The Bank for International Settlements (BIS) is the world’s oldest international financial organisation. It plays a crucial role in fostering global monetary and financial stability. Many though have either never heard of the BIS or don’t understand fully what role it plays. We’ll look into this below.
90 years of supporting international payments...
The BIS traces its origins back to 1930 when it was established in Switzerland by the governments of Belgium, France, Germany, Italy, Japan and the United Kingdom. The countries wanted a Swiss-based financial organisation to oversee the collection and management of the newly consolidated German war reparations from WW1, as set out in the ‘Young Plan’.
Following the Great Depression of the 1930s, the BIS’s role as reparations administrator was made redundant as the reparations were cancelled in 1932. Instead of fading out of existence, the organisation carved a new role for itself as the facilitator of cooperation between central banks.
Over the decades its role has become more and more significant. It facilitated gold transfers in WW2, helped establish a payments union in the 1950s, supported the Bretton Woods system in the 60s and 70s and become a foundation pillar of the modern financial system in the 80s and 90s.
A clear mission to promote international fiscal stability...
Today the BIS is owned by 62 Central banks which in turn make up 95% of the world’s GDP. (The biggest non-member is Russia which had its membership suspended following its invasion of Ukraine.)
They have a clear mission as defined below:
Our mission is to support central banks’ pursuit of monetary and financial stability through international cooperation, and to act as a bank for central banks.
To pursue our mission, we provide central banks with:
- a forum for dialogue and broad international cooperation,
- a platform for responsible innovation and knowledge-sharing,
- in-depth analysis and insights on core policy issues, and
- sound and competitive financial services
The best way to think about the BIS is that they are ‘the bank for Central Banks.’
You can find out more through their video linked below.