Banking and Investment services: Determination of irrevocable conversion rates for the Euro - a guidance to markets

The Ministers and Central Bank Governors of the Member States adopting the Euro along with the Commission and the European Monetary Institute issued, on 3 May 1998, a joint communiqué agreeing the method for determining the irrevocable conversion rates for the Euro at the starting date of Stage Three of the Euro.

The communiqué is intended to guide markets in the run-up to Stage Three, which begins on 1 January 1999. On this date, the irrevocable conversion rates should be adopted by the Council, on the basis of a proposal from the Commission and after consultation with the European Central Bank.

This guidance provides that the current ERM bilateral central rates of the currencies of the Member States which, on the first day of Stage Three, will adopt the Euro as their single currency, will be used in determining the irrevocable conversation rates for the Euro. Furthermore, the communiqué provides that the central banks of the participating Member States will ensure through appropriate market techniques that on 31 December 1998 the market exchange rates, recorded according to the regular concertation procedure used for calculating the daily exchange rate of the official ECU, are equal to the ERM bilateral central rates as set out in an annex to the communiqué.

This agreed procedure aims to ensure that the adoption of the irrevocable conversion rates for the Euro will not modify the external value of the ECU, which will be replaced on a 1:1 basis by the Euro on 1 January 1999.

The legal framework for the use of the Euro provides that once the irrevocable conversion rate for the Euro for each participating currency has been adopted, it will be the only rate which will be used for conversion either way between the Euro and the relevant national currency unit and also for conversions between participating national currency units.