EU central bank agreement on ERM II operating procedures

The European Central Bank (ECB) and the central banks of the EU countries not adopting the euro on 1 January 1999 have signed an agreement on the operating procedures for the exchange rate mechanism ERM II.

Sveriges Riksbank has signed the agreement. However, this does not imply participation in ERM II. The Riksbank will continue to base monetary policy on an inflation target under floating exchange rates.

The basic elements of the exchange rate mechanism were agreed by the European Council at its meeting in Amsterdam in June 1997. A central rate and fluctuation margin will be agreed for those currencies participating in the mechanism. The European Council has stated that participation in ERM II is voluntary for all non-euro area member states.

The agreement which has now been signed establishes the operating procedures of ERM II. It replaces the EMS agreement, which was concluded in 1979 between EU central banks when that system was established. The Riksbank became a party to the EMS agreement in conjunction with Sweden's accession to the EU.

Signing the ERM II agreement without linking the krona to the euro implies that the Riksbank will participate in a regular exchange of information between central banks on developments in foreign exchange markets. The Riksbank is, furthermore, obliged to seek prior agreement by other EU central banks if it intends to use currency issued by them for interventions or other transactions in excess of certain amounts. Such procedures already apply under the current agreement.

The English version of the agreement will be available on the ECB web site: http//:www.ecb.int. A version in Swedish will be available later.

For further information, please contact Ms Christina Lindenius, Deputy Head of Department, Monetary and Exchange Rate Policy Department, cell telephone
070 - 5543216.

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