The Bank for International Settlements (BIS) is an international organization of central banks which “fosters international monetary and financial cooperation and serves as a bank for central banks”. The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.
The BIS was established on May 17, 1930, by an intergovernmental agreement by Germany, Belgium, France, United Kingdom, Italy, Japan, United States and Switzerland. The BIS was originally intended to facilitate reparations imposed on Germany by the Treaty of Versailles after World War I. The need to establish a dedicated institution for this purpose was suggested in 1929 by the Young Committee, and was agreed to in August of that year at a conference at The Hague. A charter for the bank was drafted at the International Bankers Conference at Baden-Baden in November, and its charter was adopted at a second Hague Conference on January 20, 1930. According to the charter, shares in the bank could be held by individuals and non-governmental entities. The BIS was constituted as having corporate existence in Switzerland on the basis of an agreement with Switzerland acting as headquarters state for the bank. It also enjoyed immunity in all the contracting states.
The relatively narrow role the BIS plays today does not reflect its ambitions or historical role. A “well-designed financial safety net, supported by strong prudential regulation and supervision, effective laws that are enforced, and sound accounting and disclosure regimes“, are among the Bank’s goals. In fact they have been in its mandate since its founding in 1930 as a means to enforce the Treaty of Versailles. The BIS has historically had less power to enforce this “safety net” than it deems necessary. Recent head Andrew Crockett has bemoaned its inability to “hardwire the credit culture”, despite many specific attempts to address specific concerns such as the growth of offshore financial centres (OFCs), highly leveraged institutions (HLIs), large and complex financial institutions (LCFIs), deposit insurance, and especially the spread of money laundering and accounting scandals.
The BIS provides the Basel Committee on Banking Supervision with its 17-member secretariat, and with it has played a central role in establishing the Basel Capital Accords of 1988 and 2004. There remain significant differences between United States, European Union, and United Nations officials regarding the degree of capital adequacy and reserve controls that global banking now requires. Put extremely simply, the United States, as of 2006, favoured strong strict central controls in the spirit of the original 1988 accords, while the EU was more inclined to a distributed system managed collectively with a committee able to approve some exceptions. The UN agencies, especially ICLEI, are firmly committed to fundamental risk measures: the so-called triple bottom line and were becoming critical of central banking as an institutional structure for ignoring fundamental risks in favour of technical risk management.
