The Bank for International Settlements (BIS) is an international financial institution which is owned by members central banks. Its primary goal is to foster international monetary and financial cooperation while serving as a bank for central banks.[2] With its establishment in 1930 it is the oldest international financial institution.[3][4] Its initial purpose was to oversee the settlement of World War I war reparations.[4][5]
The BIS carries out its work through its meetings, programmes and through the Basel Process, hosting international groups pursuing global financial stability and facilitating their interaction. It also provides banking services, but only to central banks and other international organizations.
The BIS is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.
History
Background
International monetary cooperation started to develop tentatively in the course of the 19th century. An early case was a £400,000 loan in gold coins, in 1825 and facilitated by the Rothschilds, from the Bank of France to the Bank of England, which was facing a bank run. The Bank of England again borrowed from its French counterpart (and from the Hamburger Bank) in 1836 and 1839, and lent to it in return in 1847.
In 1860–1861, because of the disruption from the incipient American Civil War, the Bank of France entered a series of swap agreements in specie with the Bank of England as well as the State Bank of the Russian Empire and De Nederlandsche Bank. That episode was recorded as the "war of the banks", ostensibly because of friction between the Bank of France and the Bank of England about the transaction.[6]
A few years later, monetary cooperation took a novel form with a series of international monetary conferences devoted to better coordination of the coinage system, even though these initiatives, like the
Membership and shareholding structure
The BIS members are central banks of 63 jurisdictions: 34 in Europe, 16 in Asia, 5 in South America, 3 in North America, 3 in Africa, and 2 in Oceania.[25][26] The United States is represented by two members, the United States Federal Reserve System and Federal Reserve Bank of New York. The Central Bank of Russia is a member but its engagement with the BIS has been suspended since early March 2022 (see History section above). In the list below, (*) indicates members of the BIS Global Economy Meetings (see below) and (**) indicates observers to these meetings.
The BIS was originally owned by both central banks and private individuals, since the United States, Belgium and France had decided to sell all or some of the shares allocated to their central banks to private investors. BIS shares traded on stock markets, which made the bank an unusual organization: an international organization (in the technical sense of public international law), yet allowed for private shareholders. Many central banks had similarly started as such private institutions; for example, the Bank of England was privately owned until 1946.
At the end of 2000, such private shareholders still owned 72,648 shares, or nearly 14 percent of the BIS's capital at the time. The BIS subsequently initiated a buyback of these private owners at 16,000 Swiss francs per share, but a group of shareholders led by New York-based
Central banking cooperation
The original goal of the BIS was "to promote the co-operation of central banks and to provide additional facilities for international financial operations; and to act as trustee or agent in regard to international financial settlements entrusted to it under agreements with the parties concerned", as stated in its Statutes of 1930.[28] The BIS pursues its mission by:
- fostering discussion and facilitating collaboration among central banks;
- supporting dialogue with other authorities that are responsible for promoting financial stability;
- carrying out research and policy analysis on issues of relevance for monetary and financial stability;
- acting as a prime counterparty for central banks in their financial transactions; and
- serving as an agent or trustee in connection with international financial operations.
Basel Meetings
The activity of the BIS has always revolved around the regular meetings of its membership in Basel. In the 1930s, these meetings were held every month, with two interruptions resulting in ten meetings per year. Since 1998, these meetings have been held every other month, so six times a year.
Financials
The BIS operates in the private market as a counterparty, asset manager and lender for central banks and international financial institutions.[36] It denominates its financials in IMF special drawing rights. The balance sheet total of the BIS on 31 March 2019 was SDR 291.1 billion (US$403.7 billion) and a net profit of SDR 461.1 million (US$639.5 million).[37]
Leadership
The Chairmen concurrently held the role of President from April 1930 to May 1937. Johan Beyen of the Netherlands served as President from May 1937 to December 1939, succeeded by American national Thomas H. McKittrick from January 1940 to June 1946. The position of President remained vacant from June 1946 to June 1948, when the roles of President and Chair of the Board were again reunited until the former was abolished on 27 June 2005. Meanwhile, the Chair had been left vacant from May 1940 to December 1942.
BIS Chairs
BIS General Managers
Board of directors
As of August 2024:[38]
- Andrew Bailey (Bank of England)
Controversy
In May 1935, the BIS was the focus of allegations of insider trading, relayed by an article in the Berner Tagblatt. The BIS undertook an internal investigation but did not take punitive action.
See also
- World War I reparations
- Central bank
- Global financial system
- International financial institutions
Further reading
- Simmons, Beth A. (1993). "Why Innovate? Founding the Bank for International Settlements". World Politics. 45 (3): 361–405.
- Paul Einzig. 1931. The Bank for International Settlements. Macmillan.
External links
- "They've Got a Secret" by Michael Hirsh, The New York Times, 2013 (a book review of Tower of Basel, Adam LeBor, 2014)
- "The Money Club", by Edward Jay Epstein, Harper's, 1983.
- Andrew Crockett statement to the IMF
- , by Henry C K Liu in the Asia Times.
- , Timewatch, Paul Elston, producer Laurence Rees, narrator Sean Barrett (UK), BBC, 1998 (a video documentary about the BIS role in financing Nazi Germany)
- eabh (The European Association for Banking and Financial History e.V.)
References
- Board of Directors www.bis.org/, retrieved 2011-04-14^
- About BIS Web page of Bank for International Settlements, January 2005, retrieved May 17, 2008^
- History - overview www.bis.org, BIS, 1 June 2005, retrieved 25 July 2024^