6
in sterling balances will depend on a number of factors such as movements in international interest rates.
Over the past 10 years exchange reserves in sterling as a proportion of world exchange reserves have declined from 8% to
about 5%.
D.
INTERNATIONAL ARRANGEMENTS AFFECTING THE STERLING BALANCES
The Basle Facility
1..
At the time of the devaluation of sterling in 1967 the re already existed an arrangement with member countries of the B.I.S. for offsetting the effect on U.K. reserves of fluctuations in the
sterling balances. This dated from May 1966 and provided cover
up to $1,000 mn. The facility fell due for review in the Spring of 1968 and consideration was given to adapting the principle to
a longer term facility which would underwrite potential
diversification of the OSA balances.
Discussions in Basle
suggested that a safety net of some $2,000 mn. might be provided
via the B.I.S. but the Besle central bankers wished to see the CSA
involved in parallel stabilisation arrangements and considered
that these could only be achieved if the U.K. guaranteed the
official sterling holdings.
2. The U.K. then launched an intensive negotiation with OSA
countries in July 1968 which ended with the signature of the
terling Agreements in September 1968, and the conclusion of the
11el "Bagle Second Group Arrangement" which supported the
ee embodied in the Agreements.
countries* and the B.I.S. agreed to allow the U.E. to
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