COUNCIL DECISION of 30 October 1978 concerning the conclusion of the Agreement in the form of an exchange of letters between the European Economic Community and the Bank for International Settlements concerning the mobilization of claims held by Member States under the medium-term financial assistance arrangements (78/897/EEC)

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Economic Community,

Having regard to Council Decision 71/143/EEC of 22 March 1971 setting up machinery for medium-term financial assistance (1), as last amended by Decision 78/49/EEC (2), and in particular Articles 1 and 4 thereof,

Having regard to the recommendation from the Commission,

Having regard to the opinion of the Monetary Committee of 28 February 1978,

Whereas Decision 78/49/EEC made provision, in cases where one or more Member States which are creditors under the medium-term financial assistance system experience difficulties or are seriously threatened with difficulties as regards their balance of payments, for the mobilization of the claims held by that State or those States ; whereas it provided that mobilization of the claims could be carried out by inter alia refinancing from outside the system, either by concerted action by Member States with other international organizations, or by an agreement made with such organizations;

Whereas the Bank for International Settlements is the organization able to provide such refinancing,

HAS DECIDED AS FOLLOWS:

Article 1

1. The Agreement in the form of an exchange of letters between the European Economic Community and the Bank for International Settlements concerning the mobilization of claims held by Member States under the medium-term financial assistance arrangements is hereby approved on behalf of the Community.

2. The text of the Agreement is annexed to this Decision.

Article 2

The President of the Council is hereby authorized to designate the person empowered to sign the Agreement in order to bind the Community.

Done at Luxembourg, 30 October 1978.

For the Council

The President

J. ERTL (1)OJ No L 73, 27.3.1971, p. 15. (2)OJ No L 14, 18.1.1978, p. 14.

AGREEMENT in the form of an exchange of letters between the European Economic Community and the Bank for International Settlements concerning the mobilization of claims held by the Member States under the medium-term financial assistance arrangements

A. Letter from the Bank for International Settlements

Sir,

The BIS could conclude stand-by credit agreements with the creditor countries' central banks if they should so request.

These agreements could be concluded up to the total amount of the contribution paid into the mechanism by the creditor country, with an overall limit of 2 725 million units of account, corresponding to half of the total of future commitment ceilings of the member countries.

The practical details of each stand-by agreement would be determined by agreement between the BIS and the central bank in question. However, certain conditions, which the BIS would be prepared to apply, can be indicated already:

The initial commitment of the BIS for each stand-by credit would be for two years with the option of renewal for other periods, the total not to exceed five years.

On the opening of credits, and whenever they are renewed, the BIS would take a commission. It would also be understood that, in order to allow it to carry out the necessary adjustments to its own liquidity, the first drawings would not take place until one month after the conclusion of the stand-by agreement. Drawings would be in the currencies available to the BIS at the time the agreements were concluded, most probably in US dollars ; they would be for periods to be negotiated in the light of the Bank's resources, probably three or six months. The conditions would be equivalent to those applied by the BIS at the time for transactions concluded on similar terms, i.e. at close to market rates. Normally, these rates should be only slightly above Libor. However, if the BIS should itself have to have recourse to the market to procure the necessary funds, the rate applied could reach a maximum equivalent to Libor plus an appropriate margin.

I should be obliged if you would inform me whether the Council of the European Communities is in agreement with the above.

Please accept, Sir, the assurance of my highest consideration.

For the Bank for International Settlements

B. Letter from the Community

Sir,

I have the honour to acknowledge receipt of your letter of today's date, which reads as follows:

"The BIS could conclude stand-by credit agreements with the creditor countries' central banks if they should so request.

These agreements could be concluded up to the total amount of the contribution paid into the mechanism by the creditor country, with an overall limit of 2 725 million units of account, corresponding to half of the total of future commitment ceilings of the member countries.

The practical details of each stand-by agreement would be determined by agreement between the BIS and the central bank in question. However, certain conditions, which the BIS would be prepared to apply, can be indicated already:

The initial commitment of the BIS for each stand-by credit would be for two years with the option of renewal for other periods, the total not to exceed five years.

On the opening of credits, and whenever they are renewed, the BIS would take a Commission. It would also be understood that, in order to allow it to carry out the necessary adjustments to its own liquidity, the first drawings would not take place until one month after the conclusion of the stand-by agreement. Drawings would be in the currencies available to the BIS at the time the agreements were concluded, most probably in US dollars ; they would be for periods to be negotiated in the light of the Bank's resources, probably three or six months. The conditions would be equivalent to those applied by the BIS at the time for transactions concluded on similar terms, i.e. at close to market rates. Normally, these rates should be only slightly above Libor. However, if the BIS should itself have to have recourse to the market to procure the necessary funds, the rate applied could reach a maximum equivalent to Libor plus an appropriate margin.

I should be obliged if you would inform me whether the Council of the European Communities is in agreement with the above."

I have the honour to inform you that the Council of the European Communities is in agreement with the contents of your letter.

Please accept, Sir, the assurance of my highest consideration.

On behalf of the Council of

the European Communities