[8] The approach raised alarm among London's banking circles, as it risked German retaliation in the form of a moratorium on all British financial claims and thus a disruption of normal trade and credit channels with Germany.

On 14 June, the Reichsbank announced it would stop paying interest to creditors in foreign currencies from 1 July onwards, prompting the British to again threaten to establish a clearing house.

[10] These renewed concerns led to the establishment of a financial mission from Berlin to London in late June, headed by diplomat Geheimrat Ulrich, with Britain represented by economist Sir Frederick Leith-Ross.

Germany promised to end discrimination of creditors and purchase bond coupons in sterling (i.e. continue interest repayments),[13][14] with the agreement lasting six months from 1 July onwards.

[18][20][21] The negotiations mainly consisted of proposals for the operation of the clearing house, taking place in the background of private discussions on an alternative plan between Leith-Ross, Schacht and Ulrich.

[28] As negotiations in Berlin for a resettlement began in late May 1938, Germany explicitly refused to honour these Austrian loans, causing Britain (through Leith-Ross[29]) to threaten to end the agreement altogether within a months time.

Thus in July 1938 with the Sudeten crisis heading towards its climax, von Dirksen, the German Ambassador to London, explicitly referred to the 1934 Economic Agreement and the 1935 Naval Convention as the 'two main supports which had hitherto carried the swaying structure of foreign relations [between Britain and Germany] even in critical periods'.

"[37] Germany continued to pay interest on Dawes and Young bonds to British and French holders until September 1939, when World War II began.

Following the 1938 negotiations, British diplomat Frank Ashton-Gwatkin (and by extension the Foreign Office) argued that the revised agreement and, any further trade talks stemming from it, would "strengthen the peace party" and be "a great advance towards economic appeasement".

"[41] Similarly, Zara Steiner writes that "the implementation of the Payments Agreements was undoubtedly providing the credits and the raw materials—coal, steel, scrap-iron, copper—needed for Germany’s war industries."

[42] Before and after the September 1938 Munich Agreement, Magowan argued that an amendment enabling Germany to obtain more foreign currency would facilitate its purchase of raw materials for rearmament.

Given what he perceived as a practical state of war between Britain and Germany, he insisted that security concerns take priority over commercial interests in economic dealings with Berlin, although these views were not well received in the British government.