title: Opinion of the European Central Bank of 8 December 2023 on the obligation for enterprises to accept payment in cash from consumers (CON/2023/40)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 8 December 2023 on the obligation for enterprises to accept payment in cash from consumers (

text: ) Introduction and legal basis

text: On 9 November 2023 the European Central Bank (ECB) received a request from the Belgian Vice Prime Minister and Minister of Economy and Labour for an opinion on a draft programme-law amending the Belgian Code of Economic Law by introducing, inter alia, the obligation for enterprises to accept payment in cash (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 first and second indents of

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

text: , as the draft law relates to (1) currency matters and (2) 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 draft law introduces in the Code of Economic Law the obligation for enterprises to accept payments in cash from consumers when the payment takes place in the simultaneous physical presence of the consumer and the enterprise . The draft law further provides that, by way of derogation from the above, an enterprise may (1) temporarily refuse cash payments for duly justified security reasons and (2) limit the denomination of the banknotes it accepts if the face value of such denomination is disproportionate to the amount usually paid by consumers . In both cases, the enterprise must inform the consumer in a clear, understandable and visible manner at the entrance of its commercial premises and at the cash register .

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: 2 Code de droit économique du 28 février 2013/Wetboek van economisch recht van 28 februari 2013, tel que modifié/zoals nader gewijzigd, Moniteur belge/Belgisch Staatsblad, 29.03.2013, p. 19975.

text: 3 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 1 in the Code of Economic Law.

text: 4 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 2, section 1 in the Code of Economic Law.

text: 5 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 2, section 2 in the Code of Economic Law.

text: 6 The ECB notes that there is a discrepancy between the French and the Dutch versions of the draft law whereby the Dutch version does not provide that the information should be provided in a ‘visible’ manner.

text: 7 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 2, section 3 in the Code of Economic Law. 1.2 Furthermore, the draft law provides for the imposition of a criminal fine ranging from a minimum of EUR 26 to a maximum of EUR 5 000 (to be multiplied by the additional decimals ) or 4 % of the total annual turnover for the last closed financial year, whichever is higher, in case of breach of this obligation . Such sanction may only be imposed (1) insofar as the facts that may constitute a breach have been established at least twice by the officials competent to investigate and establish breaches of the Code of Economic Law and (2) no appropriate action has been taken in response to a warning issued by such officers to the offenders giving them formal notice to put an end to the offence, when the breach was first established . 1.3 According to the explanatory memorandum of the draft law, the draft law reiterates an essential principle that derives from the legal tender status of cash. The explanatory memorandum indeed notes that the obligation to provide electronic means of payment does not allow enterprises to refuse payment in cash, i.e. payments made with euro banknotes and coins. The aim of the draft law is therefore to allow all consumers to pay for their purchases in cash. The explanatory memorandum states that the ECB stresses that while it has a generally positive attitude towards innovations and developments in the field of electronic payment instruments and their ongoing spread in society, this should not be at the expense of cash payments in those Member States that have adopted the euro as their currency. 1.4 The explanatory memorandum further refers to the judgment of the Court of Justice of the European Union in Joined Cases

text: and

text: (hereinafter the ‘judgment in Joined Cases C- 422/19 and

text: ’) and states that the Court stressed that only reasons of public interest relating to security or to the fight against crime, or of public interest in ensuring the efficient organisation of payment systems in society, can justify a derogation by a Member State from the principle that payment may be made in cash in discharge of a payment obligation, to the extent that those restrictions are proportionate to the objective pursued. Accordingly, only the limitation on cash payments in accordance with Book III of the Law on the prevention of money laundering and terrorist financing and on the restriction of the use of cash constitutes an explicit limitation on the obligation for an enterprise to accept a cash payment from a consumer. 1.5 The explanatory memorandum, however, underlines that the obligation to pay with cash and, conversely, the prohibition on enterprises refusing cash may be nuanced. The explanatory memorandum justifies the two exceptions provided in the draft law as follows. On the one hand, enterprises should be able to temporarily refuse payments in cash for security reasons (e.g. where an enterprise was the victim, over a limited period of time, of several burglaries or of aggression, or where time is needed to temporarily repair defective security equipment). Denying payments in cash

text: 8 Additional decimals (décimes additionels/opdeciemen) are a coefficient by which any amount of criminal or administrative fines mentioned in the laws and codes needs to be multiplied to determine the actual amount of the relevant fine. It is currently set at 8.

text: 9 See Article 49 of the draft law introducing a new Article XV.82/1, section 1 in the Code of Economic Law.

text: 10 See Article 49 of the draft law introducing a new Article XV.82/1, section 2 in the Code of Economic Law.

text: 11 See judgment of 26 January 2021, Hessischer Rundfunk,

text: and

text: , EU:C:2021:63.

text: 12 Loi du 18 septembre 2017 relative à la prévention du blanchiment de capitaux et du financement du terrorisme et à la limitation de l'utilisation des espèces/ Wet van 18 september 2017 tot voorkoming van het witwassen van geld en de financiering van terrorisme en tot beperking van het gebruik van contanten, telle que modifiée/zoals nader gewijzigd, Moniteur Belge/Belgisch Staatsblad, 06.10.2017, p. 90839. for security reasons should be temporary as, without such a temporal limitation, the motive based on security reasons could be used to circumvent the obligation to accept payments in cash. On the other hand, an enterprise should be able to limit the face value of the denomination of the banknotes it accepts in transactions when such denomination is manifestly disproportionate to the ‘average’ amount of purchases normally paid for in the enterprise, or in relation to the goods and services it proposes.

text: 2. General observations

text: 2.1 The ECB recently adopted an opinion on another draft Belgian law providing for a similar obligation to accept cash payment from consumers . 2.2 Role and importance of cash payments in society 2.2.1 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 payments. These groups include not only elderly people but also some citizens with disabilities, immigrants, socially vulnerable citizens, 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 citizens 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 payment system and it is robust against cyber-crime . 2.2.2 Against this background, the ECB welcomes the fact that the draft law aims to preserve citizens' right to pay in cash. 2.3 Status of euro banknotes and coins as legal tender 2.3.1 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 . 2.3.2 The concept of legal tender as a means of payment denominated in a currency unit has been considered by the Court of Justice . In particular, the Court 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.

text: 13 See Opinion

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

text: 14 See paragraph 2.1.1 of Opinion

text: 15 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: 16 See

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: 17 In its judgment in Joined Cases

text: and

text: . In clarifying the concept of legal tender under Union law, the Court took 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, 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 . As noted by the Court, point 3 of Recommendation

text: states that high denomination banknotes should be accepted as means of payment in retail transactions. A refusal thereof should be possible only if grounded on reasons related to the ‘good faith principle’ (for example the face value of the banknote tendered is disproportionate compared to the amount owed to the creditor of the payment) . 2.3.3 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 to specify the legal rules governing the status of legal tender accorded to banknotes and coins denominated in euro. 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 (hereinafter the ‘proposed regulation on the legal tender of euro cash’), which would 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. 2.3.4 According to the Court, it is for 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 . However, the Union’s exclusive competence does not prevent a Member State, in the exercise of its own powers, such as the organisation of its public administration, from adopting a measure that obliges that administration to accept cash payments from citizens or introduces, on public interest grounds, a derogation from that obligation for statutorily imposed payments, subject to compliance with certain conditions .

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).

text: 19 See judgment in Joined Cases

text: and

text: , paragraphs 46 to 49.

text: 20 See judgment in Joined Cases

text: and

text: , paragraph 8.

text: 21 See judgment in Joined Cases

text: and

text: , paragraph 45.

text: 22 COM(2023) 364 final.

text: 23 See section 3, page 4 of the explanatory memorandum of the proposed regulation on the legal tender of euro cash, and ELTEG’s final report of 6 July 2022.

text: 24 See judgment in Joined Cases

text: and

text: , paragraphs 50 to 52.

text: 25 See judgment in Joined Cases

text: and

text: , paragraph 56. 2.3.5 The conditions established by the Court for restrictions on the legal tender status of euro banknotes in particular require (1) that the legislation does not have the object or effect of establishing legal rules governing the status of legal tender of euro banknotes; (2) that it does not lead, in law or in fact, to the abolition of those banknotes, in particular by calling into question the possibility, as a general rule, of discharging a payment obligation in cash; (3) that it has been adopted for reasons of public interest; (4) that the limitation on payments in cash which the legislation entails is appropriate for attaining the public interest objective pursued; and (5) that it does not go beyond what is necessary in order to achieve that objective . 2.3.6 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 achieving the legitimate objective(s) pursued by the legislation at issue but also that the measure does not go beyond what is necessary in order to achieve those objectives . The ECB has provided additional guidance on whether limitations are proportionate in its opinions. In particular, it 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 . In addition, 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 a less adverse impact should always be considered .

text: 3. Specific observations

text: 3.1 The explanatory memorandum of the draft law states that the provisions of the draft law providing for the obligation for enterprises to accept payment in cash from consumers and providing that an enterprise may limit the denomination of the banknotes it accepts if such denomination is disproportionate to the amount usually paid by consumers reiterate Union law. According to the explanatory memorandum, this exception aims at confirming in national law the restrictions based on the ‘good faith principle’ set out in Recommendation

text: . 3.2 The ECB underlines that the reproduction in a national provision of a Union obligation that is directly applicable in the legal order of the Member State may create uncertainty both as to the legal nature of the applicable obligation 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 The ECB also underlines that the incorporation of some elements of obligations of Union law into national law is warranted only in exceptional circumstances for the sake of coherence and in order

text: 26 See judgment in Joined Cases

text: and

text: , paragraph 78.

text: 27 See judgment in Joined Cases

text: and

text: , paragraphs 55 and 56 and 67 to 70.

text: 28 See paragraph 2.7 of Opinion

text: , paragraph 2.11 of Opinion

text: and paragraph 2.8 of Opinion

text: 29 See paragraph 2.7 of Opinion

text: and paragraph 2.8 of Opinion

text: 30 See Article 17 of the draft law introducing a new Article VI.7/5, paragraphs 1-2, section 1 in the Code of Economic Law.

text: 31 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: . to make them comprehensible to the persons to whom they apply . If such exceptional circumstances do exist, the reproduction of elements of directly applicable obligations 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 obligations of Union law are sufficiently coherent and comprehensive, making it unnecessary to repeat or reflect them in national law . 3.4 The ECB understands that the reiteration in national law of the obligation in principle under Union law to accept payments in euro cash aims at bringing this obligation more effectively to the attention of Belgian enterprises and consumers and at providing for a criminal fine under national law for any breach of this obligation. The ECB considers that the reproduction of the obligation of mandatory acceptance of euro cash is warranted as it provides a connection to the introduction of the criminal fine for breach of the obligation. To the extent that that part of the first provision of the draft law necessarily reiterates Union law for the abovementioned reasons, it should do so in an explicit manner. The ECB therefore suggests that, in addition to the explanation provided in the explanatory memorandum, the draft law should be clarified by the addition of a statement that its first provision is in accordance with Union law, including, most importantly, Article 128(1) of the Treaty and

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

text: . This clarification would also highlight that the reference to the obligation of mandatory acceptance of euro cash is subject to the exceptions to mandatory acceptance established in Union monetary law. 3.5 The ECB takes the view that the provisions of the draft law under which an enterprise may limit the face value of the denomination of the banknotes it accepts if such denomination is disproportionate to the ‘average’ amount ‘usually’ paid by consumers are not in line with Union law. 3.6 Point 3 of Recommendation

text: sets out, as an illustration of the ‘good faith principle’, the situation in which the face value of the banknote tendered is disproportionate compared to the amount owed to the creditor of the payment. In the same way, the proposed regulation on the legal tender of euro cash provides that a payee is entitled to refuse euro banknotes and coins where a refusal is made in good faith and where such refusal is based on legitimate and temporary grounds in line with the principle of proportionality in view of concrete circumstances beyond the control of the payee. On this point, the ECB welcomed the fact that several cumulative conditions have been imposed for the application of the ‘good faith’ exception to set the bar high for a payee relying on this exception to justify a refusal to accept cash . The proposed regulation, which is currently being negotiated by the co-legislators, specifies that such legitimate grounds may include, regarding high denomination banknotes, situations in which the value of the banknote tendered is manifestly disproportionate compared to the value of the amount to be settled . Contrary to the approach taken

text: 32 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: 33 See paragraph 2.2 (footnote 6) of Opinion

text: , paragraph 2.4 of Opinion

text: and paragraph 2.2.6 of Opinion

text: 34 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: 35 See paragraph 4.2 of Opinion

text: . in Recommendation

text: and in the proposed regulation, the draft law does not link the possibility to refuse certain denominations of banknotes to the case-by-case assessment of whether the value of the banknote tendered and the actual amount to be settled are manifestly disproportionate to each other. Rather, the draft law provides that high denominations may be refused ex ante and for all cases based on a calculation of the ‘average’ amount which is ‘usually’ paid to the enterprise concerned. 3.7 The ECB therefore considers that this provision in the draft law cannot be seen a reproduction of the ‘good faith principle’, and hence of the concept of legal tender under Union law, of which the ‘good faith principle’ forms part. 3.8 Furthermore, the draft law also provides for an exception to the obligation for enterprises to accept payments in cash , whereby an enterprise may temporarily refuse cash payments for duly justified security reasons. This exception must be assessed against the conditions established by the Court as set out in paragraphs 2.3.5 and 2.3.6 above as a restriction of the possibility of discharging a payment obligation in euro banknotes and coins. 3.9 The ECB considers that the restriction on payments in cash based on security reasons laid down in the draft law does not have the objective or the effect of amending the legal rules governing the legal tender status of euro cash. It does not lead, in law or in fact, to the abolition of banknotes and coins in Belgium and it is based on reasons of public interest. The explanatory memorandum explains that the restriction on payments in cash is aimed at protecting the interests of public order as it allows for the security of businesses when they are in a vulnerable situation. 3.10 However, for a national law measure to limit the possibility of generally discharging a payment obligation in cash that measure must also be proportionate to the public interest objective pursued. The ECB considers that the draft law’s authorisation of an enterprise to temporarily refuse cash payments for duly justified security reasons may, in general, constitute a reason of public interest justifying the limitation on payments in cash. 3.11 At the same time, the restriction on payments in cash set out in the draft law affects a very wide range of transactions, as it involves natural persons and payments of both small and large amounts in various segments of the economy. Therefore, any negative impact of the cash payment limitation must be carefully weighed against the anticipated public benefits . The draft law establishes that the refusal may only be temporary, that it must be duly justified for security reasons, and that the enterprise must communicate this to the consumer in a clear, understandable and visible manner at the entrance of its commercial premises and at the cash register. Despite the establishment of these conditions, the ECB observes that the draft law gives enterprises wide discretion in deciding whether to refuse banknotes and coins based on a cash restriction that pursues public interest objectives. It is for them to determine what ‘temporary’ means, as there are no limits on the total time during which the restriction can remain in place. It is also for enterprises to decide what a ‘duly justified security reason’ is. The ECB notes that the explanatory memorandum only provides examples, such as

text: 37 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 2 in the Code of Economic Law.

text: 38 See judgment in Joined Cases

text: and

text: , paragraph 78.

text: 39 See paragraph 4.6 of Opinion

text: 40 See paragraph 2.9 of Opinion

text: . needing time to repair defective security equipment. Hence, it remains unclear whether the conditions laid down in the draft law for enterprises to rely on this cash restriction are sufficient to ensure its adequate use in practice and, ultimately, its proportionality. 3.12 As a final observation, the ECB welcomes the provision of the draft law which proposes to introduce a criminal fine for breach of the obligation for enterprises with a physical location to accept cash payments from consumers. Such sanction will facilitate enforcement of this obligation of Union law. 3.13 The introduction of a criminal fine to reinforce the legal tender status of banknotes and coins in Belgium is consistent with the proposed regulation on the legal tender of euro cash, which envisages that Member States will lay down the rules on penalties, including financial penalties and non-criminal fines, applicable to infringements of the proposed regulation . As noted in the explanatory memorandum of the proposed regulation, these provisions would ensure that the proposed regulation’s provisions are enforced, while allowing Member States a level of flexibility on the nature of the penalties applicable . This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 8 December 2023. [signed] The President of the ECB Christine LAGARDE

text: 41 See Article 12 of the proposed regulation on the legal tender of euro cash.

text: 42 See page 9 (‘Penalties (

text: Article 12

text: )’) of the explanatory memorandum of the proposed regulation on the legal tender of euro cash.


publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 8 December 2023 on the liability of Banca d’Italia and the members of its decision-making bodies and staff, and the cooling-off/in rules applicable to the members of its management bodies and top managers (CON/2023/41)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 8 December 2023 on the liability of Banca d’Italia and the members of its decision-making bodies and staff, and the cooling-off/in rules applicable to the members of its management bodies and top managers (

text: ) Introduction and legal basis

type: rubrik

text: On 23 November 2023, the European Central Bank (ECB) received a request from the Italian Ministry of Economy and Finance for an opinion on a draft law on measures to support the competitiveness of capital markets (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 third and sixth indents of

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

text: , as the draft law relates to a national central bank, rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets, and the specific tasks conferred upon the ECB concerning the prudential supervision of credit institutions under Article 127(6) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the ECB, the Governing Council has adopted this opinion.

type: stycke

text: 1. Purpose of the draft law

text: 1.1 The draft law reforms, inter alia, the liability regime applicable to the Banca d’Italia (BdI), the Commissione Nazionale per le Società e la Borsa (CONSOB, National Commission on Companies and Stock Exchange), the Istituto per la Vigilanza sulle Assicurazioni (IVASS, Institute for Insurance Supervision) and the Commissione di vigilanza sui Fondi Pensione (COVIP, Supervision of Pension Funds) (hereinafter together referred to as the ‘supervisory authorities’). The draft law also amends the cooling-off/in rules applicable to the members of the management bodies and managers of the supervisory authorities. Reform of the liability regime applicable to the Banca d’Italia, the members of the Banca d’Italia’s governing bodies and the Banca d’Italia’s staff in the supervisory context 1.2 The current liability regime applicable to the supervisory authorities, the members of their governing bodies and their staff provides that they are liable for damages caused by acts or conduct carried out in the performance of their supervisory duties in case of wilful misconduct or gross negligence .

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: 2 See

text: Article 24

text: (6-bis) of the Law on public savings and financial intermediation (Legge 28 dicembre 2005, n. 262, Disposizioni per la tutela del risparmio e la disciplina dei mercati finanziari, pubblicata nella Gazzetta Ufficiale n. 301 del 28 dicembre 2005). 1.3 The draft law introduces an amendment to the liability regime, in line with the recommendations of the Organisation for Economic Co-operation and Development (OECD) , in order to make investigation processes more efficient and to improve enforcement activities. In particular, the draft law introduces a provision according to which third parties may bring civil liability actions against supervisory authorities only where damages are directly attributable to (i.e. a direct and immediate consequence of) infringements of laws or regulations, compliance with which is part of the supervisory authorities’ respective mandates. Under this provision, evidence of wilful misconduct or gross negligence on the part of the supervisory authority is required. Reform of the cooling-off/in rules 1.4 The draft law also introduces legislative amendments to the cooling-off/in rules applicable to members of the management bodies and managers of the supervisory authorities. According to the OECD, cooling-off periods can create distorted incentives to limit the attractiveness of expert positions in public institutions. With specific reference to Italy, the OECD suggests reassessing the 4 5 current cooling-off period , which it considers to be penalising . 1.5 In this respect, the draft law shortens the cooling-off period to which members of the governing bodies and managers who have ceased to hold office are subject from two years to a maximum of one year. A decree of the President of the Council of Ministers, which is to be adopted within one hundred and eighty days from the date of entry into force of the draft law, will contain the implementing rules. 1.6 Furthermore, the draft law amends the cooling-in rules by reducing the period of incompatibility from two years to one year. According to the current cooling-in rules , those who, in the previous two years, have (i) held positions in private law entities, (ii) held positions in entities financed by the government or a public body which is offering the position, or (iii) performed professional activities that are regulated, financed or otherwise remunerated by the authority or entity offering the position, cannot be appointed to: (a) carry out top-level administrative tasks in the State, regional or local governments; (b) directorships of public sector bodies at a national, regional or local level; or (c) external management positions in government and public bodies that are related to the specific sectors financed and regulated by the abovementioned public entities. 1.7 In addition to reducing the cooling-off period of two years to one year, the new rules under the draft law would limit the cooling-off obligations to cases of collaboration, consulting and employment relationships entered into directly with ‘regulated entities’ or their subsidiaries. Under the current Italian legal framework an indirect relationship is sufficient for cooling-off obligations to apply.

text: 3 See paragraph 2 of the OECD Capital Market Review of Italy 2020: Creating Growth Opportunities for Italian Companies and Savers, OECD Capital Market Series, available on the OECD’s website at www.oecd.org (hereinafter the ‘OECD Capital Market Review of Italy 2020’).

text: 4 See

text: Article 29

text: -bis of the Law on public savings and financial intermediation (Legge 28 dicembre 2005, n. 262, Disposizioni per la tutela del risparmio e la disciplina dei mercati finanziari, pubblicata nella Gazzetta Ufficiale n. 301 del 28 dicembre 2005).

text: 5 See paragraph 3 of the OECD Capital Market Review of Italy 2020.

text: 6 Legislative Decree on the unappointability and incompatibility of positions within public administrations and private bodies under public control (Decreto Legislativo 8 aprile 2013, n. 39, Disposizioni in materia di inconferibilita' e incompatibilita' di incarichi presso le pubbliche amministrazioni e presso gli enti privati in controllo pubblico, a norma dell'articolo 1, commi 49 e 50, della legge 6 novembre 2012, n. 190, pubblicato nella Gazzetta Ufficiale n. 92 del 19 Aprile 2013). 1.8 In addition, the draft law amends the rules on appointment. Under the draft law, the type of assignment carried out previously must be considered. Where the previous assignment is of low relevance (e.g. as a result of the fact that no executive or organisational powers were held) it is sufficient to provide for organisational and transparency measures to be implemented after the appointment. The draft law further specifies that these organisational safeguards will also apply to the members of the governing bodies of the supervisory authorities.

text: 2. Liability of the Banca d’Italia and the members of its decision-making bodies and staff

text: 2.1 The ECB understands that the current liability regime applicable to the members of the BdI’s governing bodies and the BdI’s staff, as amended by the draft law, is relevant in the context of the BdI’s supervisory mandates under Italian law, and does not set out the liability regime for the activities carried out by the BdI in its capacity as a Eurosystem and European System of Central Banks (ESCB) national central bank (NCB). 2.2 Liability of the Banca d’Italia The ECB welcomes the fact that, under the draft law, the BdI’s liability remains limited to cases of wilful misconduct and gross negligence and, in addition, is now explicitly restricted to damages that are directly attributable to infringements by supervised entities of laws or regulations that fall within the BdI’s supervisory mandates under Italian law. Therefore, the ECB understands that the mere infringement by a supervised entity of laws or regulations, compliance with which is part of the supervisory authorities’ respective mandates, is not sufficient to trigger the abovementioned liability provision. Under Italian law, for liability to be triggered, specific evidence of wilful misconduct or gross negligence on the part of the supervisory authority is required. Gross negligence has been interpreted by the jurisprudence as the situation where the supervisory authority, while being aware, omits to act in the face of serious, specific and repeated infringements . The limitation of the civil liability of supervisors – and specifically the authority entrusted with the functions of banking supervision and bank resolution – is consistent with the development of international standards in these fields. This highlights the need to protect the exercise of discretion in these fields, especially (a) in view of the complexity of the decisions that the authority takes and (b) having regard to the planning of the supervisory activities, which is an exclusive prerogative of the relevant authority.

text: 7 See Article 24 of the Law on public savings and financial intermediation (Legge 28 dicembre 2005, n. 262, Disposizioni per la tutela del risparmio e la disciplina dei mercati finanziari, pubblicata nella Gazzetta Ufficiale n. 301 del 28 dicembre 2005).

text: 8 See Cass. civ., sez. III, 5.9.2019, n. 22164 and Cass. civ., 12.4.2018, n. 9067.

text: 9 See Basel Committee on Banking Supervision, Core Principles for Effective Banking Supervision (September 2012), Principle 2, Essential Criterion 9, available on the website of the Bank for International Settlements at www.bis.org (hereinafter the ‘Basel Core Principles’). On resolution and crisis management of credit institutions, see Financial Stability Board, Key Attributes of Effective Resolution Regimes for Financial Institutions (October 2014), Key Attribute 2.6, available on the website of the Financial Stability Board at www.financialstabilityboard.org. Liability of the members of the BdI’s governing bodies and staff 2.3 As concerns the liability of the members of the BdI’s governing bodies and staff, the ECB notes that from the perspective of the independence of an NCB, an NCB may not be put into a position where it has limited control or no control over its staff, or where the government of a Member State can influence its policy on staff matters. In this regard, any legislative provisions affecting the members of an NCB’s decision-making bodies and its employees should be decided in close and effective cooperation with the NCB , taking due account of its views, to ensure the ability of the NCB to independently carry out its tasks . 2.4 The ECB takes note of the BdI’s memorandum to the Italian Senate, in which the BdI states that the introduction of a provision in the draft law whereby actions for civil liability may be brought by third parties against supervisory authorities, but not against the members of their governing bodies or their employees, seems important in order to prevent judicial actions aimed at influencing assessments and decisions and, therefore, ultimately, to protect the independence of the government bodies and employees of supervisory authorities in the exercise of the discretion assigned to them, especially in view of the complex nature and the multiple interests to be balanced in these areas . In this regard, the BdI points out that significant limitations on the possibility of bringing actions for damages by third parties directly against natural persons acting on behalf of the supervisory authorities are applied in most Member States, which is also relevant in the context of the ECB’s Single Supervisory Mechanism (SSM). 2.5 The ECB highlights that the current liability regime, as amended by the draft law, may have a particular impact on the members of the BdI’s governing bodies and staff performing supervisory tasks given that the adoption of individual supervisory decisions is connected to the risk of litigation actions against the supervisor by the supervised credit institution or by other affected stakeholders. Such actions may relate, for example, to an alleged reduction of profit, the loss of a business opportunity, injury to commercial reputation, etc. Litigation of this kind may be initiated irrespective of the correctness of any prudential measures adopted, especially where several categories of stakeholders with competing interests, e.g. the creditors of a failing bank, are involved. 2.6 In order to address this litigation risk, which is inherent to the prudential supervision, Principle 2 of the Basel Core Principles states that: (a) laws should protect the supervisor and its staff against lawsuits for actions taken and/or omissions made while discharging their duties in good faith; and (b) the supervisor and its staff should be adequately protected against the costs of defending any actions and/or omissions they make while discharging their duties in good faith . Therefore, the ECB

text: 10 See Opinion

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

text: 11 See Opinions

text: and

text: 12 See the Memorandum of the Banca d’Italia, Draft law: Measures to support the competitiveness of capital (Disegno di legge “Interventi a sostegno della competitività dei capitali” AS 674 Memoria della Banca d’Italia, 27 Giugno 2023).

text: 13 Principle 2, essential criterion 9, of the Basel Core Principles. suggests that the draft law should be amended in order to introduce a liability regime that is also aligned with the Basel Core Principles in this respect . 2.7 While, in principle, it is a matter for national law to determine the scope of liability connected with the performance of the tasks of national competent authorities (NCAs) in the SSM, including the BdI, it is also important for the functioning of the SSM that national liability regimes offer standards of legal protection commensurate with the Basel Core Principles. If the legal protection offered to the staff of the BdI is inadequate, the position of any of the BdI’s staff members involved in joint supervisory teams (JSTs) within the SSM may be compromised given that instructions given to such staff by the JST coordinator in line with

text: Article 6(1) of Regulation (EU) No 468/2014

text: of the European Central Bank may lead to personal liability claims against such staff. 2.8 In this context, the ECB notes that Basel Core Principle 2 requires that banking supervisors possess operational independence which implies, in particular, that: (i) there is no government or industry interference that compromises the operational independence of the supervisor and (ii) the supervisor has full discretion to take any supervisory actions or decisions regarding the banks and banking groups under its supervision . 2.9 The current liability regime, as amended by the draft law, may have a particular impact on the members of BdI’s governing bodies and the BdI’s staff also in the context of crisis management, when the BdI may need to act effectively and swiftly in order to protect the stability of the Italian financial system . 2.10 Finally, the ECB also takes note of the possibility to ensure that the abovementioned principles are duly considered in the context of the preparation of the legislative decree to be adopted by the Government, which could address the question of the civil liability of the members of the BdI’s governing bodies and the BdI’s staff , which obviously does not affect the BdI’s right of redress against them, if such is the case. In this respect, the ECB would appreciate being consulted on the legislative decree.

text: 3. Reform of the cooling-off/in rules

text: 3.1 As far as cooling-off/in rules are concerned, the draft law does not make an explicit distinction when it comes to its application to the different mandates or capacities of the BdI. However, in light of the title of Title II of the draft law , the ECB understands that this approach has been chosen in order to adopt rules applicable to the members of the governing bodies and the relevant staff of all of the supervisory authorities.

text: 14 See paragraph 2.8.2 of Opinion

text: Regulation (EU) No 468/2014

text: of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation) (ECB/2014/17) (OJ L 141, 14.5.2014, p. 1).

text: 16 See paragraph 2.8.3 of Opinion

text: 17 See paragraph 2.8.4 of Opinion

text: 18 See

text: Article 19(2)

text: , letter i) of the draft law. 19 Title II of the draft law, which includes Articles

text: and

text: , is entitled ‘Regulation of national supervisory authorities’. 3.2 The ECB’s Code of Conduct for high-level ECB officials (hereinafter the ‘Single Code’) applies to the members of the Governing Council and the Supervisory Board of the ECB when exercising their functions as members of a high-level ECB body. It also applies to persons replacing the members in meetings of the Governing Council or the Supervisory Board (hereinafter the ‘alternates’) in the performance of their duties and responsibilities relating to these high-level bodies where explicitly provided for in the Single Code. The reduction of the cooling-off period from two years to one year is less restrictive compared to the requirements of the Single Code. In addition, the Single Code sets limits on the establishment of post-employment relationships not only directly with significant or less significant credit institutions or other financial institutions, but also with ‘any entity engaged in lobbying in relation to the ECB, or consultancy and/or advocacy for the ECB or for any [supervised] institution’ . It should also be considered that the Single Code, insofar as it refers to the members of the Supervisory Board, is to be seen as implementing

text: Council Regulation (EU) No 1024/2013

text: (hereinafter the ‘SSM Regulation’), which requires the ECB, in cooperation with the NCAs, to: (a) establish and maintain comprehensive and formal procedures including ethics procedures and proportionate periods to assess in advance and prevent possible conflicts of interest resulting from subsequent employment within two years of members of the Supervisory Board; and (b) provide for appropriate disclosures. The procedures are without prejudice to the application of stricter national rules. Against this background, the ECB highlights that the draft law should be interpreted without prejudice to the Single Code and must ensure, for the members of the BdI’s governing bodies who fall within the scope of application of Article 31(3) of the SSM Regulation, the possibility of imposing and extending a cooling-off period of a maximum of two years in line with the Single Code . The cooling-in regime under the draft law appears to introduce more restrictive rules than those contained in the Single Code. In this respect, the Single Code is without prejudice to stricter ethical rules applicable to members and alternates by virtue of national law . 3.3 NCBs and NCAs, including the BdI, are also required to take the necessary measures to implement and comply with Guideline

text: (EU) 2021/2253

text: of the European Central Bank (ECB/2021/49) and Guideline

text: (EU) 2021/2256

text: of the European Central Bank (ECB/2021/50) (hereinafter the ‘Guidelines’), informing the ECB of any obstacles for their implementation. As for the cooling-off period, the Guidelines require NCBs and NCAs to have mechanisms in place to assess and avoid possible conflicts of interest arising from post-employment occupational activities undertaken by their members of staff and the members of their bodies, including appropriate cooling-off periods . The ECB highlights that the draft law should be interpreted without prejudice to the Guidelines and should

text: 20 See the Code of Conduct for high-level ECB officials (OJ C 478, 16.12.2022, p. 3). 21 See

text: Article 17.3

text: , point (b), of the Single Code. 22 See

text: Article 31(3) of 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). 23 See

text: Article 17.3

text: , point (b), of the Single Code. 24 See Article 2.2 of the Single Code. See also Opinions

text: and

text: . 25 Guideline (EU) [2021/2253] of the European Central Bank of 2 November 2021 laying down the principles of the Eurosystem Ethics Framework (ECB/2021/49) (OJ L 454, 17.12.2021, p. 7). 26 Guideline

text: (EU) 2021/2256

text: of the European Central Bank of 2 November 2021 laying down the principles of an Ethics Framework for the Single Supervisory Mechanism (ECB/2021/50) (OJ L 454, 17.12.2021, p. 21). 27 See Article 6(3) of the Guidelines. not interfere with the implementation of the Guidelines. In this respect, the scope of application of the draft law seems narrower than that of the Guidelines, as the draft law seems to refer only to the BdI's upper management (dirigenti), resulting in a partial implementation of the Guidelines. While this is not expressly stated in the draft law, the ECB understands that the Guidelines may be fully implemented by BdI through its own regulations. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 8 December 2023. [signed] The President of the ECB Christine LAGARDE

type: vagledning

utgivare: ecb


text: Patērētāju tiesību aizsardzības likums, Latvijas Vēstnesis, 104/105, 1.4.1999.

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: The draft law has evolved considerably since its inception, and no explanatory memorandum was submitted with the consultation request.

text: The draft law has been further revised since its submission to the ECB for consultation and it was passed at a third and final reading on 6 December 2023. In the present opinion the ECB refers to the text of the law, namely the Amendments to the Consumer Rights Protection Law (Nr.367/Lp14) submitted for adoption at third reading, available on the Latvian Parliament’s website at www.saeima.lv. 6 Civilprocesa likums, Latvijas Vēstnesis, 326/330, 3.11.1998. 7 See Opinion

text: . All ECB opinions are published on EUR-Lex. 8 See Opinion

text: . 9 See Opinion

text: See Opinion

text: . 11 Latvijas Vēstnesis, 43, See Article 71 of the Constitution of the Republic of Latvia (Latvijas Republikas Satversme), 1.7.1993. 12 See, for example, paragraph 2.1 of Opinion

text: , paragraph 2.1 of Opinion

text: and Chapter 2 of Opinion

text: See paragraph 3.4 of Opinion

text: and paragraph 3.4 of Opinion

text: . 14 See Appendix 2 (‘Borrowers’ ability to withstand rises in costs and interest rates’) of Latvijas Banka’s Financial Stability Report 2023, available on Latvijas Banka’s website at www.bank.lv. 15 See paragraph 3.3 of Opinion

text: See paragraph 3.5 of Opinion

text: . 17 See paragraph 3.6 of Opinion

text: . 18 See paragraph 3.3 of Opinion

text: . 19 See paragraph 3.4 of Opinion

text: and paragraph 3.7 of Opinion

title: Opinion of the European Central Bank of 11 December 2023 on a temporary mortgage loan borrower protection fee payable by credit institutions (CON/2023/42)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 11 December 2023 on a temporary mortgage loan borrower protection fee payable by credit institutions (

text: ) Introduction and legal basis

text: On 30 November 2023 the European Central Bank (ECB) received a request from the Budget and Finance (Taxation) Committee of the Latvian Parliament (hereinafter the ‘Committee’) for an opinion on a draft law amending the Law on consumer rights protection (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 third and sixth indents of

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

text: , as the draft law relates to Latvijas Banka, contains rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets, and concerns 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 draft law

text: 1.1 The objective of the draft law is to establish a support mechanism consistent with the principle of a socially responsible State and aimed at mortgage borrowers for the purpose of house purchases or construction to safeguard the welfare of society, taking account of the considerable burden borne by households resulting from the increase in loan payments and consumer prices driven by the rise in the EURIBOR rate and inflation . The explanatory memorandum accompanying the first draft of the draft law produced by the Committee referred to the preamble of the Latvian Constitution which defines Latvia as a socially responsible State, justifying the need for horizontal support measures. The consultation request notes that ongoing dialogue with banks has not brought any tangible results in terms of increasing deposit rates and reducing mortgage loan interest rates and bank service fees, and that, therefore, administrative measures providing support to mortgage payers are considered necessary to protect them in their capacity as consumers.

text: 1.2 The draft law provides that credit institutions and companies, as well as permanent establishments (branches) in Latvia of foreign credit institutions and companies, that have received a special permit (licence) for the provision of consumer lending services in Latvia (hereinafter ‘fee payers’ or, in the singular, ‘fee payer’) will be under an obligation to pay a mortgage borrower protection fee. 1.3 The mortgage borrower protection fee will be set at 0.5 % per quarter of the total amount of outstanding mortgage credits issued by the fee payer as at 31 October 2023. The fee will be paid into a dedicated income account of the central government basic budget by the 23rd day of the first month of the reporting quarter. The fee is of a temporary nature: it will be applicable for 2024. The fee will not be applied to mortgage credits issued with fixed interest rates for the entire mortgage credit repayment period. 1.4 The fee will be administered by the State Revenue Service (SRS). Fee payers will be obliged to submit to the SRS the following information regarding each mortgage borrower: (1) first name, surname, personal identity number; (2) the number of the bank account to which the credit interest rate compensation is to be credited; and (3) the credit interest rate compensation calculated. The SRS will transfer the credit interest rate compensation to the borrower’s bank account once per quarter. 1.5 The mortgage borrowers eligible to receive compensation are consumers with whom the fee payer has concluded a mortgage credit agreement provided that (1) the mortgage credit agreement was concluded by 31 October 2023 and the real estate pledged as collateral is located in Latvia, and (2) the outstanding mortgage credit does not exceed EUR 250 000. The amount of the credit interest rate compensation for each relevant mortgage is set at 30 % of interest payments calculated in compliance with the relevant mortgage credit agreement for the respective quarter, but the compensation is limited to a level equal to no more than two percentage points from the interest rate set for that period. 1.6 The draft law clarifies that disputes between a customer and a fee payer regarding the calculation of credit interest rate compensation are to be resolved in accordance with the procedure laid down in the Law on civil procedure .

text: 2. General observations

text: The ECB has recently adopted opinions on measures driven by similar considerations as the draft law, including 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 , a draft Slovenian legislative provision imposing a temporary tax on the balance sheets of banks and savings banks and a draft Spanish law on the imposition of temporary levies on operators in the energy sector, credit institutions

text: and financial credit establishments . In these opinions, the ECB considered legislative initiatives introducing temporary levies and taxes applicable to credit institutions from the monetary policy, financial stability and prudential supervision perspectives.

text: 3. The appropriate time to consult the ECB

text: The ECB notes that the draft law was already passed by the Latvian Parliament on 6 December 2023, but that the legislative procedure is not yet complete pending promulgation by the President or referral back to the Parliament . The ECB must be consulted at an appropriate stage in the legislative process. The ECB has emphasised on several occasions in its opinions that even in cases of particular urgency, or where the legislation has reached an advanced stage, the national authorities are not relieved of their duty under Articles 127(4) and 282(5) of the Treaty to consult the ECB at an appropriate stage in the national legislative process that allows sufficient time for (1) the ECB to examine the draft legislative provisions and (2) the relevant national authorities to take the ECB’s opinion into consideration before the provisions are adopted .

text: 4. Monetary policy considerations

text: 4.1 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 the 2 % target over the medium term. Key ECB policy rates were raised by a cumulative 450 basis points between July 2022 and September 2023, with the intention of dampening 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, and the ECB stands 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. 4.2 The conditions on which borrowers access bank credit play an important role in the impact of the transmission of monetary policy on aggregate demand and ultimately on inflation rates. The recent increases in policy rates have so far been rapidly transmitted to Latvian lending rates on housing loans. If implemented, the draft law would impair the pass-through of higher rates to household borrowing conditions net of the envisaged 30 % credit interest rate compensation. 4.3 Evidence shows that banks’ net interest income typically tends to expand on impact as policy rates increase. This effect is faster the greater the weight of short-term or variable interest rate loans within bank 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.

text: 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 . Against this backdrop, care should be taken to ensure that any measures taken do not hamper the ability of banks to maintain solid capital bases, which are required to ensure the smooth transmission of monetary policy.

text: 5. Financial stability considerations

text: 5.1 The implementation of the draft law is expected to entail financial costs for the Latvian banking sector. The consulting authority has not submitted an explanatory memorandum containing an impact assessment regarding the profitability, capitalisation and future lending capacity of the banking sector. 5.2 The draft law emphasises that rising mortgage loan payments and the rising cost of living put pressure on household balance sheets. Requiring banks to partially reimburse loan interest payments to borrowers whose cost burden has significantly increased can support financial stability by mitigating credit risk, for example, by allowing borrowers to recover from temporary liquidity shortages. However, the eligibility criteria laid down in the draft law do not sufficiently limit the scope of borrowers entitled to a reduction in mortgage loan interest payments as the draft law will impact the majority of outstanding mortgages. In addition, while it is estimated that around 13 % of borrowers in Latvia could face financial strain due to rising prices and interest rates, the impact of interest rate rises on the overall solvency of households will be moderate and the larger effect is expected to come from consumer price surges , potentially limiting the desired effect of the draft law. Historically low non-performing loan rates across Latvian banks also challenge the justification of the draft law. 5.3 The widespread and untargeted reduction in effective loan interest payments that adoption of the draft law is envisaged to achieve could give rise to financial stability concerns. Bank profitability will be unduly lowered if borrowers who are able to make payments benefit from the compensation fee . Reduced bank profitability implies a lower capacity for banks to retain earnings and thus may reduce capital available to credit institutions. Beyond reducing bank resilience, this could have adverse effects on bank credit supply. The lower profitability resulting from the application of the draft law could push banks to offer less favourable credit terms and increase lending rates, and may lead to lower credit supply, which can then adversely affect real economic growth. 5.4 The resulting lower profitability and capital would reduce credit institutions’ capacity to build up extra capital buffers to protect them against future economic shocks. This is especially the case considering that Latvia is in the process of implementing a special corporate income tax regime for credit institutions, frontloading the tax payment without waiting for the profit distribution. This particular measure should not, however, have an impact on the total amount of tax paid by credit institutions, as taxes already paid will be discounted from taxes to be paid after the profit distribution.

text: 5.5 The fee proposed in the draft law may also lead to fragmentation in the domestic and European financial system because of the heterogeneous nature of the banking sector . This would particularly be the case where reliance on mortgage interest income for some credit institutions is relatively high compared to other activities. Furthermore, the draft law could distort market competition and impair the level playing field across the banking union . 5.6 The draft law may generate additional unintended consequences with negative implications for financial stability. Domestic and foreign investors could have less appetite to invest in Latvian credit institutions, as adoption of the draft law would lower the profitability outlook of credit institutions . 5.7 In the light of the above, the ECB recommends that the draft law is complemented by a thorough analysis of the potential negative consequences for the banking sector . The analysis should detail the specific impact of the proposed fee on (1) the provision of new lending and (2) competition conditions in the market.

text: 6. Considerations relating to the prudential supervision of credit institutions

text: 6.1 The ECB understands that the draft law would apply to significant credit institutions directly supervised by the ECB and less significant credit institutions directly supervised by national competent authorities under the oversight of the ECB within the framework of the Single Supervisory Mechanism. 6.2 It is also the ECB’s understanding that the basis on which the proposed fee would be established does not take into consideration, inter alia, the full business cycle and the cost of credit risk, as it is being computed based on balances instead of profitability. Moreover, the draft law would result in additional operational burdens and costs given the need to administer the fee calculation.

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

text: Done at Frankfurt am Main, 11 December 2023

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


text: Lietuvos Respublikos atsiskaitymų grynaisiais pinigais apvalinimo įstatymas. 2

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: 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: See paragraph 2.1 of Opinion

text: and paragraph 2.2 of Opinion

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

text: See

text: recital 7

text: of

text: Regulation (EU) No 651/2012

text: of the European Parliament and of the Council of 4 July 2012 on the issuance of euro coins (OJ L 201, 27.7.2012, p. 135).

text: See paragraph 2.4 of Opinion

text: , paragraph 2.4 of Opinion

text: and paragraph 2.3 of Opinion

text: Available on the ECB’s website at https://www.ecb.europa.eu/euro/cash_strategy/html/index.en.html

title: Opinion of the European Central Bank of 12 December 2023 on the rounding of cash payments in Lithuania (CON/2023/43)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 12 December 2023 on the rounding of cash payments in Lithuania (

text: ) Introduction and legal basis

text: On 9 November 2023 the European Central Bank (ECB) received a request from the Chair of the Budget and Finance Committee of the Lithuanian Parliament for an opinion on a draft Law on the rounding of cash payments (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 first and second indents of

text: , as the draft law relates to currency matters and means of payment. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The purpose of the draft law is to introduce the rounding of final amounts paid for goods and services in cash. Regardless of the quantity of goods and services purchased with a single cash payment, the draft law proposes to round only the total final cash payment, i.e. the price of individual items constituting the final cash amount to be paid is not rounded. The total final cash payment amount is to be rounded down or up to the closest multiple of 5 cent. The rounding does not apply if the total final payable amount is less than 5 cent. 1.2 The explanatory memorandum explains that the purpose of the draft law is to minimise the need to use 1 and 2 cent coins, with the aim of (a) reducing costs for the public, businesses and the State in relation to cash administration and the payment settlement time; (b) simplifying the issuance of coins for cash payments insofar as the need to continually mint or procure these coins will decrease; and (c) reducing the use of resources and packaging materials, thus having a positive environmental effect on pollution, waste, CO2 emissions and the accumulation of lost coins in the environment.

text: 2. General observations

text: 2.1 The draft law is not likely to have a real impact on inflation in Lithuania, particularly considering that the rounding of prices is symmetrical and confined to final cash amounts to be paid.

text: 2.2 In accordance with Article 128(2) of the Treaty, the competence to adopt measures to harmonise the denomination and technical specifications of all euro coins intended for circulation to the extent necessary to permit their smooth circulation within the Union is vested in the Council of the European Union, on a proposal from the European Commission and after consulting the European Parliament and the ECB. The legal tender status of euro cent coins within the euro area is laid down in

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

text: . In addition,

text: Article 2 of Regulation (EC) No 974/98

text: provides that the euro, as the currency of the euro area, is divided into one hundred cent. The denomination structure of the euro coins (i.e. 1, 2, 5, 10, 50 euro cent, 1 euro and 2 euro coins) has remained unchanged since the introduction of the euro . However, the use of different denominations of euro coins, as currently devised, should be periodically and carefully examined by the competent institutions against the criteria of cost and public acceptability. In particular, the Commission should conduct an impact assessment on the continued issuance of 1 and 2 euro cent coins . In this regard, the Commission has performed a public consultation on uniform rounding rules for cash payments in euro, with the response period having closed on 11 January 2021. 2.3 With a view to preserving the unity and integrity of the single monetary area, and considering the abovementioned ongoing work of the Commission, the ECB recommends that any rounding rules are established in a harmonised manner at Union, rather than at national level . Accordingly, any mandatory rounding rules on euro coins would appear to call exclusively for Union rather than national legislation given that the euro coins are the only legal tender coins in the Member States whose currency is the euro. 2.4 The ECB also considers it important to stress that mandatory rounding legislation must not prevent the 1 and 2 euro cent coins from being accepted as a means of payment as they are de jure legal tender in the entire euro area. In this respect, Member States’ legislation must not lead to divergent treatment of euro legal tender. In this regard, the ECB understands that the provisions of the draft law do not discharge individuals and businesses from the obligation to accept 1 and 2 euro cent coins even after the draft law introduces mandatory rounding. This means that 1 and 2 cent coins remain universally accepted legal tender in Lithuania. The ECB considers it crucial that 1 and 2 euro cent coins remain universally accepted legal tender for so long and insofar as they remain legal tender under Union law.

text: 2.5 Finally, the ECB notes that the reduced use of 1 and 2 euro cent coins as a result of rounding would reduce resource consumption and be supportive of a more efficient use of cash. This is in line with the goals of the Eurosystem’s Cash 2030 strategy to make the cash cycle as cost efficient as possible and to look at the environmental footprint of cash to identify opportunities to reduce its environmental impact. This opinion will be published on EUR-Lex. Done at Frankfurt am Main,12 December 2023. [signed]

text: The President of the ECB

text: Christine LAGARDE