Opinion of the European Central Bank of 18 October 2024 on the management of the cash withdrawal service (CON/2024/34)

OPINION OF THE EUROPEAN CENTRAL BANK of 18 October 2024 on the management of the cash withdrawal service (CON/2024/34) Introduction and legal basis

On 21 August 2024 the European Central Bank (ECB) received a request from Latvijas Banka for an opinion on a draft regulation on the management of the cash withdrawal service (hereinafter the ‘draft regulation’). 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 Article 2(1), first, second and third indents, of Council Decision 98/415/EC , as the draft regulation relates to currency matters, means of payment and Latvijas Banka. In accordance with Article 17.5, first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft regulation

1.1 The overall purpose of the draft regulation is to define the numerical values for the cash withdrawal service in line with the delegation contained in the draft amendments to the Law on credit institutions, which aim to ensure access to cash to the population throughout the territory of Latvia by setting minimum requirements for the provision of cash withdrawal services . The draft regulation establishes the requirements regarding the distance to automated teller machines (ATMs), their number, their operating hours, monthly limits on the number and amount of cash withdrawals that may be made from them, as well as the conditions for the application of these requirements. 1.2 Under the Law on credit institutions, Latvijas Banka will assess the compliance of credit institutions with the relevant criteria stipulated therein and prepare a list of service providers that qualify as major credit institutions, which have a significant role in providing access to cash in Latvia and, as a consequence, will have to comply with requirements defined in the draft regulation. Latvijas Banka will review and, where necessary, update the list of service providers by 1 February each year. 1.3 Under the proposed regulation, credit institutions identified as service providers would have to ensure compliance with the following requirements: (1) a customer must have access to at least one ATM that is provided by this service provider or any other service provider within a 20-kilometre radius of any location in the territory of Latvia; (2) the number of ATMs provided by the service provider within

the territory of Latvia must be no less than 45 ATMs per 100 000 active customers of that service provider; (3) the ATM provided by the service provider must be available to the customer and operate every day for at least 12 hours between 6 a.m. and 12 p.m. or, if the ATM is installed in a public space or public outdoor space with limited accessibility, during the time period when the respective public space or public outdoor space is accessible to the public; and (4) a customer must be able to withdraw free of charge no less than EUR 750 per month irrespective of the number of cash withdrawals if the service provider relies only on its own ATMs. The number of withdrawals is limited to five per month if it also relies on ATMs provided by another service provider. 1.4 The draft regulation allows for certain exemptions from the abovementioned requirements: (1) a service provider is exempted from the 20-kilometre radius requirement in certain territories of Latvia if the total number of residents without access to at least one ATM within a 20-kilometre radius of their residence does not exceed 1 % of the total population of Latvia; (2) a service provider is exempted from the 45 ATMs per 100 000 active customers requirement if the number of ATMs provided by the service provider within the territory of Latvia is no less than 30 ATMs per 100 000 active customers of the respective service provider and if the total number of ATMs provided by service providers in Latvia exceeds 45 ATMs per 100 000 active customers of all service providers in Latvia; and (3) 3 % downtime per month is allowed from the required operating hours for routine or emergency maintenance purposes and to cater for unforeseen circumstances, such as power outages. 1.5 The draft regulation requires Latvijas Banka to verify compliance with the cash withdrawal service requirements by means of planned or unplanned inspections at ATM locations and by means of remote inspections. Latvijas Banka is also required to ensure the creation, maintenance, improvement and public availability of an information system whereby current information on ATMs provided by service providers is electronically displayed on a map of Latvia.

2. Observations

2.1 The ECB considers it important that all 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 . Sufficient and effective access to cash is necessary to preserve the effectiveness of the legal tender status of cash. If citizens do not have easy access to cash, they will not be able to use it as a means of payment and store of value . The ECB welcomes the establishment of numerical values, that will be regularly reviewed, to ensure a minimum availability of cash withdrawal services at ATMs that credit institutions have to maintain in Latvia in accordance with the Law on credit institutions.

2.2 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 includes an obligation for Member States to ensure sufficient and effective access to cash throughout their territory. The proposed regulation on the legal tender of euro cash provides that, following its adoption, the Commission will adopt implementing acts on a set of common indicators of general application in the euro area, which would allow Member States to effectively monitor and assess the acceptance of payments in cash and access to cash throughout their territory, in all their different regions, including urban and non-urban areas. The ECB will be consulted by the Commission on the preparation of such implementing acts . Once the implementing acts on the common indicators are adopted by the Commission, the cash withdrawal service requirements included in the draft regulation to be adopted by Latvijas Banka would need to be reviewed and, if necessary, adjusted accordingly. 2.3 The ECB understands that access to cash through cash counters with in-person assistance operated by credit institutions or appointed agents, or any other alternative means of providing access to cash, and access to cash deposit services provided by credit institutions are not governed by statutory requirements in Latvia, and accordingly they fall outside the scope of the draft regulation. The ECB notes that there are no viable alternatives in Latvia to cash withdrawal from ATMs of credit institutions. Furthermore, it is particularly important to ensure that small and medium enterprises (SMEs) have sufficient and effective access to cash service points, where banknotes and coins can be deposited and withdrawn, thereby ensuring that retailers will not be disincentivised from accepting payments in cash. Furthermore, sufficient and effective access to cash service points is particularly relevant for those SMEs that only accept cash. It may therefore be advisable to set minimum or recommended levels for the number of machines (including ATMs) which can be used to deposit banknotes or coins. These facts need to be taken into account when setting numerical values for cash withdrawal services at ATMs of credit institutions. 2.4 According to the explanatory memorandum accompanying the draft regulation, Latvijas Banka has assessed the appropriateness of the EUR 750 free of charge withdrawal threshold against criteria such as: (1) the contractually agreed threshold with private customers (i.e. natural persons) currently applied by credit institutions which will qualify as major credit institutions after the entry into force of the draft amendments to the Law on credit institutions; (2) the statutory minimum wage (currently EUR 700 gross or EUR 601.20 net); (3) the average old age pension (EUR 547.38 per month in 2023); and (4) the average unemployment benefit (EUR 428.54 per month in 2023). Consistent with its previous stance , and in order to preserve the effectiveness of the legal tender status of euro banknotes, the ECB would caution against low monthly thresholds for free of charge withdrawals of cash from ATMs to the extent that these could make the use of euro banknotes more expensive than electronic means of payment. Latvijas Banka is therefore invited to reflect on whether the minimum threshold from which cash withdrawals can be charged should be set at a higher level to ensure that the use of cash is not unduly discouraged, both as a means of payment and as a store of value, also

taking into account the legal tender status of euro banknotes and coins. Finally, the ECB invites Latvijas Banka to carefully monitor the appropriateness of the free of charge access to cash threshold for the purposes of implementing legislation whose objective is to ensure that, despite the growing proportion of non-cash payments, Latvia’s population continues to enjoy access to cash and freedom of payment choice. 2.5 Regarding the requirement for there to be an ATM within a 20-kilometre radius from any geographic location in Latvia, the draft regulation is essentially intended to preserve the existing ATM network in Latvia, rather than to improve access to cash in less populated areas. As noted above, once the implementing acts on the common indicators are adopted by the Commission at Union level, this requirement may need to be reviewed by Latvijas Banka.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 18 October 2024.

[signed]

The President of the ECB

Christine LAGARDE