The aim was to avoid the wide swings in liquidity and interest rates that often heralded banking crises. The central bank of that era also supported financial stability by acting as the lender of last resort, thereby preventing a liquidity shortage in one bank from becoming a full-blown panic.
Although there are no formal criteria to be met for entry into ERM II, successful participation in the mechanism requires that major policy adjustments - for example relating to fiscal policy and price liberalisation - are undertaken before joining the mechanism. Participation in ERM II is an important means to anchor exchange rate and inflation expectations and to promote consistently sound policies.