source url: http://www.bis.org/about/prof-gh.htm
source url: http://www.bis.org/about/prof-gh.htm
June 1998
The sections of this document are:
Since its creation at the Hague Conference in January 1930, the Bank for International
Settlements (the BIS) has always been
a central banking institution which is unique at the
international level. It is owned and controlled by central banks and it provides a number of
highly-
The Bank's predominant tasks are summed up most succinctly in part of Article 3 of its original Statutes. They are "to promote the co-operation of central banks and to provide additional facilities for international financial operations ...". One of the major aims of greater international central bank cooperation has always been to foster international financial stability. Nowadays, with rapidly integrating financial markets in the world, such cooperation is even more essential. The BIS is thus an important forum for international monetary and financial cooperation between central bankers and, increasingly, other regulators and supervisors. At the same time the BIS is a bank, but one whose depositors are limited to central banks and international financial institutions. A significant portion of the world's foreign exchange reserves are held on deposit with the BIS. The BIS also acts as Agent or Trustee in connection with various international financial agreements. In all these roles - as a central bankers' meeting place and bank, and as Agent or Trustee - the BIS aims for the highest standards of professionalism and complete confidentiality and discretion.
Since September 1994, the eleven countries from which the members of the Bank's Board of Directors are drawn have been identical with the countries which comprise the Group of Ten, with which the BIS has had a long and close association. The admission to membership in 1996/97 of an additional nine central banks in Asia, Latin America, the Middle East and Europe has ended the previous heavy concentration of BIS shareholding central banks in the industrialised world and eastern Europe.
The Bank has business and other relations with considerably more than its shareholding central banks because some 120 central banks and international financial institutions use the BIS as a bank; it also increasingly invites central bank officials from the emerging market economies to participate in discussions held at the BIS. Furthermore, the central banks or official monetary institutions of all but a few countries throughout the world are regularly represented at the Annual General Meeting of the BIS in June each year.
The need to create an international organisation such as the BIS had been perceived from the beginning of the century. However, it was not until the adoption of the Young Plan in accordance with the Hague Agreements of 20th January 1930, whose main purpose was the settlement of the problem of German reparations after the First World War, that the necessary steps were taken.
The inter-governmental agreements concluded at the Hague Conference in January 1930 provided for the founding of the BIS by a group of six central banks and a financial institution of the USA and for the granting of a Constituent Charter to the BIS by Switzerland, the country in which it was agreed that the BIS should be established. The new international organisation was destined not only to perform the functions of trustee in the execution of the Young Plan, but also, as already noted, to promote the cooperation of central banks and to provide additional facilities for international financial operations.
The BIS commenced its activities in Basle on 17th May 1930 and is thus the world's oldest international financial organisation. Today Basle has become the traditional international meeting place for many central bank Governors and other officials.
In common with many of its founding central banks in 1930, the BIS was given the legal structure of a limited company with an issued share capital. The Hague Agreements nevertheless established the BIS as an international organisation governed by international law with the privileges and immunities necessary for the performance of its functions. The international legal personality of the BIS and the privileges and immunities which it has enjoyed in Switzerland since its foundation were confirmed in the Headquarters Agreement which was concluded by the Bank with the Swiss Federal Council on 10th February 1987. It is apparent from that Agreement that the BIS has a legal status in Switzerland similar to that accorded to the many other international organisations which have been established there since 1930. It should be added that the BIS is subject neither to the Swiss Federal Law concerning Banks and Savings Banks nor to the provisions of Swiss Company Law.
The authorised share capital of the Bank is 1,500 million gold francs, divided into 600,000 shares of equal nominal value (2,500 gold francs per share). At the close of the financial year 517,165 shares were in issue and, in accordance with Article 7 of the Statutes of the BIS, they are paid up to the extent of 25% of their nominal value (625 gold francs per share). The amount of the paid-up capital appearing in the Balance Sheet of the BIS at 31st March 1998 thus stands at 323.2 million gold francs.
The gold franc of the BIS has a gold weight of just over 0.29 of a gramme of fine gold, which is identical with the gold parity of the Swiss franc from the foundation of the BIS in 1930 until September 1936 when, after a number of leading countries had left the gold standard, the gold parity of the Swiss franc was suspended. The BIS employs the gold franc solely as a unit of account for balance-sheet purposes, assets and liabilities in US dollars being converted into gold francs at the fixed rate of US$ 208 per ounce of fine gold (equivalent to 1 gold franc = US$ 1.94) and all other items in currencies being converted into gold francs on the basis of market rates against the US dollar.
When the Bank's initial capital was issued, the subscribing institutions were given the option of taking up the whole of their respective national issues of shares or of arranging for those shares to be subscribed by the public. As a result, part of the Belgian and French issues and the whole of the American issue are not held by the institutions to which they were originally allocated. In all, some 86% of the Bank's issued share capital is registered in the names of central banks, the remaining 14% being held by private shareholders. While all shares carry equal rights with respect to the annual dividend, private shareholders have no right to attend or vote at General Meetings of the BIS, since all rights of voting and representation are reserved for the central bank of the country in which the relevant national issue of shares was initially subscribed.
At 31st March 1998 forty-five central banks had rights of representation and voting at General Meetings of the BIS. These included all the G-10 central banks - namely those of Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States of America - and the central banks of Australia, Austria, Brazil, Bulgaria, China, the Czech Republic, Denmark, Estonia, Finland, Greece, Hong Kong, Hungary, Iceland, India, Ireland, Korea, Latvia, Lithuania, Mexico, Norway, Poland, Portugal, Romania, Russia, Saudi Arabia, Singapore, Slovakia, South Africa, Spain and Turkey, together with the Central Bank of Bosnia and Herzegovina, the Croatian National Bank, the National Bank of the Republic of Macedonia and the Bank of Slovenia, which have been issued shares of the Bank pending a comprehensive settlement of all outstanding questions in connection with the legal status of the suspended Yugoslav issue of the Bank's capital.
The BIS has three administrative bodies: the General Meeting, the Board of Directors and the Management.
The General Meeting is held annually, usually on the second Monday in June.
The Board of Directors comprises the Governors of the central banks of Belgium, France, Germany, Italy and the United Kingdom and the Chairman of the Board of Governors of the US Federal Reserve System, as ex officio members, each of whom appoints another member of the same nationality. The Statutes also provide for the election to the Board of not more than nine Governors of other member central banks. The Governors of the central banks of Canada, Japan, the Netherlands, Sweden and Switzerland are currently elected members of the Board.
The Board of Directors elects a Chairman from among its members and appoints the President of the Bank. Since 1948 the two offices have been vested in one person. They are currently held by Alfons Verplaetse, Governor of the National Bank of Belgium.
The Board of Directors appoints the General Manager, currently Andrew Crockett, and the other members of the Management. The staff of the Bank (including temporary staff) now numbers 463 and is drawn from twenty-nine countries.
The Bank's offices in Basle are the meeting place for the Governors and other officials not only of the shareholding central banks referred to in Section 3 above but also of the central banks of many other countries throughout the world, including both major industrialised countries and, more recently, countries with emerging market economies. The purpose of these meetings is to achieve a high degree of mutual understanding of monetary and economic questions and to facilitate international cooperation in areas of common interest, in particular as regards the monitoring of and support to the international financial system.
The stability of the international monetary and financial systems has long been a central concern of the central bankers meeting at the BIS. For example, the Bank played an important role in both the creation and operation of the various intra-European payments arrangements between 1947 and 1958. Then, during the period between 1960 and 1971, particularly at the times when waves of speculation took place against a number of different currencies, the Basle meetings on many occasions resulted in important initiatives being undertaken by the central banks.
The General Arrangements to Borrow (GAB) of 1962, under which ten member countries of the IMF (together with Switzerland, which was not a member of the Fund at that time) agreed to make resources available to the Fund outside their quotas, led to the countries participating in the GAB being known as the Group of Ten (G-10). As well as making resources available to the IMF under the GAB the G-10 has, since 1963, been a principal forum for discussion of international monetary questions. From the outset, the BIS has been a participant in G-10 meetings, above all because the Governors of the G-10 central banks meet regularly on the occasion of the Basle monthly meetings. It was thus through their contacts at the BIS that between 1961 and 1968 the G-10 central banks coordinated their interventions in the gold markets through the so-called gold pool, which was operated on the basis of directives formulated and issued in Basle by the central bank Governors. Furthermore, the network of swap arrangements between the US monetary authorities and a number of central banks to reinforce confidence in the dollar had its origins in 1962 within the framework of the BIS. The G-10 meetings have, over time, become the pivotal forum in which much wider activities have been set in motion by the G-10 central banks in the pursuit of international financial stability - for example in the fields of monetary and financial market monitoring and analysis, banking supervision and payment and settlement systems.
It should be noted, however, that the BIS is also - and increasingly - a forum for meetings of the Governors and other officials from those central banks throughout the world which make a substantial contribution to international monetary cooperation, irrespective of whether or not those institutions are BIS shareholding central banks.
In the background, the progressive globalisation of financial markets and the continuous process of financial innovation over the last two decades have also added to the need for deeper understanding of the resulting systemic implications and for cooperation among those central banks most affected. As early as 1971 concern among central banks about the evolution of the Euro-currency markets led to the establishment of a Standing Committee of the Group of Ten central banks which has met periodically in Basle ever since. Circumstances have from time to time prompted the central banks concerned to deal with a series of specific questions, such as the apparent lack of a lender of last resort in the Euro-market, the implications of international debt problems, financial innovation, the evolution of financial market structures and the collection of new statistical information; for example, most recently in the rapidly-growing field of derivatives.
Meeting more regularly - at the time of the monthly meetings - the Committee of Experts on Gold and Foreign Exchange also monitors ongoing financial market developments with a view to their implications for central bank policies and operating procedures.
Another important initiative was the agreement of the G-10 Governors in December 1974 to set up a committee to improve collaboration between bank supervisors in the light of the experiences earlier that year in connection with Bankhaus Herstatt in Germany and the Franklin National Bank in New York. The work of the Basle Committee on Banking Supervision, the Secretariat for which is provided by the BIS, encompasses three main areas. Firstly, the Committee provides a forum for discussion on the handling of specific supervisory problems. Secondly, it coordinates the sharing of supervisory responsibilities among national authorities in respect of banks' foreign establishments with the aim of ensuring effective supervision of banks' activities worldwide. A report by the Committee on this matter (which has become known as the Basle 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. Thirdly, it seeks to enhance standards of supervision, notably in relation to solvency, so as to help strengthen the soundness and stability of international banking. In this respect, it has over the years issued a wide range of papers designed to guide bank supervisors in the establishment of sound supervisory standards. The best known of these is the agreement reached in 1988 to achieve international convergence in the measurement of the adequacy of banks' capital and to establish minimum capital standards. More recently, the Committee has issued the Core Principles for Effective Banking Supervision, which is a comprehensive blueprint for an effective supervisory system, backed up by a three-volume Compendium of guidance documents.
The efficiency and stability of domestic and cross-border payment and settlement systems have also been a key central bank concern. The BIS hosts meetings of, and provides the Secretariat for, the Committee on Payment and Settlement Systems and its various working parties. This Committee reviews developments in payment and settlement systems, including those for securities and foreign exchange market transactions. It also monitors developments relating to cross-border and multilateral netting schemes following the publication in 1990 of the report of the ad hoc Committee on Interbank Netting Schemes.
The need to strengthen financial systems worldwide has led to increased demand for assistance in implementing sound policies in all areas bearing on financial system stability. To help respond to these demands, and to improve the effectiveness with which training is planned, coordinated and delivered, the BIS in a joint initiative with the Basle Committee on Banking Supervision is establishing an Institute for Financial Stability which is expected to commence its activities some time in the second half of this year.
Since January 1998 the BIS has hosted the Secretariat of the International Association of Insurance Supervisors (IAIS). The IAIS is a relatively new organisation, founded in 1994. Similar to the Basle Committee on banking supervision, but directed at insurance business the members of the IAIS aim to cooperate to ensure improved supervision of the insurance industry, to develop practical standards for supervision of insurance, to provide mutual assistance and to exchange information on their respective experiences in order to promote the development of domestic insurance markets. In 1997 the IAIS issued its first papers: Insurance supervisory principles; guidance on insurance regulation and supervision for emerging market economies; a paper comparable to the above-mentioned "Basle Concordat" of the Basle Committee and a model Memorandum of Understanding (MOU) that can be used by supervisors to improve the exchange of information and to facilitate cooperation with each other.
The Secretariat operates in full independence of the BIS but has its offices at the BIS and enjoys its support in certain technical and administrative areas. The proximity to the Basle Committee and to the other secretariats at the BIS focusing on issues of financial stability facilitates the cooperation and exchange of information which is becoming increasingly necessary as differences between financial institutions and sectors diminish and therefore call for joint supervisory approaches.
As central bank cooperation has intensified in other parts of the world, either within existing regional political associations or specialised central banking organisations, the BIS has been in touch with most of them, notably in Latin America with CEMLA (Centro de Estudios Monetarios Latinoamericanos), in Asia with EMEAP (Executive Meeting of East Asian and Pacific Central Banks), with SEANZA (Central Banks of South East Asia, New Zealand and Australia), with SEACEN (South East Asian Central Banks), in South Asia with SAARC (South Asian Association for Regional Cooperation), in the Gulf Region with GCC (Gulf Cooperation Council), and in South Africa with SADC (South African Development Community). The BIS contributes to the activities of these organisations as well as conducting seminars together with an increasing number of them.
The BIS performs functions in the field of technical assistance for the central banks of eastern Europe,the former Soviet Union and some Asian economies in transition, and coordinates the technical assistance and training being provided by the central banks of over twenty industrialised countries. That coordination is founded on a database and on regular meetings bringing together officials of the donor and recipient central banks concerned as well as the IMF and other international organisations. The BIS also participates with the EBRD, the IBRD, the IMF and the OECD in a training institution (the Joint Vienna Institute) which they set up in September 1992 in order to offer courses for officials of the central banks and of the economic and financial authorities of the countries whose economies were formerly subject to central planning.
The BIS also regularly organises meetings of central bank economists and other experts on a variety of matters, such as economic and monetary issues of interest to central banks, including, for example, monetary policy techniques and operating procedures and netting arrangements. Meetings of central bank experts also take place on more specialised topics, such as data bank management, security, automation, internal management procedures, the collection of international financial statistics, and specific legal topics of interest to central banks. In recent years, participation has been increasingly extended to representatives from emerging markets, who also attend special meetings at the BIS on topics of particular concern to them.
From 1964 until the end of 1993 the BIS hosted the Secretariat of the Committee of Governors of the Central Banks of the Member States of the European Economic Community (the Committee of Governors). From 1st June 1973 until the end of 1993 the Secretariat of the Committee of Governors also served the Board of Governors of the European Monetary Co-operation Fund (EMCF) and the Bank acted as EMCF Agent (see Section 8 below). Until they were replaced by the European Monetary Institute (EMI) on 1st January 1994, the Committee of Governors and the EMCF were the Community bodies which provided the institutional framework for monetary cooperation in the European Community.
Apart from the specific tasks performed by the BIS, and by various committees and groups of experts, as described in Section 5 above, the Monetary and Economic Department of the BIS conducts research, particularly into monetary and financial questions, collects and publishes data on international banking and financial market developments, and runs an intra-central bank economic database to which contributing central banks have automated access.
The research work of the BIS tends to focus on questions of direct interest to central banks, and is therefore of an applied nature. The Bank's economic research and analysis find an outlet in the various Economic Papers and Working Papers which are published by the BIS. Much of the work undertaken also serves, directly or indirectly, as an important input to the wide-ranging review of international economic and financial developments in the Bank's Annual Report, the publication for which it is perhaps most widely known among the general public. The BIS also publishes its own research, along with papers submitted by central banks, in its new series of Conference Papers and Policy Papers.
At the request of central banks the BIS also compiles and analyses data on developments in the international banking and securities markets. The data relating to international banking statistics, currently the most extensive part of the data compiled, shed light on the growing international business of banks and on one important component of countries' international indebtedness. The data have also recently been adapted for use in the compilation of more accurate national balance-of-payments statistics. In addition, the Bank has been mandated to build up databases on activity in international debt securities markets, as well as in exchange and over-the-counter traded derivatives. Finally, the Bank maintains a database on the results of the triennial Central Bank Survey of Foreign Exchange Market Activity, which was expanded in 1995 to include comprehensive information on derivatives markets.
Most of the data are regularly published by the BIS in its quarterly "International Banking and Financial Market Developments" which also provides a detailed commentary on market developments. Some of the statistics are published once a year in the Annual Report of the BIS, where one chapter is devoted to international financial market developments. Data concerning the maturity breakdown of banks' external assets are published twice yearly, also accompanied by a commentary. The BIS also contributes data on bank lending to a joint publication with the OECD on external indebtedness. Finally, the BIS publishes the results from the triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in a separate report.
Information about the BIS, together with a growing number of its publications, can now be accessed on the Bank's World Wide Web site (http://www.bis.org).
At 31st March 1998 the Bank's balance-sheet total stood at 62.5 billion gold francs, with the Bank's published own funds (capital and reserves) at 2.6 billion gold francs. Expressed in US dollars with gold at the then current market price the figures could be put at US$ 124.8 billion and US$ 5.6 billion, respectively.
The Banking Department of the BIS carries out a wide range of banking operations, which arise from its role of providing financial services to assist central banks in the management of their external reserves. At present, around 120 central banks and international financial institutions from all over the world place deposits with the BIS. The total of the currency deposits so placed with the BIS amounted to about US$ 104.9 billion at the end of March 1998, representing around 7% of world foreign exchange reserves.
The substantial size of the Bank's balance-sheet total reflects the importance of the functions of the BIS as banker to central banks. Because a high proportion of the reserve assets which central banks hold in the form of deposits with the BIS needs to be available to them at rather short notice, the Bank's employment of these resources focuses upon maintaining a high degree of liquidity. Most of these funds are placed in the market, mainly in the form of investments with top-quality commercial banks and purchases of short-term government securities. While these operations today constitute the bulk of the Bank's business, it also conducts a range of foreign exchange and gold operations on behalf of its customers.
The guiding principle that must be observed by the BIS in its banking operations is laid down in Article 19 of its Statutes, which states that: "The operations of the Bank shall be in conformity with the monetary policy of the central banks of the countries concerned". The Bank is not permitted to make advances to governments or open current accounts in their name.
In recent years the Bank has expanded the investment services it offers to central banks: new BIS-developed instruments enable central banks to manage their liquidity more efficiently, while to help with longer-term reserve management the Bank offers tailor-made portfolio management schemes to central banks.
In addition to placing funds in the international markets, the BIS sometimes has occasion to make liquid resources available to central banks. Such facilities usually take the form of secured credits against gold or currency deposits held with the BIS, but on occasion they may be granted on an unsecured basis, for example in the form of a standby credit which a central bank can draw on at very short notice.
A further dimension to the Bank's lending activities was added in 1982 when the debt crisis erupted and was seen as a potential threat to the stability of the international financial system. At the request of the leading central banks, and with their support (in the form of guarantees), the BIS has, since then, helped to provide bridging finance to a number of central banks, mainly in Latin America and eastern Europe, pending the disbursement of credits granted by such international bodies as the IMF or the IBRD, which were conditional on certain undertakings with regard to future economic policy.
The BIS assists, in a number of fields, in the execution of international financial agreements as Agent or Trustee.
In the past, the BIS performed various functions as Trustee, Fiscal Agent or Depositary with regard to a number of international loan agreements, such as the Dawes and Young loans which were issued by the German government in 1924 and in 1930, respectively, and the secured loans which were issued by the European Coal and Steel Community from 1952. Following the reunification of Germany, the Federal Republic has issued a new series of funding bonds concerning arrears of interest under the Dawes and Young loans.
A function which has now lapsed but whose influence survives in various forms of monetary cooperation is that which the BIS fulfilled in the context of the European Payments Union (1950-58) and its forerunners, the multilateral payments agreements of 1947-50. At the end of 1958, after the European currencies had become fully convertible, the European Payments Union was replaced by the European Monetary Agreement (EMA), a multilateral system of settlements, and the Bank assumed responsibility for the execution of all financial operations connected with this Agreement until it was terminated in 1972. It then lent its services as Agent for the application of the OECD Exchange Guarantee Agreement, which was concluded in place of the EMA and continued in force until the end of 1978.
From June 1973 until the end of 1993, the BIS acted as Agent for the European Monetary Co-operation Fund (EMCF). With effect from 1st January 1994 the EMCF was dissolved and, pursuant to the Treaty on European Union which was agreed in Maastricht in December 1991, the tasks previously performed by the EMCF were taken over by the European Monetary Institute (EMI).
Since October 1986 the BIS has performed the functions of Agent for the private ECU clearing and settlement system in accordance with the provisions of successive agreements concluded between the Euro Banking Association (EBA), formerly the ECU Banking Association, Paris, and the BIS, the most recent of which was signed and entered into force on 16th September 1996. Fifty-six commercial banks, which have been granted the status of clearing bank by the EBA, were participating in the ECU Clearing and Settlement System at end of May 1998. It is foreseen that a further eleven commercial banks will join the System during the summer of 1998.
In April 1994 the BIS assumed new functions in connection with the rescheduling of Brazilian external debt which had been agreed by Brazil in November 1993. In accordance with two Collateral Pledge Agreements, the BIS acts in the capacity of Collateral Agent to hold and invest collateral for the benefit of the holders of certain US dollar denominated bonds, maturing in either 15 or 30 years, which have been issued by Brazil under the rescheduling arrangements.
The BIS has undertaken similar functions for Peru since March 1997 and for the Côte d'Ivoire since March 1998 in connection with the external debt rescheduling arrangements agreed in November 1996 and May 1997 respectively.
From the foregoing profile of the BIS, the following key fields of activity emerge:
Registered office of the BIS: Centralbahnplatz 2, Basle, Switzerland.
| Postal address: | CH-4002 Basle |
| Telephone: | (+41-61) 280 80 80 |
| Cable address: | INTERBANK |
| Telex: | 962 487 biz ch |
| Telefax: | (+41-61) 280 91 00 and (+41-61) 280 81 00 |
| World Wide Web site: | http://www.bis.org |
| E-mail: | EMAILMASTER@bis.org |
In July 1998 the BIS will open a Representative Office for Asia and the Pacific in the Hong Kong Special Administrative Region of the People’s Republic of China.
Chairman of the Board of Directors, President of the Bank: Alfons Verplaetse, Brussels.
Vice-Chairman: Lord Kingsdown, London.
| Andrew Crockett | General Manager [Bilderberg '98] |
| André Icard | Assistant General Manager |
| Gunter D. Baer | Secretary General, Head of Department |
| Malcolm Gill | Head of the Banking Department |
| William R. White | Economic Adviser, Head of the Monetary and Economic Department |
| Marten de Boer | Manager, Accounting, Budgeting and ECU Clearing |
| Renato Filosa | Manager, Monetary and Economic Department |
| Mario Giovanoli | General Counsel, Manager |
| Guy Noppen | Manager, General Secretariat |
| Günter Pleines | Deputy Head of the Banking Department |
29th May 1998