Exchange Rate Mechanism (Hansard, 13 July 1992)

§ Mr. Austin Mitchell
To ask the Chancellor of the Exchequer what additional loans, support credits and other facilities are made available to countries entering the narrower bands of the ERM; and what additional responsibilities fall on the member Governments.

§ Mr. Nelson
If one currency is at its limit against another in the ERM, the central banks of both currencies each have an unlimited obligation to buy or sell at the limiting rates during European business hours. The EMS provides for a very short-term facility (VSTF) under which credit is automatically available in unlimited quantities to finance such obligatory intervention at the limiting rates. If intervention is undertaken when one currency is not at its limit against another in the ERM, the VSTF can be made available, but not automatically. VSTF credits have to be repaid within a period of three months.
The amounts available under the VSTF do not differ between wide band and narrow band currencies.

§ Mr. Austin Mitchell
To ask the Chancellor of the Exchequer what loans, support credits and other facilities are made available under the terms of ERM entry to Britain to maintain the pound within the 6 per cent. bands; to what extent these have been called on since Britain joined; and at whose cost these aids are provided.

§ Mr. Nelson
On the first part of his question, I refer the hon. Member to the reply I gave him today.
Since becoming a member of the exchange rate mechanism, the United Kingdom has not had recourse to these credit facilities.
Where intervention is carried out at the limits of the ERM bands, interest on drawings under the very short-term facility (VSTF) is paid by the central bank of the currency at its lower limit.