The United Kingdom experienced the 1992 Black Wednesday crisis after leaving the European Exchange Rate Mechanism. On September 16, 1992, the British government withdrew the pound sterling from the ERM after failing to keep it within the system’s required exchange-rate band.
The ERM was designed to reduce exchange-rate fluctuations among participating European currencies and prepare conditions for closer monetary integration. Britain had joined in October 1990, but economic pressures and disagreements over interest rates made the pound difficult to defend.
The Bank of England raised interest rates and intervened in currency markets, yet speculation against sterling continued. The government eventually suspended the pound’s ERM membership, and the currency fell substantially.
Black Wednesday was a currency crisis rather than a conventional share-market crash, but it caused major financial-market losses and political damage. The episode is also associated with investor George Soros, whose fund reportedly made a large profit by betting against sterling.