Bank for International Settlements (BIS)

The Bank for International Settlements is an international economic organization that promotes cooperation on monetary and financial matters and is a bank for central banks.

Bank for International Settlements (BIS)

Definition / explanation

The BIS has supported and continues to support the pursuit of global monetary and financial stability in two ways:

1) By providing emergency aid to central banks in an emergency.

2) Supporting experts from the national central banks and supervisory authorities in proposing measures and developing standards to strengthen the international financial architecture and in particular international banking supervision.

The Bank for International Settlements was founded on May 17, 1930 and is the oldest international financial institution. The BIS is located in Basel, Switzerland. It has two representative offices: in Hong Kong (opened in 1998) and in Mexico City (opened in 2002). The BIS does not accept deposits from individuals or companies and does not offer any financial services. The Bank for International Settlements operates as follows:

  • Discussion forum for central banks and international organizations
  • Monetary and Economic Research Center
  • Participants in transactions with central banks
  • Trustee for international financial transactions

Organization of the BIS

There are three main departments in the Bank for International Settlements: Currency and Economic Department, Banking Department and General Secretariat. The decision-making bodies are:

  • the general assembly of 56 member banks
  • the board of directors - 19 members (I 2010)
  • the management of the bank - the managing director is Jaime Caruana

Member central banks

Algeria, Argentina, Australia, Austria, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Macedonia, Malaysia, Mexico, Netherlands, New Zealand, Norway, Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia Slovenia, South Africa, Spain , Sweden, Switzerland, Thailand, Turkey, the United Kingdom and the United States, and the European Central Bank.

Founding of the BIS

The Bank for International Settlements was founded in 1930 to administer (settle) the reparations payments Germany had to pay under the Treaty of Versailles, due to the role that the attackers played during the First World War (The Young Plan) .
The BIS founding countries were: Belgium, France, Germany, Italy, Japan, the United Kingdom and the United States. The BIS also acted as a trustee for Dawes and Young Loans (international loans for financing of reparations) and to promote cooperation with central banks. In the financial and economic crisis of the early 1930s, the reparations issue soon subsided and the BIS was able to concentrate its activities entirely on cooperation between central banks.

On the way to European Monetary Union

For more than 30 years, the BIS has been closely linked to the process of European currency integration, providing a platform for discussions between European central banks and contributing to the technical infrastructure for European exchange rate agreements. In 1973 a European Monetary Cooperation Fund was set up to support the use of the "currency snake" mechanism.

In 1988/89, members of the European Economic Community were members of the Delors Committee, which in 1989 issued a report setting out a model for an independent central bank committed to price stability. Your recommendations have had a major impact on the framework for European Economic and Monetary Union. The European Monetary Institute, the forerunner of the European Central Bank, was part of the BIS until it moved to Frankfurt in 1994.

Currency and Financial Stability

“Monetary and financial stability” is one of the objectives of central bank cooperation in the BIS.

Governors and senior officials from the central banks of the Member States meet every two months at the Bank for International Settlements to discuss these issues. The BIS also has committees that prepare policy recommendations and analyzes:

  • the Basel Committee on Banking Supervision
  • the Committee on the Global Financial System
  • the Committee on Payment and Settlement Systems
  • the market committee
  • the Irving Fisher Committee for Central Bank Statistics

Basel II

The Basel Committee on Banking Supervision formulated rules for banking and banking supervision. These rules and principles - Basel II (Basel I, the first framework, issued as equity capital in 1988, were then also a change in 1996 - on "market risk") describes a measure and minimum standard for the capital resources of banks (other Implementation currently working the national banking supervisory authorities).

The aim is to improve the existing rules by aligning regulatory capital requirements with the underlying risks banks face. In addition, the Basel II framework aims to encourage a more forward-looking approach to capital supervision, encouraging banks to identify the risks they face today and in the future and to develop or improve their ability to cope with those risks .

There are three pillars in the Basel II Framework:

  • 1st pillar: minimum capital requirements
  • 2nd pillar: banking supervisory review process
  • 3rd pillar: Extended disclosure / market discipline

The Basel II Framework was issued in 2004, revised in 2005 and the revised framework entitled "Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework - Comprehensive Version" was published in 2006.

Publications

BIS also conducts research in finance: monetary and financial stability, monetary policy and exchange rates, financial institutions and infrastructure, financial markets, central bank governance, and legal issues. There are regular publications: the quarterly review, BIS papers and working papers.

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