The central banks of Australia, Austria, Belgium, Denmark, Finland, France, the Federal Republic of Germany, Greece, Iceland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey and the United Kingdom (hereinafter called the "central banks");

Considering that their Governments are Parties to the Convention on the Organisation for Economic Co-operation and Development (hereinafter called the "Organisation") of 14th December 1960;

Having regard to Article 5(a) of that Convention;

Having regard to the Decision of the Council of the Organisation (hereinafter called the "Council"), concerning the future of the European Monetary Agreement, which is the subject of Item 196 of the Minutes of the meeting of the Council on 25th July 1972 [Doc. No. C/M(72)22(Final)];

Having regard to the Report by the Ad Hoc Committee, of 27th November 1972 concerning Termination of the European Monetary Agreement, Setting-up of an Exchange Guarantee between the Central Banks of certain Members of the Organisation and Creation of a new Committee of the Organisation [Doc. No. C(72)230];

Having regard to the draft Agreement concerning an Exchange Guarantee between the Central Banks of certain Members of the Organisation, annexed to the Note by the Secretary-General of the Organisation, of 11th December 1972 [Doc. No. C(72)241 and Corrigendum I ];

Having regard to the Decision of the Council of 13th December 1972 concerning the Setting-up of an Exchange Guarantee between the Central Banks of certain Members of the Organisation [Doc. No. C(72)251];

Having regard to the Decision of the Council of 13th December 1972 Terminating the European Monetary Agreement [Doc. No. C(72)252];

Having regard to the Resolution of the Council of 13th December 1972 concerning the Creation of a Committee for Monetary and Foreign Exchange Matters (hereinafter called the "Committee") [Doc. No. C(72)253];

HAVE AGREED as follows:

Article 1

Purpose of the Agreement

The central banks hereby establish between themselves, in the framework of the Organisation, an exchange guarantee on holdings in their national currencies, subject to limits agreed between them and on the conditions provided for in the present Agreement (hereinafter called the "Agreement").

Article 2

Balances covered by the exchange guarantee

(a)       The exchange guarantee shall apply, up to the amount shown in respect of the balance concerned in the Table set out in the Annex to the Agreement (hereinafter called the "Table"), to any balance in the national currency of a central bank which is held on current account with that central bank by another central bank, or which, while originating in such an account, is invested in short-term investments the liquidity of which is assured at all times by the former central bank.

(b)       The two central banks concerned may decide, by mutual agreement, to increase or reduce by up to 50% either of the amounts shown in the Table in respect of the two balances in their relationship. The adjusted amount shall be notified by the two central banks concerned to the Agent referred to in Article 8.

(c)       If the two central banks concerned intend to increase or reduce by more than 50% either of the amounts shown in the Table in respect of the two balances in their relationship, or to include in the Table an amount in respect of a balance in their relationship for which no amount is shown in the Table, they will consult the Committee before they notify the amount agreed between them to the Agent referred to in Article 8.

(d)       Whenever the legal definition of the parity of the currency concerned, or the par value or central rate declared to the International Monetary Fund in respect of that currency, is changed the amounts shown in the Table which are expressed in that currency will be adjusted so as to maintain the approximately equivalent amounts in terms of Special Drawing Rights. Any such adjustments will be agreed between the two central banks concerned and notified by them to the Agent referred to in Article 8. In the event, however, of a generalised change in the value of Special Drawing Rights the Committee shall decide what adjustments, if any, shall be made.

(e)       If a central bank accedes to the Agreement in accordance with Article 10, the amounts covered by the guarantee in each bilateral relationship between this central bank and the other central banks, to be included in the Table, shall be agreed between the two central banks concerned, after consultation in the Committee; and the establishment of the amounts to be covered by the exchange guarantee in these relationships shall not imply any reduction in the amounts covered in other relationships.

Article 3

Declaration of selling rates

(a)       Each central bank shall declare a selling rate, in terms of its national currency, for each national currency of another central banks which keeps, or which may keep, a balance on an account with it. The premium for the other currency which each of these rates represents, in relation to the cross-parity, shall not exceed the maximum authorised by the International Monetary Fund. These rates shall be related, directly or indirectly, to the exchange rate margins applied in practice by the two central banks concerned and any change in the latter shall require a corresponding change in the former.

(b)       Each central bank shall notify these selling rates and any suspension or modification of them only to the Agent referred to in Article 8.

(c)       The declaration of selling rates under the present Agreement shall imply no obligation of the central banks concerned to intervene in the exchange markets at those rates. These declared rates shall in no circumstances be published by the institutions to which they are notified.

Article 4

The exchange guarantee and its settlement

(a)       The settlements due under the guarantee shall be carried out by the central bank in the national currency of which the balance concerned is held (hereinafter called the "debtor"). Whenever the national currency of the debtor (hereinafter called the "debtor's currency") is devalued in the sense defined in paragraph (b) of this Article, the debtor shall credit the account of the central bank which holds the balance (hereinafter called the "creditor") with an amount in the debtor's currency which shall be calculated, in accordance with paragraph (c) of this Article, on the basis of the selling rates declared by the debtor, before and after the devaluation, for the national currency of the creditor (hereinafter called the "creditor's currency").

(b)        

(i)        As a general principle, the debtor shall compensate the creditor whenever the value of the debtor's currency in relation to a point of reference common to both the debtor's currency and that of the creditor (hereinafter called the "common reference point"), is reduced; the reduction in the value of the debtor's currency being calculated on the basis of its previous and its new selling rate for the creditor's currency, and the common reference point being determined by reference to the legal definitions of the parities of the two currencies, or the par values or central rates declared by the debtor and the creditor to the International Monetary Fund, in force in the period immediately preceding the change in the debtor's selling rate for the creditor's currency.

(ii)       However, if the values of the creditor's and the debtor's currencies, in relation to the common reference point, are reduced with effect on the same day, the debtor shall compensate the creditor only if, and to the extent that, the value of the debtor's currency is reduced to a greater extent than that of the creditor's currency.

(c)       In application of the general principle described in paragraph (b) of this Article, the debtor shall provide the compensation due by crediting the account of the creditor with an amount in the debtor's currency which shall be calculated as follows:

(i)        If, with effect on the day on which the value of the debtor's currency in relation to the common reference point is reduced, the value of the creditor's currency in relation to the common reference point either remains unchanged, or is reduced to a smaller extent than that of the debtor's currency, the debtor shall increase the balance held by the creditor in the debtor's currency, outstanding at the close of business on the last working day on which the debtor's previous selling rate for the creditor's currency was effective, so that the augmented balance, if converted into the creditor's currency at the debtor's new selling rate, would be equal to the unaugmented balance, if the latter where converted into the creditor's currency at the debtor's previous selling rate for that currency.

(ii)       If, with effect on the day on which the value of the debtor's currency in relation to the common reference point is reduced, the value of the creditor's currency in relation to the common reference point is increased, the debtor shall increase the balance held by the creditor in the debtor's currency, outstanding at the close of business on the last working day on which the debtor's previous selling rate for the creditor's currency was effective, so that the augmented balance, if converted into the creditor's currency at a theoretical new selling rate of the debtor for the creditor's currency, would be equal to the unaugmented balance, if the latter were converted into the creditor's currency at the debtor's previous selling rate for that currency; the theoretical new selling rate being that which the debtor would have declared if the value of the creditor's currency in relation to the common reference point had not increased.

(iii)      If the debtor suspends its selling rate for the creditor's currency, the debtor shall, when it declares a new selling rate, credit the creditor with the amount in the debtor's currency which would have been due, in accordance with sub-paragraphs (i) or (ii) of this paragraph, if the debtor's new selling rate had taken effect on the working day on which its previous selling rate was suspended.

(d)        

(i)        For the purposes of the provisions of sub-paragraph (c) (i) of this Article, any reduction in the value of the creditor's currency in relation to the common reference point which takes effect within the period of ten working days following the day on which the reduction in the value of the debtor's currency takes effect, as well as any reductions in the values of the debtor's and the creditor's currencies which are deemed to be the outcome of the same multilateral negotiation, shall be treated as taking effect on that day.

(ii)       For the purposes of sub-paragraph (c) (iii) of this Article, any increase or reduction in the value of the creditor's currency in relation to the common reference point which takes effect during the period up to the day on which the debtor's new selling rate takes effect shall be considered as taking effect on the day on which the debtor's previous selling rate was suspended.

(e)       In the circumstances referred to in sub-paragraphs (c) (i) or (ii) of this Article, and if the debtor has widened the exchange rate margins declared by it, but has not changed the legal definition of the parity of its currency, or the par value or central rate declared to the International Monetary Fund in respect of that currency, no compensation shall be paid if the spot rate quoted for the creditor's currency in the exchange market of the debtor represents an appreciation of the debtor's currency in respect of the previous selling rate declared by the debtor. If that spot rate represents a depreciation of the debtor's currency in respect of the previous selling rate declared by the debtor, the question of compensation shall be decided by the Committee, taking account of the general principle described in paragraph (b) of this Article. If, following the widening of its margins, the debtor reduces the value of its currency in relation to the common reference point, without making a further change in its selling rate for the creditor's currency, compensation shall be due in accordance with the general principle described in paragraph (b) of this Article.

(f)        In the circumstances referred to in sub-paragraph (c) (iii) of this Article, following suspension of the debtor's selling rate for the creditor's currency:

(i)        the creditor may request settlement at any time before the debtor declares a new selling rate and, in this event, the settlement shall be carried out expeditiously on terms to be agreed between the creditor and the debtor, if necessary after consultation in the Committee, provided that, once compensation is settled under the provisions of the present paragraph, no further compensation shall be due in respect of that suspension of the debtor's selling rate;

(ii)       the creditor shall continue to use the balance concerned as a working balance.

(g)       In any circumstances which are not covered by the provisions of paragraphs (c) to (f) of this Article, the compensation due by the debtor shall be determined on the basis of the general principle described in paragraph (b) of this Article, by agreement between the two central banks concerned, if necessary after consultation in the Committee.

(h)       Compensation due under the provisions of paragraphs (a) to (e) and (g) of this Article shall be paid not later than twenty working days after the date on which the conditions required for the application of those provisions are fulfilled.

(i)        All operations carried out by the central banks under the present Article shall be notified to the Agent referred to in Article 8.

Article 5

Application of the Agreement to the Bank of italy and the Italian Exchange Office

For the purposes of the Agreement, the term central bank of Italy shall refer both to the Bank of Italy and to the Italian Exchange Office, and the exchange guarantee shall apply to balances held with or by both these institutions. The limits indicated in the Table shall apply to the sum of the balances held by these two institutions with another central bank and to the sum of the balances held by another central bank with these two institutions. While the Bank of Italy and the Italian Exchange Office shall each be responsible for the execution of the operations required under the Agreement as far as concerns the balances held with or by it, all communications under the Agreement, relating to the exchange guarantee on the balances held by or with these two institutions shall be addressed to or by the Italian Exchange Office, by or to the central banks and the Agent.

Article 6

Items in transit

Balances within the meaning of Articles 2 and 4 shall be adjusted, by agreement between the two central banks concerned, to take account of "items in transit". These items shall consist of:

(a)       amounts which are due by virtue of contracts for normal spot usance, concluded by the creditor before the close of business on the working day preceding the modification in the debtor's selling rate for the creditor's currency, and which are to be received or to be paid in the debtor's currency by means of:

(i)        telegraphic transfers (normal two working day usance),

(ii)       mail transfers, or

(iii)      cheques negotiated or issued by the creditor; and

(b)       bank notes in course of delivery, provided that the transfer of these notes is in conformity with the regulations of the Government of the debtor.

Article 7

The Committee

The Operation of the Agreement shall be kept under review in the Committee. Proposals concerning the operation, application or modification of the Agreement shall be examined by the Committee and the multilateral decisions thereon which are provided for in the Agreement shall be taken in the Committee by mutual agreement of the central banks.

Article 8

The Agent

(a)       The bank for International Settlements, acting in accordance with an agreement between the Organisation and the Bank shall be entrusted with the task of Agent, for the Organisation and the central banks, for the purposes of the Agreement.

(b)       The Agent shall transmit to the central banks and the Secretary-General of the Organisation, who will inform the Committee, the information notified to him under the Agreement. The Agent shall send to the Secretary-General copies of the letters and notifications deposited with him in accordance with Article 9.

(c)       The Agent shall submit reports to the central banks and the Organisation, annually, unless otherwise agreed by the central banks. These reports shall be examined in the Committee and shall be transmitted by the Committee to the Council.

Article 9

Entry Into Force

(a)       The Agreement shall enter into force with effect from 1st January 1973.

(b)       To this end each central bank shall, not later than that date, deposit with the Agent a letter accepting the Agreement as far as it is concerned.

(c)       However, if any central bank is temporarily unable to declare selling rates in terms of its national currency it may deposit a letter with the Agent, not later than that date, accepting the Agreement in principle but stating that temporarily it is unable to accept the application of the Agreement as far as it is concerned. In this case the central bank concerned shall, as soon as it is able to declare selling rates in terms of its national currency, deposit with the Agent a further letter accepting the application of the Agreement as far as it is concerned.

Article 10

Accession

(a)       Any central bank of a Member of the Organisation which has not become a party to the Agreement pursuant to Article 9 may notify the central banks and the Organisation of its desire to accede to the Agreement.

(b)       The central banks and the Council will decide on the conditions for accession and the date on which it may take effect, on the basis of a report by the Committee to the Council.

(c)       With effect from the date of accession, the term "central bank" or "central banks" used in the Agreement shall refer to any central bank which has acceded to the Agreement pursuant to this Article, as well as to the central banks mentioned in the Preamble to the Agreement.

Article 11

Prolongation

(a)       The Agreement shall remain in force for an initial period of three years, from 1st January 1973 to 31st December 1975. Its prolongation after 31st December 1975 and the conditions on which it may remain in force after that date shall be subject to decisions by the central banks and by the Council, to be taken on the basis of the report by the Committee to be submitted to the Council in accordance with paragraph 5 of the Resolution of the Council of 13th December 1972, referred to above.

(b)       Not later than 30th June 1975 the central banks shall review, in the Committee, the operation of the Agreement in order that their conclusions concerning the prolongation of the Agreement after 31st December 1975 can be included in the report referred to in paragraph (a) of this Article.

Article 12

Amendments

The Agreement may be amended by decisions of the Committee. However, any modification which is not in accordance with the principles described in paragraph 1(a) of the Decision of the Council of 13th December 1972, concerning the Setting-up of an Exchange Guarantee between the Central Banks of certain Members of the Organisation, referred to above, shall require a concordant decision of the Council.

ANNEX

AGREEMENT CONCERNING AN EXCHANGE GUARANTEE BETWEEN THE CENTRAL BANKS OF CERTAIN OECD MEMBER COUNTRIES

Amounts covered by the exchanges guarantee

(in thousands of units of national currencies)

Amounts covered by the exchange guarantee - expressed in SDRs (thousands)