Opinion of the European Central Bank of 19 September 2022 on the donation of the proceeds of the issuance of numismatic coins for the general support of Ukrainian society (CON/2022/35)

OPINION OF THE EUROPEAN CENTRAL BANK of 19 September 2022 on the donation of the proceeds of the issuance of numismatic coins for the general support of Ukrainian society (CON/2022/35) Introduction and legal basis

On 8 September 2022, the European Central Bank (ECB) received a request from Latvijas Banka for an opinion on amendments to the Law on Assistance to Ukrainian Civilians (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 third indents of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to currency matters and Latvijas Banka. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The draft law enables Latvijas Banka, on the basis of an independent decision of the Council of Latvijas Banka, to donate some of the proceeds of the sale of Ukrainian-specific euro collector and commemorative coins issued by Latvijas Banka for the general support of Ukrainian society . As noted in the explanatory memorandum accompanying the draft law, Latvijas Banka will organise and implement the design, manufacture, delivery and issuance of these coins in accordance with its existing tasks as the legal issuer of all coins in Latvia . Latvijas Banka, when deciding on the amount of the donation, will be bound by the limit set by the draft law. Accordingly, Latvijas Banka may, from the income generated from the sale of the euro coins, donate no more than that part of the income exceeding the direct expenditure related to the production of the coins in question . 1.2 As noted in the explanatory memorandum, the 2022-23 programme for the issuance of numismatic coins approved by the Council of Latvijas Banka foresees, as an expression of solidarity with Ukraine and the Ukrainian people, the issuance of two numismatic coins whose design is dedicated to Ukraine: (i) a 5-euro collector coin dedicated to the theme of responsibility, planned to be issued

at the end of 2022; and (ii) a 2-euro commemorative coin dedicated to the Ukrainian sunflower, planned to be issued in March/April 2023. 1.3 As noted in the explanatory memorandum, the possibility for Latvijas Banka to donate part of the proceeds from the sale of these coins to the general support of Ukrainian society is not allowed by existing Latvian legislation. In particular, the Law On Prevention of Squandering of the Financial Resources and Property of a Public Person prohibits a public person, including Latvijas Banka, from donating financial resources or property to other persons, except in cases specifically provided for by law or Government regulations . 1.4 The draft law provides that Latvijas Banka will be obliged to respect the limits laid down in the Law On Prevention of Squandering of the Financial Resources and Property of a Public Person, insofar as the draft law does not provide otherwise . As noted in the explanatory memorandum, this implies an obligation for Latvijas Banka to, as far as possible, follow the use of the donation in accordance with its purpose. The explanatory memorandum further specifies that the donation’s purpose will be selected by the Council of Latvijas Banka in close consultation and cooperation with the National Bank of Ukraine. 1.5 As noted in the explanatory memorandum, according to estimates made by Latvijas Banka, the maximum amount donated, as set out in the draft law, is estimated to range from EUR 200,000 to EUR 250,000. It is not possible to predict the exact amount of the donation as the exact amount of direct expenditure related to the production of these coins, including the price of precious metals and the cost of minting, and the volume and selling prices of the coins have not yet been confirmed.

2. General observations

2.1 Given that Latvijas Banka is the legal issuer of all coins in Latvia , no new task to issue numismatic coins dedicated to Ukraine is attributed to Latvijas Banka by the draft law. In this respect, and in view of the existing prohibition under Latvian law on Latvijas Banka donating financial resources to any person, absent specific authorisation by law, the ECB understands that the main motivation of the draft law is to authorise Latvijas Banka, as part of its public outreach task, to donate some of the proceeds of the issuance of the numismatic coins dedicated to Ukraine. 2.2 The draft law does not specify the total volume of Ukraine-specific coins that Latvijas Banka will issue. Article 128(2) of the TFEU establishes that Member States may issue coins subject to approval by the ECB of the volume of the issue. Decision (EU) 2015/2332 of the European Central Bank (ECB/2015/43) establishes that the ECB adopts a decision on the approval of the annual volume of coin issuance for the euro area before the end of the calendar year preceding the year for which the requests for approval by euro area Member States are made. The ECB understands

that the issuance of Ukraine-specific collector and commemorative coins will remain within the volume of coin issuance approved by the ECB for Latvia for 2022 and (to be approved) for 2023, respectively. 2.3 Furthermore, the ECB would like to draw attention to the limitations relating to the total volume of commemorative coins put into circulation for each individual issue (as provided for in Article 4 of the Regulation (EU) No 651/2012 of the European Parliament and of the Council ) and the proportion of circulation coins (including commemorative coins) that may be put on the market above face value (in accordance with Article 3(2) of Regulation (EU) 651/2012). The ECB understands that the Ukraine-specific euro collector and commemorative coins will be issued (and sold) within the aforementioned limits.

3. Compliance with monetary financing prohibition

3.1. Article 123(1) of the TFEU prohibits national central banks (hereinafter the ‘NCBs’) from granting overdraft facilities or any other type of credit facility in favour of the Member States. It also prohibits measures that circumvent the objective of the prohibition and undermine its effectiveness by either having an effect equivalent to that of such facilities or, although they do not have such an effect, by reducing the impetus of Member States to follow a sound budgetary policy . 3.2 Article 1(1)(b)(ii) of Council Regulation (EC) No 3603/93 defines, for the purposes of Article 123(1) of the TFEU, ‘any other type of credit facility’, inter alia, as ‘any financing of the public sector’s obligations vis-à-vis third parties’. As Article 14.4 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’) allows NCBs to perform functions other than those specified in the Statute of the ESCB, the exercise of non-European System of Central Banks (ESCB) tasks does not necessarily constitute financing of the public sector’s obligations vis-à-vis third parties. Rather, a case-by-case assessment is required as to whether this exercise has an equivalent effect to such financing or reduces the impetus of Member States to follow a sound budgetary policy. 3.3 The exercise of the non-ESCB task of giving donations to cultural, scientific, and charitable activities and initiatives as part of an NCB’s public outreach does not constitute financing of the public sector’s obligations vis-à-vis third parties, provided that sufficient safeguards are established to ensure that such exercise does not have an equivalent effect to this financing or reduces the impetus of Member States to follow a sound budgetary policy. While the specific set-up of such safeguards may vary, they typically include that those donations are of a temporary nature and a limited

volume to guarantee that NCBs do not de facto take over the public sector’s cultural, scientific, or charitable obligations vis-à-vis third parties. 3.4. The ECB considers that, based on this standard, the draft law complies with the monetary financing prohibition. By donating the income exceeding the direct expenditure related to the production of the numismatic coins dedicated to Ukraine to Ukrainian society, Latvijas Banka is exercising the non-ESCB task of giving donations to charitable activities and initiatives as part of its public outreach. Among others, Latvijas Banka informs the public that the selling price of the numismatic coins dedicated to Ukraine exceeds the respective face value of euro coins to provide general support to Ukrainian society. 3.5 The ECB also considers that sufficient safeguards are established to ensure that the exercise of the non-ESCB task of giving donations to charitable activities and initiatives as part of Latvijas Banka’s public outreach does not circumvent the objective of the monetary financing prohibition. The donation by Latvijas Banka to Ukrainian society is of a one-off and therefore temporary nature, as Latvian law generally prohibits a public person, including Latvijas Banka, from donating financial resources to other persons. Hence, the main motivation of the draft law is to authorise Latvijas Banka to donate in this specific case. 3.6 The donation to be made by Latvijas Banka to Ukrainian society are also limited in volume. First, as Latvijas Banka only intends to issue numismatic coins dedicated to Ukraine in order to donate the resulting income exceeding the direct expenditure related to the production of these coins to Ukrainian society, and since the Latvian public will be aware of this, Latvijas Banka is de facto transferring money from the public to Ukrainian society, rather than using its own resources. Second, the issuance volume of the numismatic coins dedicated to Ukraine will neither exceed the volume approved by the ECB for 2022 and 2023, nor involve an ad hoc request to the ECB for approval of any additional volume of coin issuance. Finally, the maximum amount of donation is estimated to range from EUR 200,000 to EUR 250,000.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 19 September 2022.

[signed]

The President of the ECB

Christine LAGARDE