French franc 6.53883
Deutschmark 1.94964
Dutch guilder 2.19674
Belgian franc 40.21223
Irish pound 0.808628
Spanish peseta 154.250
Portuguese escudo 192.854
Danish kroner 7.43679
Austrian schilling 13.7167
British pound 0.786749
Greek drachma 264.513
Italian lira 1793.19This pivot rate (reference rate) represents the unit of base from which the bilateral rates
are derived. For example, we have the following two rates.
- Maximum Divergence (MD)
In the beginning the currencies could only vary within the narrow limit of + 2.25 per cent
around the pivot rate. On 2nd August 1993, it was decided that the rates could vary within
- 15 per cent of the pivot rate.
European Fund for Monetary Cooperation (EFMC) has been set up to ensure smooth
functioning of the EMS. The Fund receives 20 per cent of reserves of each country
(Central Bank Reserves); in exchange, it provides ECU reserves in the form of bonds or
coupons. These securities of E
FMC are used to serve as instruments of settlement among central banks. For instance, if
a central bank needs more ECUs, it can borrow from either EFMC or from another
central bank.
The system has created several credit mechanisms; the three major ones being:
a) Very short-term credit used to be for a maximum period of three months.
No limit has been specified for the magnitude of funds involved in a
transaction.
b) Short-term credits. The duration of this credit is three months; it can be
renewed twice more. In operational terms, therefore, the credit can be for
a maximum period of nine months. It is accorded to the member states to
tide over temporary difficulties of BOP.
c) Medium-term credit. These credits are for a period of two to five years
and meant for remedying serious difficulties relating to BOP. They should
be accompanied by other economic and monetary measures to effectively
deal with BOP crises.