Bank for International Settlement BIS is the financial institution meant for the Central banks across the world. It serves as a bank for the member central banks and works towards financial stability and corporation. The institution is the lender of last resort for the Central Banks and acts as an emergency lender for the nations that reel under debt pressure.
BIS- A Brief History
Founded in 1930 out of Hague Agreement, BIS replaced the Agent-General for Repatriation in Berlin. As per its official website, a total of 60 Central banks of different countries came together to form Bank for International Settlement BIS. Together, these nations constitute around 95% of the world GDP. Bank for International Settlement BIS has its head office in Basel, Switzerland, with two representative offices in Hong Kong and Mexico City.
More About Representative Offices
The office in Hong Kong represents Asia and the Pacific region, while the Mexico office is the Representative Office for the Americas.
The main activities of the American office include:-
- Enhancing the relationship between the BIS and Central Banks across the region. Relationship building, however, does not limit to the Central banks but to other institutions as well.
- Conducting and facilitating the meetings of Central banks to discuss and brainstorm on the significant topics in the region. The Economics takes up all these activities for Latin America and the Caribbean group based out of Mexico City.
The Office of Asia and Pacific has similar roles and responsibilities as the Office of America. Bank of International Settlement BIS created the Asian Consultative Council (ACC) – established on March 12, 2001 – to look over the activities of the Asian Office and acts as a Secretariat. The ACC helps build communication between the central banks in the region and the BIS’s Board Management on matters of significant value to the Asia-Pacific Central Banking community.
The typical structure of ACC includes the Governors of the BIS member Central Banks in the Asia-Pacific region. The Asia-Pacific region is inclusive of India, China, Australia, Hong Kong SAR, Japan, Malaysia, Indonesia and Korea, Philippines, Thailand, and Singapore.
Financial Stability Institute (FSI)
FSI also comes under BIS and was created in collaboration with the Basel Committee on Banking Supervision. FSI is responsible for helping supervisors across the globe improve and strengthen their financial systems.
The key objectives of FSI are:
- Establishing rational supervisory standards and practices across the world. FSI also strives toward full implementation of these standards in all the countries.
- FSI provides the supervisors with up-to-date information on the market, practices, products, and techniques.
- Provides a platform for discussions over policy and supervisory practices and experiences.
- Promote cross-sectoral and cross-border supervisory contacts and cooperation.
Decision Making at BIS
There are three significant decision-making bodies – the board of directors, BIS management, and Central Banks in General Meeting. All the decisions made by these decision-making bodies are based on a weighted voting arrangement. These bodies collectively take decisions that hold significance either on the administrative front or the financial front. BIS decision-making bodies can take the decision on matters including budgetary resource allocation, internal policies, banking operations, and so on.
Functions of Bank for International Settlement (BIS)
Bank to the Central Banks
As discussed earlier, BIS helps in fostering coordination and ensure proper implementation of policy and governance across the Central Banks of the member countries. BIS offers high returns to the Central Banks on the funds they invest and also provides liquidity by buying back tradable securities from the Central Banks.
Lender of the Last Resort
Banking for International Settlement BIS offers a host of financial services to the Central Banks and other financial institutions in the management of foreign reserves. In the event that Central Banks are in need of ready liquidity, BIS offers credit services, as well as buyback of tradable securities. BIS can also act as a trustee related to international financial operations, thereby promoting global financial and monetary stability globally.
Research and Statistics
BIS publishes a host of research and statistics on global banking, financial market securities, foreign exchange, and derivatives market. It shares its information across the Central banks of the member countries, and this, in turn, helps them to make more informed decisions. The research is also open to academic journals and other external publications. It is the BIS staff that conducts and concludes all the research. However, member countries Central Banks also help conduct the research and publish the same.
Apart from the above functions, BIS performs the following tasks:
- Encourage discussion and collaboration among the participant Central Banks.
- Facilitate dialogue with the authorities responsible for promoting financial stability.
- Act as a trustee or an agent in connection with international financial operations.
- Serve as a primary counter-party for Central Banks in their financial transactions.
BIS has come into existence and has been running since with the aim of fostering monetary and financial stability. It has played and is playing a major role in developing the global financial market. Moreover, the organization acts as a stabilizing force and encourages financial stability during challenging social, political, and economic situations.
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