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

OPINION OF THE EUROPEAN CENTRAL BANK of 6 February 2024 on the cash infrastructure network (CON/2024/3) Introduction and legal basis

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 Article 2(1) of Council Decision 98/415/EC , 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.

1. Purpose of the draft decree

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

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.

2. General observations

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

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.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 6 February 2024.

[signed]

The President of the ECB

Christine LAGARDE