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 preceded 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).

Governors and officials of shareholding central banks meet regularly at the offices of the BIS in Basel and, on occasion, at the Representative Office in Hong Kong SAR. Often they are joined by representatives of other central banks. The largest such gathering is the Annual General Meeting. In 2001, 107 central banks attended the Annual General Meeting, 93 at Governor level. Sixteen international institutions also attended.

The main events take place at the time of the bimonthly meetings of the BIS Board. All shareholding central bank Governors and senior officials are invited. These meetings facilitate central bank cooperation in areas such as the monitoring of foreign exchange market activities, the surveillance and analysis of financial market developments, and the oversight of payment and settlement systems.

Meetings fall into three broad categories:

• meetings of the Board of Directors;

• meetings of the Group of Ten central bank Governors and their subcommittees; and

• meetings of central bank Governors.

An example of the last category is the bimonthly Global Economy Meeting, which brings together central bank Governors of major emerging market economies and of the G10 countries.

In December 1974, the G10 Governors set up the Basel Committee on Banking Supervision to improve collaboration between bank supervisors. The secretariat for this Committee is provided by the BIS in Basel.

The Basel Committee is a forum for discussion on the handling of specific supervisory problems. It coordinates the sharing of supervisory responsibilities among national authorities with the aim of ensuring effective supervision of banks' activities worldwide. A paper on this topic - the Basel Concordat - was issued in 1983, and in 1992 the Committee strengthened these arrangements by agreeing on minimum standards for the supervision of international banking groups and their cross-border establishments.

The Committee also seeks to enhance standards of supervision, notably in relation to solvency, to help strengthen the soundness and stability of international banking. The best known agreement is the 1988 Basel Capital Accord This aims to achieve international convergence in the measurement of the adequacy of banks' capital and to establish minimum capital standards. The Committee is currently consulting on a new capital adequacy framework that is due to come into force in 2004. With the active contribution of emerging market supervisors, the Committee in 1997 issued the Core Principles for Effective Banking Supervision, a comprehensive blueprint for an effective supervisory system.

The BIS provides the secretariat for the G10 Committee on Payment and Settlement Systems and its working parties. This Committee focuses on the efficiency and stability of domestic and cross-border payment and settlement systems. It has increasingly involved non-G10 central banks in its recent work, in particular on core principles for the design and operation of payment systems.

The Committee on the Global Financial System is a standing committee of the G10 central banks, which meets regularly in Basel. Its secretariat is provided by the BIS. The Committee focuses on short-term monitoring of global financial system conditions, longer-term analysis of the functioning of financial markets, and the formulation of policy recommendations aimed at improving market functioning.

The Committee on Gold and Foreign Exchange monitors foreign exchange market activities and identifies implications for central bank policies and operating procedures, occasionally addressing longer-term structural issues.

The mandate of the Financial Stability Institute is to help improve and strengthen financial systems and institutions worldwide, primarily through assistance in implementing sound prudential supervision. The FSI concentrates its activities on effective implementation of prudential regulations, promoting common practices and codes of conduct, and providing supervisors with information on the latest developments on market products, techniques and innovations. The FSI holds a large number of seminars and workshops, primarily on banking supervision; however, the FSI programme is being gradually expanded to include securities and insurance supervision.

The BIS actively contributes to work on reforming the international financial architecture. This work was first given prominence in 1995 at the Halifax summit of heads of state and government of the G7 countries and ultimately led to the establishment of the Financial Stability Forum in 1999.

The FSF promotes information exchange and coordination among national authorities, international institutions (such as the IMF, OECD and World Bank) and international regulatory or experts' groupings with responsibilities in the area of international financial stability. The BIS and other international institutions and groupings participate in the meetings of the FSF and jointly provide secretariat support through the BIS in Basel.

Since 1998 the BIS has hosted the Secretariat of the International Association of Insurance Supervisors. The IAIS, founded in 1994, aims to ensure improved supervision of the insurance industry, develop practical standards for supervision of insurance, provide mutual assistance and exchange information to promote the development of domestic insurance markets. The Secretariat is independent of, but has its offices at, the BIS, which provides support in certain technical and administrative areas.

The BIS assists the Central Banks of over 20 industrialised countries in the coordination of technical assistance and selective training. The coordination is supported by a database and by regular meetings of officials from donor and recipient central banks, as well as the IMF and other international organisations. The BIS actively contributes to the work of the Joint Vienna Institute a facility set up in 1992 to provide for the training needs of the central banks of countries in transition.
[Source - web site of bis ]