What Is The Bank For International Settlements?
The Bank for International Settlements (BIS), also known as "the bank for central banks," defines its mission as being an "international organisation that serves central banks and other financial authorities across the globe to build a greater collective understanding of the world economy, fosters international cooperation among them and supports them in the pursuit of global monetary and financial stability."
Based in Basel, Switzerland, the bank is owned by 60 member central banks and monetary authorities that collectively account for about 95% of world GDP. It also has offices in Hong Kong and Mexico City.
The BIS is the oldest international financial institution. It was created in 1930 at the Hague Conference by Belgium, France, Germany, Italy, Japan, Switzerland and the United Kingdom. It was originally founded to settle reparation payments that were imposed on Germany after World War I, but its scope has grown well beyond that.
Prior to World War II, the BIS helped ship gold from Europe to New York and London on behalf of European central banks. After the war, it acted as the technical agent for creating a European Payments Union, which helped restore currency convertibility in Europe.
Following the 1997 Asian crisis and the 1998 Russian crisis, the Financial Stability Forum (more on this below), which is headquartered at the BIS, was created in February 1999 to coordinate the work of national financial authorities and international standard-setting bodies. The forum was renamed as the Financial Stability Board in 2009.
The BIS performs these three main functions:
- Promote international cooperation among monetary and financial authorities to then promote stability in those same areas.
- Conduct economic research and analysis. The bank provides independent research, analysis and statistics on financial institutions and markets.
- Provide banking services to central banks. The BIS provides credit intermediation, gold and foreign exchange, asset management, and risk management services to help central banks and other monetary authorities manage their foreign exchange reserves. It does not do business with private individuals, corporations or governments.
The BIS also houses many international committees that are likewise involved in promoting financial stability. According to the BIS' website, "Being located in the same place makes it easier for these groups to communicate and collaborate, as well as interact with policymakers." These committees include:
- The Basel Committee on Banking Supervision, which develops regulatory standards for banks on a global scale.
- The Committee on Payments and Market Infrastructures, which creates regulatory standards for payment, clearing and settlement systems.
- The Committee on the Global Financial System, which follows issues relating to financial markets and systems.
- The Markets Committee, which monitors financial markets developments and examines how they impact central banks.
There are also several related but independent associations headquartered at the BIS. These include the following:
- The Financial Stability Board, which monitors and makes recommendations about the global financial system in order to promote international financial stability.
- The International Association of Deposit Insurers, which sets standards for deposit insurance programs around the world.
- The International Association of Insurance Supervisors, which is the international standard-setting body for developing and implementing principles and standards for supervising the insurance industry. It is made up of insurance supervisors and regulators from more than 200 authorities that account for 97% of the world's insurance premiums.
The BIS, commonly known as "the bank for central banks," is an international organisation that serves central banks and other financial authorities around the world. Its main functions include promoting monetary and financial stability, offering independent economic research and analysis, and providing banking services to central banks, mainly to help them manage their foreign exchange reserves. In addition to the BIS itself, the bank's headquarters houses several committees and independent associations that are involved in promoting international financial stability.
Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…