BIS History

The Bank for International Settlements (BIS - Basel, Switzerland) is the world's oldest international financial institution and remains to this day the principal centre for international central bank cooperation. The BIS was established in the context of the Young Plan (1930), which dealt with the issue of the reparation payments imposed on Germany by the Treaty of Versailles. The new bank was to take over the functions previously performed by the Agent General for Reparations in Berlin and to act as a trustee for the Dawes and Young Loans. In addition, the BIS was to promote central bank cooperation in general. The reparations issue quickly faded into the background, focusing the Bank's activities entirely on cooperation among central banks and, increasingly, other agencies in pursuit of monetary and financial stability.

The Bank's main tasks, as they have developed over the past 70 years, can be summarised as follows:

1. The BIS provides a forum for central bank cooperation . Through regular meetings, bringing together governors and officials of its member central banks, the BIS acts as the prime forum for information exchange and cooperation among central banks worldwide. Central bank cooperation at the BIS aimed at defending the Bretton Woods system in the 1960s and early 1970s, and managing capital flows following the two oil crises and the international debt crisis in the 1980s. More recently, the thrust has been to foster financial stability in the wake of economic integration and globalisation.
2. Within the framework of international cooperation, the BIS conducts research contributing to monetary and financial stability, collects and publishes statistical material on international finance and - through committees of national experts - formulates recommendations to the financial community aimed at strengthening the international financial system. Thus, for example, the Basel Committee on Banking Supervision has recommended a risk-weighted capital ratio for internationally active banks (1988 Basel Capital Accord, currently under revision) that has become an international standard.
3. The BIS performs traditional banking functions , such as reserve management and gold transactions, for the account of central bank customers and international organisations. The total of currency deposits placed with the BIS amounted to US$ 128 billion at 31 March 2000, representing around 7% of world foreign exchange reserves. In addition, the BIS has performed trustee and agency functions. Thus, the BIS was the agent for the European Payments Union (EPU, 1950-58), helping the European currencies restore convertibility after the Second World War. Likewise, the BIS has acted as the agent for various European exchange rate arrangements, including the European Monetary System (EMS, 1979-94) which preceeded the move to a single currency.
4. Finally, the BIS has also provided or organised emergency financing to support the international monetary system when needed. During the 1931-33 financial crisis, the BIS organised support credits for both the Austrian and the German central bank. In the 1960s, the BIS arranged special support credits for the Italian lira (1964) and for the French franc (1968) and two so-called Group Arrangements (1968 and 1969) to support sterling. More recently, the BIS has provided finance in the context of IMF-led stabilisation programmes (eg for Mexico in 1982 and for Brazil in 1998).