlights the risk for the cash infrastructure and the smooth supply of cash should Member States’ policies be tailored in such a way that they disincentivise or prohibit citizens from using legal tender money for payments or as a store of value. Rather, the ECB considers that policy measures should be designed to guarantee the freedom of choice on how to pay. 3.4 As noted above, Danmarks Nationalbank can continue to redeem 1 000 DKK banknotes for 12 months after they have been withdrawn, until and including 31 May 2026, and may subsequently still redeem such banknotes ‘if circumstances justify it’. The ECB notes that a sufficiently long redemption period of the 1 000 DKK and the old series DKK banknotes would serve to uphold trust in cash, and refers to the Eurosystem policy of exchanging €500 banknotes for an unlimited period. In this context, the ECB understands that Danmarks Nationalbank will assume ´justifiable circumstances´ and redeem any DKK banknotes held legitimately by any persons in the Union and the European Economic Area, who have come to possess such banknotes as a result of the free movement of

text: 31 See COM (2020) 592 final.

text: 32 The euro value in this opinion is based on the DKK/EUR exchange rate (7,45 DKK per EUR) on the date of receipt of the consultation request by the ECB, 1 December 2023, as published by the ECB, available at: www.ecb.europa.eu.

text: 33 See paragraph 3.1 of Opinion

text: . capital under

text: Article 63

text: TFEU, if the person holding such banknotes is for good reason unable to present them for redemption before 31 May 2026, for instance due to greater obstacles by nonresidents compared to Danish residents. Lowering of cash prohibition limit 3.5 The purpose of the draft law is to lower the existing threshold for certain cash payments to professionals from a maximum equivalent of approximately 2684 EUR to 2013 EUR. 3.6 Under the Treaty, the European System of Central Banks (ESCB) has the basic task of promoting the smooth operation of payment systems , and the ECB has the exclusive right to authorise the issue of euro banknotes within the Union . The euro banknotes issued by the ECB and the NCBs of the euro area are the only banknotes with legal tender status within the euro area . 3.7 Were Denmark to initiate an abrogation of its exemption status in accordance with Protocol (No 16) TFEU on certain provisions relating to Denmark, the draft law would represent a restriction of the legal tender status of euro banknotes, which would be assessed against the relevant Union law, as set out in paragraphs 3.8 to 3.13 . 3.8 The concept of ‘legal tender’ of a means of payment denominated in a currency unit has been considered by the Court of Justice of the European Union. In particular, the Court has clarified that the concept of ´legal tender´ signifies that this specific means of payment cannot generally be refused in settlement of a debt, denominated in the same currency unit, at its full face value, with the effect of discharging the debt. In clarifying the concept of ‘legal tender’ under Union law, the Court has taken into consideration Commission Recommendation 2010/191 , which provides useful guidance for the interpretation of the relevant provisions of Union law. Point 1 of Recommendation 2010/191 states that, where a payment obligation exists, the legal tender of euro banknotes and coins should imply (a) mandatory acceptance of those banknotes and coins; (b) their acceptance at full face value; and (c) their power to discharge from payment obligations. According to the Court, this shows that the concept of ‘legal tender’ encompasses, inter alia, an obligation in principle to accept banknotes and coins denominated in euro for payment purposes . 3.9 The Court has clarified that the concept of ‘legal tender’ is a concept of Union law that must be given an autonomous and uniform interpretation throughout the European Union . Insofar as it allows the Union legislature to lay down the measures necessary for the use of the euro as the single currency, the Court clarified that Article 133 of the Treaty empowers the Union legislature alone to specify the legal rules governing the status of legal tender accorded to banknotes and coins denominated in euro, insofar as that is necessary for the use of the euro as the single currency. In this respect, the ECB notes that, on 28 June 2023, the Commission published a proposal for a regulation on the legal tender of euro banknotes and coins, which would establish rules on the legal tender of euro

text: 37 See paragraph 3.1 of Opinion

text: 38 Commission Recommendation 2010/191 of 22 March 2010 on the scope and effects of legal tender of euro banknotes and coins (OJ L 83, 30.3.2010, p. 70).

text: 39 See judgment of 26 January 2021, Hessischer Rundfunk, joined cases

text: and

text: , EU:C:2021:63, paragraphs 46 to 49.

text: 40 See judgment of 26 January 2021, Hessischer Rundfunk, joined cases

text: and

text: , EU:C:2021:63, paragraph 45. banknotes and coins in binding Union secondary law . The explanatory memorandum of the proposed regulation states that discussions within the Euro Tender Expert Group (ELTEG) confirmed the existence of uncertainty and important differences regarding the practical application of the concept of legal tender across the euro area . These differences would justify establishing rules on the legal tender of euro cash in a regulation adopted under Article 133 of the Treaty. The ECB has welcomed the proposed regulation and strongly supported the establishment of rules on the legal tender status of euro banknotes and coins in secondary Union law, as well as the measures laid down in the proposed regulation regarding access to cash . 3.10 The Union legislature’s exclusive competence precludes any competence on the part of the Member States in this matter, unless they are acting on the basis that they have been empowered by the Union to do so or for the implementation of Union acts . 3.11 However, the Court further clarified that the status of legal tender calls for acceptance in principle of banknotes and coins denominated in euro as a means of payment, not for absolute acceptance. The Union´s exclusive competence in matters of monetary policy is without prejudice to the competence of Member States whose currency is the euro to regulate the procedures for settling pecuniary obligations, which do not affect the principle that, as a general rule, it must be possible to discharge a payment obligation in cash. Thus, that exclusive competence does not prevent a Member State from adopting measures falling within one of the Member State´s competences; for instance, a Member State may, based on its competence to organise its public administration, oblige the public administration to accept cash payments from citizens. Neither does it prevent a Member State, in the exercise of its own powers, from introducing, on legitimate public interest grounds, a derogation from that obligation for statutorily imposed payments, subject to compliance with certain conditions. In particular, the obligation to accept euro banknotes and coins may, in principle, be restricted by the Member States for reasons of public interest and subject to the principle of proportionality. This means that any such restrictions must be proportionate to the public interest objective pursued. When limiting the possibility, recognised by Union law, of generally discharging a payment obligation in banknotes and coins denominated in euro, Member States must ensure that any measures comply with the principle of proportionality, which requires in particular that they are appropriate for achieving the legitimate objectives pursued by the legislation at issue and do not go beyond what is necessary in order to achieve those objectives . 3.12 The Court has established that restrictions of the legal tender status of euro banknotes in particular require that the legislation (i) does not have the object or effect of establishing legal rules governing the status of legal tender of euro banknotes; (ii) does not lead, in law or in fact, to abolition of those banknotes, in particular by calling into question the possibility, as a general rule, of discharging a payment obligation in cash; (iii) has been adopted for reasons of public interest; (iv) only entails a

text: 41 Proposal of the European Commission of 28 June 2023 for a regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins (COM(2023) 364 final).

text: 42 See the explanatory memorandum of the proposed regulation on the legal tender of euro banknotes and coins section 3, page 4, and the Final report of the Euro Legal Tender Expert Group (ELTEG) of 6 July 2022.

text: 43 See paragraphs 1.1 and 1.2 of Opinion

text: 44 See judgment of 26 January 2021, Hessischer Rundfunk, joined cases

text: and

text: , EU:C:2021:63, paragraphs 50 to 52.

text: 45 See judgment of 26 January 2021, Hessischer Rundfunk, joined cases

text: and

text: , EU:C:2021:63, paragraphs 55 to 56 and 67 to 70. limitation in on payments in cash that does not go beyond what is necessary in order to achieve the public interest objective . 3.13 Regarding the proportionality of a restriction of the legal tender status of euro banknotes, the Court requires not only that the measure is appropriate for attaining the public interest objective pursued, but also that it must not go beyond what is necessary in order to achieve that objective. The ECB has opined on whether limitations may be considered appropriate . In particular, the ECB has noted that the broader and more general a limitation is, the stricter should be the interpretation of the requirement for the limitation to be proportionate to the objective pursued . When considering whether a limitation is proportionate, the adverse impact of the limitation in question and whether alternative measures could be adopted that would fulfil the relevant objective with less adverse impact should always be considered . 3.14 The draft law does not have the objective or the effect of amending the legal rules governing the status of legal tender of euro banknotes or coins. The draft law does not lead, in law or in fact, to the abolition of banknotes in Denmark, in particular by calling into question the possibility, as a general rule, of discharging a payment obligation in cash . 3.15 According to the explanatory notes , the draft law is, as mentioned above, proposed to be adopted for reasons of public interest. More specifically, all businesses receiving cash are seen, until the phasing out of the 1 000 DKK banknote, to be extraordinarily exposed to an increased risk of being misused for money laundering purposes, whilst the risk is thought to be particularly high for professionals not subject to the procedures for fighting money laundering under the Law on money laundering. Therefore, it is considered necessary to enhance the protection against money laundering in retail and other trades where cash is accepted by lowering the threshold for certain cash payments, as a consequence of the phasing out of the 1 000 DKK banknote. 3.16 The draft law´s objective of combating money laundering may, in general, constitute a ´public interest reason´ justifying the dis-incentivisation of, and the resulting limitation on, the use of cash payments . It is, however, difficult for the ECB to assess whether the measure contained in the draft law is appropriate for attaining the public interest objective pursued, and whether it goes beyond what is necessary in order to achieve that objective, especially in view of the absence of a concrete impact assessment of the expected effect of the draft law . 3.17 The proposal for lowering the threshold for certain cash payments follows two previous reductions of the same threshold in 2013 and 2020 respectively, on which the ECB was consulted and adopted opinions . In 2013, the cash prohibition limit was reduced from 100 000 DKK (approximately

text: 46 See judgment of 26 January 2021, Hessischer Rundfunk, joined cases

text: and

text: , EU:C:2021:63, paragraph 78.

text: 47 See paragraph 4 of Opinion

text: 48 See paragraph 2.7 of Opinion

text: , paragraph 2.11 of Opinion

text: and paragraph 2.8 of Opinion

text: 49 See paragraph 2.7 of Opinion

text: and paragraph 2.7 of Opinion

text: , and paragraph 2.8 of Opinion

text: 50 See paragraph 4.6 of Opinion

text: and paragraph 3.2 of Opinion

text: 51 See points 1 and 1.1.2 of the general comments to the draft law.

text: 52 See, amongst others, paragraph 2.2 of Opinion

text: , paragraph 2.4 of Opinion

text: , paragraph 2.5 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 4 of Opinion

text: , paragraph 2.10 of Opinion

text: and paragraph 3.6 of Opinion

text: 53 See paragraph 3.7 of Opinion

text: 54 See Opinion

text: and Opinion

text: . equivalent to 13 422 EUR) to 50 000 DKK (approximately equivalent to 6 711 EUR). At the time, the ECB noted that any impact of the proposed provisions should be carefully weighed against the public benefits expected to be derived from them. Also, in view of the fact that the measures affected relatively low value payments, competent authorities should ensure that the effects of these measures do not go beyond what is necessary for achieving the objective of combating money laundering and financing of terrorism. In 2020, the explanatory notes of that draft law did not clarify what the impact had been of the lowering of the threshold since its introduction and adoption in 2013. Moreover, in 2020 the explanatory notes did not clarify why, seven years after the lowering of the threshold for certain cash payments, the threshold needed to be further reduced to just around one fifth of the pre-2013 threshold . Likewise, the explanatory notes of the current draft law do not in any manner address the effect of the two previous reductions of the threshold. Neither do they contain any discussion as to possible alternatives to the proposed reduction. For instance, one possible alternative could have been to restrict the reduction of the threshold to only apply to cash payments made in 1 000 DKK banknotes instead of making it applicable to all cash payments irrespective of the banknote denominations used. For these reasons, it is difficult for the ECB to assess whether the objective of the current draft law will be effective. 3.18 The ECB also notes that the effect of the current inflation rates throughout Europe on the purchasing power of money is something which should also be taken into account when assessing whether the cash prohibition limit proposed in the draft law is proportionate to the public interest objective pursued. 3.19 The ECB acknowledges that other lawful means for the settlement of monetary debts with similar benefits to those of cash are generally available in Denmark above the proposed threshold equivalent to approximately 2013 EUR. Moreover, as noted above, the proposal to further lower the threshold for certain cash payments applies only to professionals who are not covered by the scope of application of the Law on measures to prevent money laundering and financing of terrorism, when receiving cash. Thus, the lowering of the threshold applies only to this specific group of business-tobusiness and customer-to-business payments. In this respect, the ECB welcomes the fact that this restriction is not intended to apply to payments between consumers, in the same way as is the case for the existing restriction of 20 000 DKK. However, as noted above, no substantiation has been provided in the explanatory notes on the effect of the previous 2013 and 2020 reductions of the cash limitations. . If such measures have not produced the desired effects, it is hard to understand why lowering that threshold to 15 000 DKK would be considered more appropriate and more effective . Moreover, in respect of contingencies where alternative means of payment are temporarily not functioning, flexibility should be ensured for the settlement of payment obligations in cash.

text: 55 See paragraph 2.3 of Opinion

text: 56 See paragraph 2.9 of Opinion

text: 57 See also paragraph 3.5 of Opinion

text: , with a view to fighting fiscal fraud, the limitation of cash payments from 2 500 EUR to 1 000 EUR was considered to be disproportionate, where at least one of the parties to the transaction acts in a professional or business capacity.

text: 58 See paragraph 3.10 of Opinion

text: . 3.20 Against this background, it is therefore questionable whether or not the draft law could be considered proportionate to the objective pursued. This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 12 January 2024. [signed] The President of the ECB Christine LAGARDE

type: vagledning

utgivare: ecb


text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: See

text: Article 9

text: and Article 10(7) of 1/2023. (I. 17.) MNB rendelet a bankjegyek feldolgozásáról, forgalmazásáról, valamint hamisítás elleni védelmével kapcsolatos technikai feladatokról, published in Magyar Közlöny 2023/8.

text: See paragraph 2.3 of Opinion

text: and paragraph 2.1 of Opinion

text: . All ECB opinions are available on EUR-Lex.

text: See paragraph 2.1 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 2.2.1 of Opinion

text: and paragraph 2.1 of Opinion

text: See paragraph 2.1 of Opinion

text: , paragraph 2.2.1 of Opinion

text: and paragraph 2.1 of Opinion

text: See paragraph 2.1 of Opinion

text: , paragraph 2.2.1 of Opinion

text: and paragraph 2.1 of Opinion

text: See paragraph 2.2 of Opinion

text: and paragraph 1.2 of Opinion

text: COM(2023) 364 final. For the ECB opinion on the proposal, see Opinion

text: See paragraph 2.2 of Opinion

text: and paragraph 3.3 of Opinion

title: Opinion of the European Central Bank of 6 February 2024 on the cash infrastructure network (CON/2024/3)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 6 February 2024 on the cash infrastructure network (

text: ) Introduction and legal basis

text: On 18 December 2023 the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank (MNB) for an opinion on a draft MNB decree amending the MNB decree on the processing and distribution of banknotes and on technical tasks relating to the protection of banknotes against counterfeiting (hereinafter 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

text: Article 2(1) of Council Decision 98/415/EC

text: , 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.

text: 1. Purpose of the draft decree

text: 1.1 The draft decree has two main purposes: first, to lay down equivalent requirements as to the minimum required size of the operating cash infrastructure for credit institutions, including Hungarian branches of credit institutions registered abroad already operating in Hungary and those entering the Hungarian market; and second, to clarify the circumstances under which credit institutions may limit the cash services they provide in their branches. 1.2 Credit institutions are currently obliged to operate an automated teller machine (ATM) network based on territorial and turnover-based criteria and must conduct an examination of their ATM network every three years, the results of which must be sent to the MNB. Certain credit institutions are exempt from these obligations . The draft decree clarifies when credit institutions starting their operations in Hungary after the entry into force of the draft decree that will have a market share of less than 1 % in respect of issued payment cards with a cash withdrawal function will be exempt from the obligation to operate such an ATM network. Additionally, the draft decree requires all credit institutions starting their operations in Hungary after the entry into force of the draft decree to conduct an initial examination of their ATM network, based on both territorial and turnover-based criteria. 1.3 The draft decree also proposes to supplement the existing rules on closing or restricting the operations of cash desks in branches of credit institutions and establishing new branches without a

text: cash desk. Accordingly, credit institutions aiming to restrict the operation and availability of their branches’ cash desks in a way that is expected to reduce the number of cash transactions of the given cash desk by at least 30 % will be obliged to install at least one new ATM in an infrastructure hub within the municipality or metropolitan district. In addition, credit institutions opening a new branch without a cash desk will be required to install at least two new ATMs in that branch or in that municipality or metropolitan district.

text: 2. General observations

text: 2.1 Cash payments facilitate the inclusion of the entire population in the economy by allowing citizens to settle a wide range of payment transactions in this way, thus ensuring freedom of choice as to method of payment for all citizens . Additionally, cash is a well-established means of payment providing for immediate settlement of debts and direct control over the payer’s spending. It is currently the only payment instrument that allows citizens to settle a transaction in central bank money which is also settled instantly, while, importantly, ensuring privacy . Cash could also play an essential role in the event of a disturbance in the payment system . The ability to pay in cash also remains particularly important for certain groups in society that, for various legitimate reasons, prefer to use cash rather than other means of payment, or do not have access to bank services and electronic means of payments. These groups include disabled citizens, immigrants, socially vulnerable citizens, elderly people, minors and others with limited or no access to digital payment services . 2.2 While the ECB holds a positive view of further innovation and development in the field of electronic payment instruments, it considers that access to cash is necessary to preserve the effectiveness of its legal tender status. If citizens do not have easy access to cash, they will not be able to use it as a means of payment . In this context, on 28 June 2023 the Commission published a proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins, which includes an obligation for euro area Member States to ensure sufficient and effective access to cash throughout their territory . 2.3 While the official currency in Hungary is the forint, not the euro, the ECB considers it important that all Member States, including non-euro area Member States, take appropriate measures to ensure that credit institutions and branches operating within their territories provide adequate access to cash services, in order to facilitate the continued use of cash . The ECB therefore welcomes the initiative of the MNB to regulate the infrastructure network of credit institutions used to carry out cash transactions and facilitate cash flows with the objective of ensuring a minimum level of availability of

text: cash for their customers throughout Hungary. The ECB also welcomes the particular attention given to refining the rules for cash desks at the branches of credit institutions as these in-person services are more inclusive, contribute to a more resilient cash supply in times of crisis and facilitate the provision of services that cash dispensers cannot provide, such as the exchange of damaged or mutilated banknotes.

text: This opinion will be published on EUR-Lex.

text: Done at Frankfurt am Main, 6 February 2024.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


text: Zákon č. 530/2023 Z.z. z 19. decembra 2023, ktorým sa menia a dopĺňajú niektoré zákony v súvislosti so zlepšením stavu verejných financií.

text: Zákon č. 235/2012 Z.z. z 26. júla 2012, o osobitnom odvode z podnikania v regulovaných odvetviach a o zmene a doplnení niektorých zákonov v znení neskorších predpisov.

text: The ECB understands that the coefficient for credit institutions is likely to equal one or be close to one. 4 The explanatory memorandum explains that the special levy will decrease the tax basis for the income tax of legal persons and thus the fiscal benefit of the special levy will be partially offset by lower income from corporate taxes. 5 See footnote 4.

text: See Opinion

text: . All ECB opinions are published on EUR-Lex. 7 See Opinion

text: . 8 See Opinion

text: . 9 See Opinion

text: . 10 See Opinion

text: . 11 See Opinions

text: and

text: . 12 See Article 127(1) of the Treaty. 13 See paragraph 2.1 of Opinion

text: and paragraph 3.1 of Opinion

text: See Opinions

text: and 17 See paragraph 3.2.1 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 3.1 of Opinion

text: , paragraph 3.1 of Opinion

text: , paragraph 4.1 of Opinion

text: and paragraph 4.1 of Opinion

text: See paragraph 3.2 of Opinion

text: , paragraph 4.3 of Opinion

text: and paragraph 4.2 of Opinion

text: . 19 See paragraph 3.4 of Opinion

text: , paragraph 3.7 of Opinion

text: , paragraph 4.6 of Opinion

text: and paragraph 4.5 of Opinion

text: . 20 See paragraph 3.1 of Opinion

text: and paragraph 3.4 of Opinion

text: . 21 In the meaning of Article 6(4), third paragraph, of

text: Council Regulation (EU) No 1024/2013 of 15 October 2013

text: conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 22 Available on the ECB’s banking supervision website at www.bankingsupervision.europa.eu.

title: Opinion of the European Central Bank of 14 February 2024 on a special levy for credit institutions (CON/2024/4)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 14 February 2024 on a special levy for credit institutions (

text: ) Introduction and legal basis

text: On 19 December 2023 the National Council of the Slovak Republic adopted Law No 530/2023 which amends and supplements several laws in relation to improving the state of public finances (hereinafter the ‘adopted law’). The European Central Bank (ECB) has not been consulted by the Slovak authorities on the adopted law. The ECB has decided to deliver an own initiative opinion on the adopted law. The ECB’s competence to deliver an opinion is based on Article 127(4), second paragraph, and Article 282(5) of the Treaty on the Functioning of the European Union, as the adopted law relates to the European System of Central Banks’ task to contribute to the smooth conduct of policies relating to the stability of the financial system pursuant to Article 127(5) of the Treaty and the ECB’s tasks concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. 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.

text: 1. Purpose of the adopted law

text: 1.1 The adopted law amended and supplemented Law No 235/2012 on a special levy on business in regulated industries (hereinafter ‘Law No 235/2012’). In particular, the adopted law expanded the scope of regulated persons that are to be subject to a special levy to include persons or branches of foreign persons that are authorised to perform activities based on an authorisation issued or granted by Národná banka Slovenska (NBS). Considering this new broader scope of regulated persons subject to Law No 235/2012, the adopted law introduced a special levy with respect to credit institutions authorised by the NBS or in other European Economic Area Member States. 1.2 The monthly special levy for credit institutions is computed by multiplying the levy base by the levy rate. The levy base for the special levy is the gross profit reported for the accounting period in which the regulated person is authorised to carry out regulated activities multiplied by a coefficient representing a ratio between the revenue from regulated activities and the total revenue belonging to the accounting period for which the reported economic result was used for the calculation of the

text: levy . The levy rate introduced for credit institutions equals 0.025 for the accounting period starting after 31 December 2023, 0.0208 for the accounting period starting after 31 December 2024, 0.0167 for the accounting period starting after 31 December 2025, 0.0125 for the accounting period starting after 31 December 2026, and 0.00363 for the accounting periods starting after 31 December 2027. 1.3 The explanatory memorandum that accompanied the adopted law when it was presented to the National Council of the Slovak Republic sets out the Ministry of Finance’s view that the special levy on credit institutions will, on a net basis ,increase the income of the public budget by EUR 335,600,000 in 2024, EUR 281,300,000 in 2025 and EUR 237,900,000 in 2026. 1.4 According to the explanatory memorandum, developments in the European economy, the increase in interest rates by the ECB and other measures created the conditions for increased profitability in the banking sector, with the expectation that such higher profitability would be maintained. The explanatory memorandum identified credit institutions as market participants with high profits and thus with a higher potential to be taxed compared to entities in other regulated sectors. The explanatory memorandum considered the profits in the banking sector as excessive, as these profits did not result from credit institutions’ business activities, but rather from unexpected developments in financial markets which allowed credit institutions to have higher profitability than other entrepreneurs. The explanatory memorandum considered that this anomaly allowed the State to adopt measures to establish equilibrium so that credit institutions would bear a higher tax burden and thus, based on tax solidarity, contribute to an improvement to public finances. Overall, in view of the higher profitability of credit institutions caused by developments in interest rates, the explanatory memorandum did not consider the proposed tax burden as excessive, but rather reflected the aim of achieving a fair balance between the public interest and impacted legal persons. 1.5 Finally, the explanatory memorandum noted that the increased profitability of credit institutions also contributed to the adoption of restrictive tax measures in other Member States, such as Hungary, Czechia, Spain, Lithuania, Italy and Sweden, and also in the United Kingdom, while noting Slovenia’s plans to introduce increased taxation of credit institutions.

text: 2. General observations

text: 2.1 The ECB understands that the special levy imposed on credit institutions translates into an additional taxation of gross profits at an annual rate of 30 % in 2024, 24.96 % in 2025, 20.04 % in 2026, 15 % in 2027, and 4.356 % in 2028 and in the following years. The ECB also understands that the current income tax applicable to legal persons in Slovakia is 21 % and that the payment of the special levy partially decreases payments under income tax , which translates into an effective tax burden applicable to credit institutions amounting to 44.7 % in 2024, 40.7 % in 2025, 36.8 % in 2026, 32.9 % in 2027 and 24.4 % in 2028, respectively.

text: 2.2 The ECB recently adopted opinions on a draft Dutch law on the imposition of a tax on credit 6 7 institutions , a draft Slovenian law on the imposition of a temporary tax on credit institutions , a draft Italian law on the imposition of an extraordinary tax on credit institutions , a draft Lithuanian law establishing a temporary solidarity contribution applicable to credit institutions and a draft Spanish law on the imposition of temporary levies on operators in the energy sector, credit institutions and financial credit establishments . In these opinions, the ECB considered legislative initiatives introducing temporary levies and taxes from the monetary policy, financial stability and prudential supervision perspectives. 2.3 The ECB has been consulted by the Slovakian Ministry of Finance on six occasions from 2011 to 2020 on draft laws introducing, amending and abolishing a special levy on financial institutions, including credit institutions, operating in Slovakia. The ECB has adopted opinions in response to five of these consultation requests .

text: 3. Monetary policy context

text: 3.1 The euro area inflation rate reached record levels over the course of 2022 and posed significant challenges for the conduct of monetary policy. Guided by its primary objective of maintaining price stability , the ECB has taken determined action to ensure a timely return of inflation to its mediumterm 2 % target. Key ECB policy rates were raised by a cumulative 450 basis points between July 2022 and September 2023, with the intention of decreasing demand and guarding against the risk of a persistent upward shift in inflation expectations. In parallel, net purchases of assets have ended, the asset purchase programme’s portfolio is declining at a measured and predictable pace, the pandemic emergency purchase programme’s portfolio is intended to be reduced starting from the second half of 2024, and the ECB remains ready to adjust all instruments within its mandate to ensure that inflation returns to the ECB’s medium-term target and to preserve the smooth functioning of monetary policy transmission . 3.2 As key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to ensure a timely return of inflation to the 2 % medium-term target, it is important to keep in mind that monetary policy decisions always have some distributional implications. In particular, they have effects on incomes and the profitability of credit institutions. From a monetary policy perspective, credit institutions play a special role in ensuring the smooth transmission of monetary policy measures to the wider economy. In this context maintaining an adequate capital position helps credit institutions to avoid abrupt adjustments to their lending to the real economy .

text: 3.3 Evidence shows that net interest income of credit institutions typically expands as policy rates increase. This effect is faster the greater the weight of short-term or variable interest rate loans on the asset side of banks’ balance sheets. However, as the tightening cycle proceeds, this positive income effect can be offset by lower lending volumes, a higher cost of funding, losses recorded in the securities portfolio and an increase in provisions resulting from potential deterioration of the quality of the credit portfolio. The realisation of downside risks in the current environment may significantly reduce the repayment capacity of debtors and translate into lower bank profitability. The net effect of tighter monetary policy on bank profitability when measured across the policy cycle may therefore be less positive, or even negative, over an extended horizon . 3.4 Thus, with respect to the special levy introduced by the adopted law, and, while it is acknowledged that the decrease of the special levy over time mitigates the effects of this additional burden on credit institutions over time, the risks to economic growth, and therefore to the overall position of credit institutions, remain tilted to the downside. 3.5 More generally, a cautious approach must be taken to ensure that the special levy does not impact the ability of individual credit institutions to build strong capital bases, to adequately provide for increased impairments and deterioration in credit quality. Curtailing the ability of credit institutions to maintain adequate capital positions or to prudently build provisions against the backdrop of a possible downturn in credit quality could endanger a smooth bank-based transmission of monetary policy measures to the wider economy.

text: 4. Financial stability context

text: 4.1 The ECB has previously opined on draft legislation introducing taxes applicable to credit institutions in several Member States . It has, in this respect, underscored that imposing a special tax on the banking sector could make it more difficult for credit institutions to build up additional capital buffers, as their retained earnings will be reduced, making them less resilient to economic shocks. In effect, such taxes could have negative economic effects by limiting credit institutions’ ability to provide credit, contributing to less favourable terms for customers when providing loans and other services. It is essential that credit institutions have a sound capital base so that they can fulfil their role as credit intermediaries. Higher costs and reduced credit supply, or higher costs of other banking services, can adversely affect real economic growth . 4.2 As noted in paragraph 3, higher net interest income of credit institutions can initially ensue as interest rates increase. But increasing interest rates can also contribute to a higher cost of funding and eventual losses on outstanding bank securities portfolios. Moreover, in a long-term perspective, higher interest rates may negatively impact borrowers’ financial situations, thereby increasing credit risk and reducing bank profitability. In that regard, taxes applicable to credit institutions may put

text: additional pressure on their capacity to maintain a solid capital position or to rebuild buffers in an environment in which profits are lower and (credit) losses may occur. These different factors should be properly evaluated in order to ensure that credit institutions remain well positioned to absorb potential future losses . 4.3 The introduction of taxes applicable to credit institutions may lead to fragmentation in the European financial system because of the heterogeneous nature of such taxes across Member States. The risk of double taxation for credit institutions in other jurisdictions where a special bank tax is also levied may be a further source of such fragmentation. 4.4 In the light of the above, the ECB is of the view that the adopted law should have been accompanied by a thorough analysis of potential negative consequences for the banking sector in order to assess whether it poses risks to financial stability, and in particular its potential to impair the banking sector’s resilience and cause market distortion . The ECB acknowledges that the special levy is based on gross profits and decreases over the five-year period between 2024 and 2028 to more sustainable levels. The ECB considers these elements of the adopted law crucial for financial stability, as keeping special levy rates at such high levels could seriously hamper the longer-term capital generation capacity of credit institutions. The ECB has also previously recommended a clear separation of the proceeds of special levies, similar to the adopted law, from the general budgetary resources of a government to avoid their use for general fiscal consolidation purposes .

text: 5. Considerations relating to the prudential supervision of credit institutions

text: 5.1 The ECB understands that the special levy applies to all credit institutions, including significant institutions directly supervised by the ECB . 5.2 As pointed out above, the special levy does not seem to fully take into consideration the full business cycle. Thus, the amount of the tax might not be commensurate with the longer-term profitability of a credit institution and its capital generation capacity. Also, as a result of the general application of the tax to the banking sector, credit institutions that have lower solvency positions or have challenging capital projections could become less able to absorb the potential downside risks of an economic downturn. As noted in the ECB’s press release of 28 July 2023 on the 2023 stress test , an improved capital position was a key factor in helping banks stay resilient amidst highly adverse conditions.

text: This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 14 February 2024. [signed]

text: The President of the ECB

text: Christine LAGARDE