BIS-Bank of International Settlement

BIS - Bank of International Settlement

The Mother of all Central Banks

Ruling The World of Money

The Money Club (part 2)

HARPER'S,  November 1983, by Edward Jay Epstein

http://www.edwardjayepstein.com/archived/moneyclub.htm

Ten times a year— once a mouth except in August and October— a small elite of well dressed men arrives in Basel, Switzerland. Carrying overnight bags and attache cases, they discreetly check into the Euler Hotel, across from the railroad station. They have come to this sleepy city from places as disparate as Tokyo, London, and Washington, D.C., for the regular meeting of the most exclusive, secretive, and powerful supranational club in the world. Each of the dozen or so visiting members has his own office at the club, with secure telephone lines to his home country. The members are fully serviced by a permanent staff of about 300, including chauffeurs, chefs, guards, messengers, translators, stenographers, secretaries, and researchers. Also at their disposal are a brilliant research unit and an ultramodern computer, as well as a secluded country club with tennis courts and a swimming pool, a few kilometers outside Basel.

The membership of this club is restricted to a handful of powerful men who determine daily the interest rate, the availability of credit, and the money supply of the banks in their own countries. They include the governors of the U.S. Federal Reserve, the Bank of England, the Bank of Japan, the Swiss National Bank, and the German Bundesbank. The club controls a bank with a $40 billion kitty in cash, government securities, and gold that constitutes about one tenth of the world's available foreign exchange. The profits earned just from renting out its hoard of gold (second only to that of Fort Knox in value) are more than sufficient to pay for the expenses of the entire organization. And the unabashed purpose of its elite monthly meetings is to coordinate and, if possible, to control all monetary activities in the industrialized world. The place where this club meets in Basel is a unique financial institution called the Bank for International Settlements-or more simply, and appropriately, the BIS (pronounced "biz" in German).

THE BIS was originally established in May 1930 by bankers and diplomats of Europe and the United States to collect and disburse Germany's World War I reparation payments (hence its name). It was truly an extraordinary arrangement. Although the BIS was organized as a commercial bank with publicly held shares, its immunity from government interference, and even taxation, in both peace and war was guaranteed by an international treaty signed in The Hague in 1930. Although all its depositors are central banks, the BIS has made a profit on every transaction. And because it has been highly profitable, it has required no subsidy or aid from any government.

Since it also provided, in Basel, a safe and convenient repository for the gold holdings of the European central banks, it quickly evolved into the bank for central banks. As the world depression deepened in the Thirties and- financial panics flared up in Austria, Hungary, Yugoslavia, and Germany, the governors in charge of the key central banks feared that the entire global financial system would collapse unless they could closely coordinate their rescue efforts. The obvious meeting spot for this desperately needed coordination was the BIS, where they regularly went anyway to arrange gold swaps and war-damage settlements.

Even though an isolationist Congress officially refused to allow the U.S. Federal Reserve to participate in the BIS, or to accept shares in it (which were instead held in trust by the First National City Bank), the chairman of the Fed quietly slipped over to Basel for important meetings. World monetary policy was evidently too important to leave to national politicians. During World War 11, when the nations, if not their central banks, were belligerents, the BIS continued operating in Basel, though the monthly meetings were temporarily suspended. In 1944, following Czech accusations that the BIS was laundering gold that the Nazis had stolen from occupied Europe, the American government backed a resolution at the Bretton Woods Conference calling for the liquidation of the BIS. The naive idea was that the settlement and monetary-clearing functions it provided could be taken over by the new International Monetary Fund.

What could not be replaced, however, was what existed behind the mask of an international clearing house: a supranational organization for setting and implementing global monetary strategy, which could not be accomplished by a democratic, United Nations-like international agency. The central bankers, not about to let their club be taken from them, quietly snuffed out the American resolution.

After World War 11, the BIS reemerged as the main clearing house for European currencies and, behind the scenes, the favored meeting place of central bankers. When the dollar came under attack in the 1960s, massive swaps of money and gold were arranged at the BIS for the defense of the American currency. It was undeniably ironic that, as the president of the BIS observed, "the United States, which had wanted to kill the BIS, suddenly finds it indispensable." In any case, the Fed has become a leading member of the club, with either Chairman Paul Volcker or Governor Henry Wallich attending every "Basel weekend."

Originally, the central bankers sought complete anonymity for their activities. Their headquarters were in an abandoned six story hotel, the Grand et Savoy Hotel Universe, with an annex above the adjacent Frey's Chocolate Shop. There purposely was no sign over the door identifying the BIS, so visiting central bankers and gold dealers used Frey's, which is across the street from the railroad station, as a convenient landmark. It was in the wood-paneled rooms above the shop and the hotel that decisions were reached to devalue or defend currencies, to fix the price of gold, to regulate offshore banking, and to raise or lower short-term interest rates. And though they shaped "a new world economic order" through these deliberations, according to Guido Carli, the governor of the Italian central bank,, the public, even in Basel, remained almost totally unaware of the club and its activities.

In May 1977, however, the BIS gave up its anonymity, against the better judgment of some of its members, in exchange for more efficient headquarters. The new building, an eighteen story-high circular skyscraper that rises over the medieval city like some misplaced nuclear reactor, quickly became known as the "Tower of Basel" and began attracting attention from tourists. "That was the last thing we wanted," Dr. Fritz Leutwiler, its president told me, when I interviewed him in 1983. "If it had been up to me, it never would have been built." While we talked, he kept his eyes glued to the Reuters screen in his office, which signaled currency fluctuations around the globe.

Despite its irksome visibility, the new headquarters does have the advantages of luxurious space and Swiss efficiency. The building is completely air-conditioned and self-contained, with its own nuclear-bomb shelter in the sub-basement, a triply redundant fire-extinguishing system (so outside firemen never have to be called in), a private hospital, and some twenty miles of subterranean archives. "We try to provide a complete clubhouse for central bankers ... a home away from home," said Gunther Schleiminger, the supercompetent general manager, as he arranged a rare tour of the headquarters for me

. The top floor, with a panoramic view of three countries, Germany, France, and Switzerland, is a deluxe restaurant, used only to serve the members a buffet dinner when they arrive on Sunday evenings to begin the "Basel weekends." Aside from those ten occasions, this floor remains ghostly empty.

On the floor below, Schleiminger and his small staff sit in spacious offices, administering the day-today details of the BIS and monitoring activities on lower floors as if they were running an out-of-season hotel.

The next three floors down are suites of offices reserved for the central bankers. All are decorated in three colors— beige, brown, and tan— and each has a similar modernistic lithograph over the desk. Each office also has coded speed-dial telephones that at a push of a button directly connect the club members to their offices in their central banks back home. The completely deserted corridors and empty offices, with nameplates on the doors and freshly sharpened pencils in cups and neat stacks of incoming papers on the desks, are again reminiscent of a ghost town. When the members arrive for their forthcoming meeting in November, there will be a remarkable transformation, according to Schleiminger, with multilingual receptionists and secretaries at every desk, and constant meetings and briefings.

On the lower floors are the BIS computer, which is directly linked to the computers of the member central banks and provides instantaneous access to data about the global monetary situation, and the actual bank, where eighteen traders, mainly from England and Switzerland, continually roll over short" term loans on the Eurodollar markets and guard against foreign-exchange losses (by simultaneously selling the currency in which the loan is due). On yet another floor, gold traders are constantly on the telephone arranging loans of the bank's gold to international arbitragers, thus allowing central banks to make interest on gold deposits.

Occasionally there is an extraordinary situation, such as the decision to sell gold for the Soviet Union, which requires a decision from the "governors," as the BIS staff calls the central bankers. But most of the banking is routine, computerized, and riskless. Indeed, the BIS is prohibited by its statutes from making anything but short-term loans. Most are for thirty days or less that are government guaranteed or backed with gold deposited at the BIS. The profits the BIS receives for essentially turning over the billions of dollars deposited by the central banks amounted to $162 million last year.

As skilled as the BIS may be at all this, the central banks themselves have highly competent staffs capable of investing their deposits. The German Bundesbank, for example, has a superb international trading department and 15,000 employees— at least twenty times as many as the BIS staff. Why then do the Bundesbank and the other central banks transfer some $40 billion of deposits to the BIS and thereby permit it to make such a profit?

One answer is of course secrecy. By commingling part of their reserves in what amounts to a gigantic mutual fund of short term investments, the central banks created' a convenient screen behind which they can hide their own deposits and withdrawals in financial centers around the world. And the central banks are apparently willing to pay a high fee to use the cloak of the BIS.

There is, however, another reason why the central banks regularly transfer deposits to the BIS: they want to provide it with a large enough profit to support the other services it provides. Despite its name, the BIS is far more than a bank. From the outside, it seems to be a small, technical organization. Just eighty-six of its 298 employees are ranked as professional staff. But the BIS is not a monolithic institution: artfully concealed within the shell of an international bank, like a series of Chinese boxes one inside another, are the real groups and services the central bankers need-and pay to support.

The first box inside the bank is the board of directors, drawn from the eight European central banks (England, Switzerland, Germany, Italy, France, Belgium, Sweden, and the Netherlands), which meets on the Tuesday morning of each "Basel weekend." The board also meets twice a year in Basel with the central banks of other nations. It provides a formal apparatus for dealing with European governments and international bureaucracies like the IMF or the European Economic Community (the Common Market). The board defines the rules and territories of the central banks with the goal of preventing governments from meddling in their purview. For example, a few years ago, when the Organization for Economic Cooperation and Development in Paris appointed a low-level committee to study the adequacy of bank reserves, the central bankers regarded it as poaching on their monetary turf and turned to the BIS board for assistance. The board then arranged for a high-level committee, under the head of Banking Supervision at the Bank of England, to preempt the issue. The OECD got the message and abandoned its effort.

To deal with the world at large, there is another Chinese box called the Group of Ten, or simply the "G-10." It actually has eleven full-time members, representing the eight European central banks, the U.S. Fed, the Bank of Canada, and the Bank of Japan. It also has one unofficial member: the governor of the Saudi Arabian Monetary Authority. This powerful group, which controls most of the transferable money in the world, meets for long sessions on the Monday afternoon of the "Basel weekend." It is here that broader policy issues, such as interest rates, money-supply growth, economic stimulation (or suppression), and currency rates are discussed-if not always resolved.

Directly under the G-10, and catering to all its special needs, is a small unit called the "Monetary and Economic Development Department," which is, in effect, its private think tank. The head of this unit, the Belgian economist Alexandre Larnfalussy, sits in on all the G-10 meetings, then assigns the appropriate research and analysis to the half dozen economists on his staff. This unit also produces the occasional blue-bound "economic papers" that provide central bankers from Singapore to Rio de Janeiro, even though they are not BIS members, with a convenient party line. For example, a recent paper called "Rules versus Discretion: An Essay on Monetary Policy in an Inflationary Environment," politely defused the Milton Friedmanesque dogma and suggested a more pragmatic form of monetarism. And last May, just before the Williamsburg summit conference, the unit released a blue book on currency intervention by central banks that laid down the boundaries and circumstances for such actions. When there are internal disagreements, these blue books can express positions sharply contrary to those held by some BIS members, but generally they reflect a consensus of the G-10.

Over A bratwurst-and-beer lunch on the top floor of the Bundesbank, which is located in a huge concrete building (called "the bunker") outside of Frankfurt, Karl Otto Pohl, its president and a ranking governor of the BIS, complained to me in 1983 about the repetitiousness of the meetings during the "Basel weekend." "First, there is the meeting on the Gold Pool, then, after lunch, the same faces show up at the G-10, and the next day there is the board which excludes the U.S., Japan, and Canada, and the European Community meeting which excludes Sweden and Switzerland." He concluded: "They are long and strenuous-and they are not where the real business gets done." This occurs, as Pohl explained over our leisurely lunch, at still another level of the BIS: "a sort of inner club."

The Money Club HARPER'S, November 1983, by Edward Jay Epstein

The inner club is made up of the half dozen or so powerful central bankers who find themselves more or less in the same monetary boat: along with Pohl are Volcker and Wallich from the Fed, Leutwiler from the Swiss National Bank, Lamberto Dini of the Bank of Italy, Haruo Mayekawa of the Bank of Japan, and the retired governor of the Bank of England, Lord Gordon Richardson (who had presided over the G-10 meetings for the past ten years). They are all comfortable speaking English; indeed, Pohl recounted how he has found himself using English with Leutwiler, though both are of course native German-speakers.

And they all speak the same language when it comes to governments, having shared similar experiences. Pohl and Volcker were both under secretaries of their respective treasuries; they worked closely with each other, and with Lord Richardson, in the futile attempts to defend the dollar and the pound in the 1960s. Dini was at the IMF in Washington, dealing with many of the same problems. Pohl had worked closely with Leutwiler in neighboring Switzerland for two decades. "Some of us are very old friends," Pohl said. Far more important, these men all share the same set of well-articulated values 'about money.

The prime value, which also seems to demarcate the inner club from the rest of the BIS members, is the firm belief that central banks should act independently of their home governments. This is an easy position for Leutwiler to hold, since the Swiss National Bank is privately owned (the only central bank that is not government owned) and completely autonomous. ("I don't think many people know the name of the president of Switzerland-even in Switzerland," Pohl joked, "but everyone in Europe has heard of Leutwiler.") Almost as independent is the Bundesbank; as its president, Pohl is not required to consult with government officials or to answer the questions of Parliament-even about such critical issues as raising interest rates. He even refuses to fly to Basel in a government plane, preferring instead to drive in his Mercedes limousine.

The Fed is only a shade less independent than the Bundesbank: Volcker is expected to make periodic visits to Congress and at least to take calls from the White House-but he need not follow their counsel. While in theory the Bank of Italy is under government control, in practice it is an elite institution that acts autonomously and often resists the government. (In 1979, its then governor, Paolo Baffi, was threatened with arrest, but the inner club, using unofficial channels, rallied to his support.) Although the exact relationship between the Bank of Japan and the Japanese government purposely remains inscrutable, even to the BIS governors, its chairman, Mayekawa, at least espouses the principle of autonomy. Finally, though the Bank of England is under the thumb of the British government, Lord Richardson was accepted by the inner club because of his personal adherence to this defining principle. But his successor, Robin Leigh-Pemberton, lacking the years of business and personal contact, probably won't be admitted to the inner circle.

In any case, the line is drawn at the Bank of England. The Bank of France is seen as a puppet of the French government; to a lesser degree, the remaining European banks are also perceived by the inner club as extensions of their respective governments, and thus remain on the outside.

A second and closely related belief of the inner club is that politicians should not be trusted to decide the fate of the international monetary system. When Leutwiler became president of the BIS in 1982, he insisted that no government official be allowed to visit during a "Basel weekend." He recalled that in 1968, U.S. Treasury undersecretary Fred Deming had been in Basel and stopped in at the bank. "When word got around that an American Treasury official was at the BIS," Leutwiler said, "bullion traders, speculating that the U.S. was about to sell its gold, began a panic in the market." Except for the annual meeting in June (called "the Jamboree" by the staff ), when the ground floor of the BIS headquarters is open to official visitors, Leutwiler has tried to enforce his rule strictly. "To be frank," he I have no use for politicians. They lack the judgment of central bankers." This effectively sums up the common antipathy of the inner club toward "government muddling," as Pohl puts it.

The inner-club members also share a strong preference for pragmatism and flexibility over any ideology, whether that of Lord Keynes or Milton Friedman. Rather than resorting to rhetoric and invoking principles, the inner club seeks any remedy that will relieve a crisis. For example, earlier this year, when Brazil failed to pay back on time a BIS loan that was guaranteed by the central banks, the inner club quietly decided to extend the deadline instead of collecting the money from the guarantors. "We are constantly engaged in a balancing act-without a safety net," Leutwiler explained.

THE FINAL and by far the most important belief of the inner club is the conviction that when the bell tolls for any single central bank, it tolls for them all. When Mexico faced bankruptcy in the early eighties. The issue for the inner club was not the welfare of that country but, as Dini put it, "the stability of the entire banking system." For months Mexico had been borrowing overnight funds from the interbank market in New York-as every bank recognized by the Fed is permitted to do-to pay the interest on its $80 billion external debt. Each night it had to borrow more money to repay the interest on the previous night's transactions, and, according to Dini, by August Mexico had borrowed nearly one quarter of all the "Fed Funds," as these overnight loans between banks are called.

The Fed was caught in a dilemma: if it suddenly stepped in and forbade Mexico from further using the interbank market, Mexico would be unable to repay its enormous debt the next day, and 25 percent of the entire banking system's ready funds might be frozen. But if the Fed permitted Mexico to continue borrowing in New York, in a matter of months it would suck in most of the interbank funds, forcing the Fed to expand drastically the supply of money.

It was clearly an emergency for the inner club. After speaking to Miguel Mancera, director of the Banco de Mexico, Volcker immediately called Leutwiler, who was vacationing in the Swiss mountain village of Grison. Leutwiler realized that the entire system was confronted by a financial time bomb: even though the IMF was prepared to extend $4.5 billion to Mexico to relieve the pressure on its long-term debt, it would require months of paperwork to get approval for the loan. And Mexico needed an immediate 1.85 billion dollar loan to get out of the interbank market, which Mancera had agreed to do. But in less than forty eight hours, Leutwiler had called the members of the inner club and arranged the temporary bridging loan.

While this $1.85 billion appeared in the financial press to have come from the BIS, virtually all the funds came from the central banks in the inner club. Half came directly from the United States -$600 million from the Treasury's exchange-equalization fund and $325 million from the Fed's coffers; the remaining $925 million mainly from deposits of the Bundesbank, Swiss National Bank, Bank of England, Bank of Italy, and Bank of Japan, deposits that were specifically guaranteed by these central banks, though advanced pro forma by the BIS (with a token amount advanced by the BIS itself against the collateral of Mexican gold). The BIS undertook virtually no risk in this rescue operation; it merely provided a convenient cloak for the inner club. Otherwise, its members, especially Volcker, would have had to take the political heat individually for what appeared to be the rescue of an underdeveloped country.

In fact, they were true to their paramount values: rescuing the banking system itself.

Inner club members publicly pay lip service to the ideal of preserving the character of the BIS and not turning it into a lender of last resort for the world at large. Privately, however, they will undoubtedly continue their maneuvers to protect the banking system at whatever point in the world it seems most vulnerable. After all, it is ultimately the central banks' money at risk, not the BIS's. And the inner club will also keep using the BIS as its public mask, and pay the requisite price for the disguise.

BIS-Bank of International Settlement

BIS - Bank of International Settlement: the Mother of all Central Banks

• John Kenneth Galbraith on the Central Federal Reserve Bank
• Milton Friedman on the Central Federal Reserve Bank

http://hubpages.com/hub/BIS_-_Bank_of_International_Settlement

The stated mission of the BIS is to serve central banks in their pursuit of monetary and financial stability, to foste rinternational cooperation in those areas and to act as a bank for central banks. The BIS pursues its mission by: ... acting as a prime counterparty for central banks in their financial transactions

The Bank for International Settlements (BIS) is an international financial institution[2] owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks".[3] The BIS carries out its work through its meetings, programmes and through the Basel Process – hosting international groups pursuing global financial stability and facilitating their interaction. 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.

History of the Bank of International Settlements

The BIS was established in 1930 by an intergovernmental agreement between Germany, Belgium, France, the United Kingdom, Italy, Japan, the United States, and Switzerland.[4][5] It opened its doors in Basel, Switzerland, on 17 May 1930.

The BIS was originally intended to facilitate reparations imposed on Germany by the Treaty of Versailles after World War I, and to act as the trustee for the German Government International Loan (Young Loan) that was floated in 1930.[6] 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. The charter for the bank was drafted at the International Bankers Conference at Baden-Baden in November, and 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. However, the rights of voting and representation at the Bank's General Meeting were to be exercised exclusively by the central banks of the countries in which shares had been issued. By agreement with Switzerland, the BIS had its corporate existence and headquarters there. It also enjoyed certain immunities in the contracting states (Brussels Protocol 1936).

The BIS’s original task of facilitating World War I reparation payments quickly became obsolete. Reparation payments were first suspended (Hoover moratorium, June 1931) and then abolished altogether (Lausanne Agreement, July 1932). Instead, the BIS focused on its second statutory task, i.e. fostering the cooperation between its member central banks. It acted as a meeting forum for central banks and provided banking facilities to them. For instance, in the late 1930s, the BIS was instrumental in helping continental European central banks shipping out part of their gold reserves to London and New York.[7] At the same time, the BIS fell under the spell of the appeasementillusion. The most notorious incident in this context was the transfer of 23 tons of gold held by the BIS in London on behalf of the Czechoslovakian national bank to the German Reichsbank after Nazi Germany occupied Czechoslovakia in March 1939.[8]

At the outbreak of World War II in September 1939, the BIS Board of Directors – on which the main European central banks were represented – decided that the Bank should remain open, but that, for the duration of hostilities, no meetings of the Board of Directors were to take place and that the Bank should maintain a neutral stance in the conduct of its business. However, as the war dragged on evidence mounted that the BIS conducted operations that were helpful to the Germans. Also, throughout the war, the Allies accused the Nazis of looting and pled with the BIS not to accept gold from the Reichsbank in payment for prewar obligations linked to the Young Plan. This was to no avail as remelted gold was either confiscated from prisoners or seized in victory and thus acceptable as payment to the BIS.[9] Operations conducted by the BIS were viewed with increasing suspicion from London and Washington. The fact that top level German industrialists and advisors sat on the BIS board seemed to provide ample evidence of how the BIS might be used by Hitler throughout the war, with the help of American, British and French banks. Between 1933 and 1945 the BIS board of directors included Walther Funk, a prominent Nazi official, and Emil Puhl, as well as Hermann Schmitz, the director of IG Farben, and Baron von Schroeder, the owner of the J.H. Stein Bank [de].[10]

The 1944 Bretton Woods Conference recommended the "liquidation of the Bank for International Settlements at the earliest possible moment". This resulted in the BIS being the subject of a disagreement between the U.S. and British delegations. The liquidation of the bank was supported by other European delegates, as well as Americans (including Harry Dexter White and Secretary of the Treasury Henry Morgenthau Jr.).[11] But it was opposed by John Maynard Keynes, head of the British delegation.

Keynes went to Morgenthau hoping to prevent or postpone the dissolution, but the next day it was approved. However, the liquidation of the bank was never actually undertaken.[12] In April 1945, the new U.S. president Harry S. Truman and the British government suspended the dissolution, and the decision to liquidate the BIS was officially reversed in 1948.[13]

After World War II, the BIS retained a distinct European focus. It acted as Agent for the European Payments Union (EPU, 1950–58), an intra-European clearing arrangement designed to help the European countries in restoring currency convertibility and free, multilateral trade.[14] During the 1960s – the heyday of the Bretton Woods fixed exchange rate system – the BIS once again became the locus for transatlantic monetary cooperation. It coordinated the central banks’ Gold Pool and a number of currency support operations (e.g. Sterling Group Arrangements of 1966 and 1968). The Group of Ten (G10), including the main European economies, Canada, Japan, and the United States, became the most prominent grouping.

With the end of the Bretton Woods system (1971–73) and the transition to floating exchange rates, financial stability issues came to the fore. The collapse of some internationally active banks, such as Herstatt Bank(1974), highlighted the need for improved banking supervision at an international level. The G10 Governors created the Basel Committee on Banking Supervision (BCBS), which remains active to this day. The BIS developed into a global meeting place for regulators and for developing international standards (Basel Concordat, Basel Capital Accord, Basel II and III). Through its member central banks, the BIS was actively involved in the resolution of the Latin American debt crisis (1982).

From 1964 until 1993, the BIS provided the secretariat for the Committee of Governors of the Central Banks of the Member States of the European Community (Committee of Governors).[15] This Committee had been created by European Council decision to improve monetary cooperation among the EC central banks. Likewise, the BIS in 1988–89 hosted most of the meetings of the Delors Committee (Committee for the Study of Economic and Monetary Union), which produced a blueprint for monetary unification subsequently adopted in the Maastricht Treaty (1992). In 1993, when the Committee of Governors was replaced by the European Monetary Institute (EMI – the precursor of the ECB), it moved from Basel to Frankfurt, cutting its ties with the BIS.

In the 1990s–2000s, the BIS successfully globalised, breaking out of its traditional European core. This was reflected in a gradual increase in its membership (from 33 shareholding central bank members in 1995 to 60 in 2013, which together represent roughly 95% of global GDP), and also in the much more global composition of the BIS Board of Directors. In 1998, the BIS opened a Representative Office for Asia and the Pacific in the Hong Kong SAR. A BIS Representative Office for the Americas was established in 2002 in Mexico DF.

The BIS was originally owned by both central banks and private individuals, since the United States, Belgium and France had decided to sell all or some of the shares allocated to their central banks to private investors. BIS shares traded on stock markets, which made the bank an unusual organization: an international organization (in the technical sense of public international law), yet allowed for private shareholders. Many central banks had similarly started as such private institutions; for example, the Bank of England was privately owned until 1946. In more recent years the BIS has bought back its once publicly traded shares.[16] It is now wholly owned by BIS members (central banks) but still operates in the private market as a counterparty, asset manager and lender for central banks and international financial institutions.[17]Profits from its transactions are used, among other things, to fund the bank's other international activities.

BIS - Bank of International Settlement: the Mother of all Central Banks

The BIS was originally established in May 1930 by bankers and diplomats of Europe and the United States to collect and disburse Germany's World War I reparation payments (hence its name). It was truly an extraordinary arrangement. Although the BIS was organized as a commercial bank with publicly held shares, its immunity from government interference, and even taxation, in both peace and war was guaranteed by an international treaty signed in The Hague in 1930. Although all its depositors are central banks, the BIS has made a profit on every transaction. And because it has been highly profitable, it has required no subsidy or aid from any government.

Since it also provided, in Basel, a safe and convenient repository for the gold holdings of the European central banks, it quickly evolved into the bank for central banks. As the world depression deepened in the Thirties and- financial panics flared up in Austria, Hungary, Yugoslavia, and Germany, the governors in charge of the key central banks feared that the entire global financial system would collapse unless they could closely coordinate their rescue efforts. The obvious meeting spot for this desperately needed coordination was the BIS, where they regularly went anyway to arrange gold swaps and war-damage settlements. Even though an isolationist Congress officially refused to allow the U.S. Federal Reserve to participate in the BIS, or to accept shares in it (which were instead held in trust by the First National City Bank [owned by William Rockefeller]), the chairman of the Fed quietly slipped over to Basel for important meetings. World monetary policy was evidently too important to leave to national politicians. During World War 11, when the nations, if not their central banks, were belligerents, the BIS continued operating in Basel, though the monthly meetings were temporarily suspended. In 1944, following Czech accusations that the BIS was laundering gold that the Nazis had stolen from occupied Europe, the American government backed a resolution at the Bretton Woods Conference calling for the liquidation of the BIS. The naive idea was that the settlement and monetary-clearing functions it provided could be taken over by the new International Monetary Fund. What could not be replaced, however, was what existed behind the mask of an international clearing house: a supranational organization for setting and implementing global monetary strategy, which could not be accomplished by a democratic, United Nations-like international agency. The central bankers, not about to let their club be taken from them, quietly snuffed out the American resolution. After World War 11, the BIS reemerged as the main clearing house for European currencies and, behind the scenes, the favored meeting place of central bankers. When the dollar came under attack in the 1960s, massive swaps of money and gold were arranged at the BIS for the defense of the American currency. It was undeniably ironic that, as the president of the BIS observed, "the United States, which had wanted to kill the BIS, suddenly finds it indispensable." In any case, the Fed has become a leading member of the club, with either Chairman Paul Volcker or Governor Henry Wallich attending every "Basel weekend." Originally, the central bankers sought complete anonymity for their activities. Their headquarters were in an abandoned six story hotel, the Grand et Savoy Hotel Universe, with an annex above the adjacent Frey's Chocolate Shop. There purposely was no sign over the door identifying the BIS, so visiting central bankers and gold dealers used Frey's, which is across the street from the railroad station, as a convenient landmark. It was in the wood-paneled rooms above the shop and the hotel that decisions were reached to devalue or defend currencies, to fix the price of gold, to regulate offshore banking, and to raise or lower short-term interest rates. And though they shaped "a new world economic order" through these deliberations, according to Guido Carli, the governor of the Italian central bank,, the public, even in Basel, remained almost totally unaware of the club and its activities. In May 1977, however, the BIS gave up its anonymity, against the better judgment of some of its members, in exchange for more efficient headquarters. The new building, an eighteen story-high circular skyscraper that rises over the medieval city like some misplaced nuclear reactor, quickly became known as the "Tower of Basel" and began attracting attention from tourists. "That was the last thing we wanted," Dr. Fritz Leutwiler, its president told me, when I interviewed him in 1983. "If it had been up to me, it never would have been built." While we talked, he kept his eyes glued to the Reuters screen in his office, which signaled currency fluctuations around the globe.

http://hubpages.com/hub/Nelson_Aldrich

Nelson Aldrich: the Rockefeller's Middle Man who crafted the Income Tax and the Central Federal Reserve System

 69  By thecounterpunch

"There are two distinct classes of men...those who pay taxes and those who receive and live upon taxes." -- Thomas Paine (1737–1809), pamphleteer and revolutionary

"You know, gentlemen, that I do not owe any personal income tax. But nevertheless, I send a small check, now and then, to the Internal Revenue Service out of the kindness of my heart." -- David Rockefeller (1915-), before a Congressional Committee

"In his final Senate years, Aldrich chaired the National Monetary Commission. His Aldrich Plan, providing for flexible cash reserves, was the forerunner of the Federal Reserve System."

-- Senate.gov

Aldrich introduced established an income tax, although he had declared a similar measure "communistic" a decade earlier

Born in Rhode Island, Nelson Aldrich (1841–1915) was a direct descendant of Rhode Island founder, Roger Williams. He had directed the Finance Committee and was tightly linked to Rockefeller as his only daughter married the only son ofJohn D. Rockefeller (Nelson Aldrich Rockefeller is his grandson and his son Winthrop Aldrich's will become chairmanship of the Chase National Bank - Rockefeller's Bank). In 1909, Aldrich introduced a constitutional amendment to establish an income tax, although he had declared a similar measure "communistic" a decade earlier. In 1908 he became the chief sponsor of the Aldrich-Vreeland Act which created the National Monetary Commission, later to become the Federal Reserve in 1913. Aldrich became wealthy with investments in street railroads, sugar, rubber and banking. In 1906 Aldrich and other American financiers invested heavily in mines and rubber in the Belgian Congo. They supported Belgium's King Leopold II, who was alleged to have imposed slave labor conditions in the colony.

TAGS

business, finance,  education, politics, history, bank, tax, federal reserve, income tax, elite, ron paul, fed, central bank, banking system, rockefeller, chase manhattan bank, financial history, rockfeller, aldrich

http://hubpages.com/hub/Astonishing_Interview_with_Aaron_Russo_who_met_with_Nick_Rockefeller

Astounding Interview of Aaron Russo about Nicholas Rockefeller who asked him to join the CFR

"The end goal is to get everybody chipped, to control the whole society, to have the bankers and the elite people control the world."

- Nick Rockefeller quoted by Aaron Russo in this interview.

Protest against youtube who has erased the Video Speech of Dick Cheney about the CFR
It was only a 1 min Video of a PUBLIC SPEECH and youtube pretends it violates their TOS. Does youtube participate in the coverup about the CFR ?

It's not about more power, it's not about more money, it's about the survival of the elite pyramid

Several years ago, after his popular video Mad As Hell was released and he began his campaign to become Governor of Nevada, Russo was noticed by Rockefeller and introduced to him by a female attorney. Seeing Russo's passion and ability to affect change, Rockefeller set about on a subtle mission to recruit Russo into the elite's CFR (Council of Foreign Relation) organization.

Aaron Russo, the famous Film Maker of Trading Places starring Eddy Murphy, also made a film called "America: Freedom To Fascism". The motive behind this latter is surely linked to Nick (Nicholas) Rockefeller revelation about the ultimate aim of the Elites New World Order.

As Russo refused to join them, Rockefeller coldly questioned why Russo cared about the "serfs"

Russo rejected the invitation, saying he had no interest in "enslaving the people" to which Rockefeller coldly questioned why he cared about the "serfs."

"I used to say to him what's the point of all this," states Russo, "you have all the money in the world you need, you have all the power you need, what's the point, what's the end goal?" to which Rockefeller replied (paraphrasing), "The end goal is to get everybody chipped, to control the whole society, to have the bankers and the elite people control the world."

Rockefeller even assured Russo that if he joined the elite his chip would be specially marked so as to avoid undue inspection by the authorities.

Other themes are 9/11, agenda behind feminism the Rockefeller Foundation has helped promoted with CIA and depopulation of the world by 50%.

The Big Picture ?

Aaron and Nick were friends ...until the Revelation about Microchips

http://hubpages.com/hub/The_Bilderberg_Group

The Bilderberg Group - no more a secret in mass Medias - 64 By thecounterpunch

Cities of the UnderworldUnveil the Hidden World Beneath Major Cities. Videos at HISTORY Freemasony Warning: Do Not Join The Freemasons Until You've Seen This...

BBC - Bilderberg's head Viscount Davignon

In 1974, U.S. Senator James Buckley wrote: "I don't subscribe to the theory that there exists an organization of international bankers called the Bilderbergers." Bilderberg Group, so called because of their first meeting in May 1954 at the Bilderberg Hotel, was kept in secrecy for several dozens of years. Today they prefer not to hide any more at least on European medias like the BBC (for example through their article "Inside the secretive Bilderberg Group"). Prince Bernhard, the Dutch aristocrat, former member of the honorary German Reiter SS Corps, founded the group and chaired meetings for more than 30 years. Over the years the group became a model for transnational diplomacy, lending support to European integration and oil company policies. Its steering committee was virtually a who's who of international finance; David Rockefeller, Gabriel Hauge (Manufacturer's Hanover Trust), Emilio Collado (Standard Oil, later Exxon) international lawyers such as Arthur Dean and George Ball. All U.S. steering committee members were also members of the Council on Foreign Relations (CFR), Rockefeller's organization (founded by Colonel House), which has dominated US foreign policy planning since World War II. Take George Ball, for example. A long-time CFR member, director of the Trilateral Commission (founded by Brzezinski for David Rockefeller - lifetime member), Undersecretary of State, and lawyer with Lehman Brothers. Or Arthur Dean. CFR member, partner in Sullivan and Cromwell law firm, whose partners included John Foster and Allen Dulles. Before World War II Sullivan and Cromwell worked with German chemical and steel monopolies. By the time the Bilderbergers began to meet, attorney Allen Dulles had become CIA director. Is Bilderberg goal the same as described by Caroll Quigley, Bill Clinton's mentor, in his book "Tragedy and Hope: A History of the World in Our Time" ?

"The powers of financial capitalism had far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert." Carroll Quigley, Bill Clinton's mentor

Globalization: Astounding Interview of Aaron Russo about Nicholas Rockefeller who asked him to join the CFR

Globalization: Maurice Allais, French Economics Nobel Prize for the "theory of markets and efficient utilization of ressources"

Links

BBC - Inside the secretive Bilderberg Group

The World Bank, GATT and Free Trade by Noam Chomsky

Novus Ordo Seclorum or New World Order

Organization of Central Banks by the BIS-Bank of International Settlement

https://en.wikipedia.org/wiki/Bank_for_International_Settlements

As an organization of central banks, the BIS seeks to make monetary policy more predictable and transparent among its 60-member central banks, except in the case of Eurozone countries which forfeited the right to conduct monetary policy in order to implement the euro. While monetary policy is determined by most sovereign nations, it is subject to central and private banking scrutiny and potentially to speculation that affects foreign exchange rates and especially the fate of export economies. Failures to keep monetary policy in line with reality and make monetary reforms in time, preferably as a simultaneous policy among all 60 member banks and also involving the International Monetary Fund, have historically led to losses in the billions as banks try to maintain a policy using open market methods that have proven to be based on unrealistic assumptions.

Central banks do not unilaterally "set" rates, rather they set goals and intervene using their massive financial resources and regulatory powers to achieve monetary targets they set. One reason to coordinate policy closely is to ensure that this does not become too expensive and that opportunities for private arbitrage exploiting shifts in policy or difference in policy, are rare and quickly removed.

Two aspects of monetary policy have proven to be particularly sensitive, and the BIS therefore has two specific goals: to regulate capital adequacy and make reserve requirements transparent.

Regulates capital adequacy

Capital adequacy policy applies to equity and capital assets. These can be overvalued in many circumstances because they do not always reflect current market conditions or adequately assess the risk of every trading position. Accordingly, the Basel standards require the capital/asset ratio of internationally active commercial banks to be above a prescribed minimum international standard, to improve the resilience of the banking sector.

The main role of the Basel Committee on Banking Supervision, hosted by the BIS, is setting capital adequacy requirements. From an international point of view, ensuring capital adequacy is key for central banks, as speculative lending based on inadequate underlying capital and widely varying liability rules causes economic crises as "bad money drives out good" (Gresham's Law).

Encourages reserve transparency

Reserve policy is also important, especially to consumers and the domestic economy. To ensure liquidity and limit liability to the larger economy, banks cannot create money in specific industries or regions without limit. To make bank depositing and borrowing safer for customers and reduce risk of bank runs, banks are required to set aside or "reserve".

Reserve policy is harder to standardize, as it depends on local conditions and is often fine-tuned to make industry-specific or region-specific changes, especially within large developing nations. For instance, the People's Bank of China requires urban banks to hold 7% reserves while letting rural banks continue to hold only 6%, and simultaneously telling all banks that reserve requirements on certain overheated industries would rise sharply or penalties would be laid if investments in them did not stop completely. The PBoC is thus unusual in acting as a national bank, focused on the country and not on the currency, but its desire to control asset inflation is increasingly shared among BIS members who fear "bubbles", and among exporting countries that find it difficult to manage the diverse requirements of the domestic economy, especially rural agriculture, and an export economy, especially in manufactured goods.

Effectively, the PBoC sets different reserve levels for domestic and export styles of development. Historically, the United States also did this, by dividing federal monetary management into nine regions, in which the less-developed western United States had looser policies.

For various reasons it has become quite difficult to accurately assess reserves on more than simple loan instruments, and this plus the regional differences has tended to discourage standardizing any reserve rules at the global BIS scale. Historically, the BIS did set some standards which favoured lending money to private landowners (at about 5 to 1) and for-profit corporations (at about 2 to 1) over loans to individuals. These distinctions reflecting classical economics were superseded by policies relying on undifferentiated market values – more in line with neoclassical economics.

Goal: monetary and financial stability

The stated mission of the BIS is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks. The BIS pursues its mission by:

• fostering discussion and facilitating collaboration among central banks;
• supporting dialogue with other authorities that are responsible for promoting financial stability;
• carrying out research and policy analysis on issues of relevance for monetary and financial stability;
• acting as a prime counterparty for central banks in their financial transactions; and
• serving as an agent or trustee in connection with international financial operations.

The role that the BIS plays today goes beyond its historical role. The original goal of the BIS was "to promote the co-operation of central banks and to provide additional facilities for international financial operations; and to act as trustee or agent in regard to international financial settlements entrusted to it under agreements with the parties concerned", as stated in its Statutes of 1930.

Role in banking supervision

The BIS hosts the Secretariat of the Basel Committee on Banking Supervision and with it has played a central role in establishing the Basel Capital Accords of 1988, Basel II framework in 2004 and more recently Basel III framework.

Financial results

The balance sheet total of the BIS on 31 March 2017 was SDR 242.2 billion.

Members

The number of countries represented in each continent are: 35 in Europe, 13 in Asia, 5 in South America, 3 in North America, 2 in Oceania, and 2 in Africa. The sixty member central banks or monetary authorities represent the following countries:

•  Bank of Algeria
•  Central Bank of Argentina
•  Reserve Bank of Australia
•  Oesterreichische Nationalbank
•  National Bank of Belgium
•  Central Bank of Bosnia and Herzegovina
•  Central Bank of Brazil
•  Bulgarian National Bank
•  Bank of Canada
•  Central Bank of Chile
•  People's Bank of China
•  Bank of the Republic of Colombia
•  Croatian National Bank
•  Czech National Bank
•  Danmarks Nationalbank
•  Bank of Estonia
•  European Central Bank
•  Bank of Finland
•  Bank of France
•  Deutsche Bundesbank
•  Bank of Greece
•  Hong Kong Monetary Authority
•  Hungarian National Bank
•  Central Bank of Iceland
•  Reserve Bank of India
•  Bank Indonesia
•  Central Bank of Ireland
•  Bank of Israel
•  Bank of Italy
•  Bank of Japan
•  Bank of Korea
•  Bank of Latvia
•  Bank of Lithuania
•  Central Bank of Luxembourg
•  Bank Negara Malaysia
•  Bank of Mexico
•  De Nederlandsche Bank
•  Reserve Bank of New Zealand
•  National Bank of the Republic of North Macedonia
•  Norges Bank
•  Central Reserve Bank of Peru
•  Bangko Sentral ng Pilipinas
•  Narodowy Bank Polski
•  Banco de Portugal
•  National Bank of Romania
•  Central Bank of the Russian Federation
•  Saudi Arabian Monetary Agency
•  National Bank of Serbia
•  Monetary Authority of Singapore
•  National Bank of Slovakia
•  Bank of Slovenia
•  South African Reserve Bank
•  Bank of Spain
•  Sveriges Riksbank
•  Swiss National Bank
•  Bank of Thailand
•  Central Bank of the Republic of Turkey
•  Central Bank of the United Arab Emirates
•  Bank of England
•  Federal Reserve System

Leadership

The first chairman was Gates W. McGarrah (1863–1940). In 1898 he became cashier of the Leather Manufacturers National Bank, succeeding to the presidency in 1902. The institution merged with the Mechanics National Bank in 1904 and McGarrah was chosen president. He headed this bank until its merger with the Chase National in 1926. He was the first Chairman of the Federal Reserve Bank of New York May 1925 through February 1930. August 30, 1924 he was appointed as the American director of the general council of the Reichsbank. He was a past president of the New York Clearing House Association.

Board of directors

• Mark Carney, London
• Alejandro Díaz de León Carrillo (es), Mexico City
• Juyeol Lee, Seoul
• Mario Draghi, Frankfurt am Main
• John C Williams, New York
• Ilan Goldfajn, Brasília
• Pablo Hernández de Cos, Madrid[27]
• Thomas Jordan, Zurich
• Klaas Knot, Amsterdam
• Haruhiko Kuroda, Tokyo
• Anne Le Lorier, Paris
• Fabio Panetta, Rome
• Shaktikanta Das, Mumbai
• Stephen S Poloz, Ottawa
• Jan Smets (nl), Brussels
• François Villeroy de Galhau, Paris
• Ignazio Visco, Rome
• Pierre Wunsch, Brussels
• Jerome Powell, Washington, D.C.
• Yi Gang, Beijing

Red Books

One of the Group's first projects, a detailed review of payment system developments in the G10 countries, was published by the BIS in 1985 in the first of a series that has become known as "Red Books". Currently the red books cover countries participating in the Committee on Payments and Market Infrastructures (CPMI). 

A sample of statistical data in the red books appears in the table below, where local currency is converted to US dollars using end-of-year rates.

The most notable currency not included in this table since 2009 is the Chinese yuan where statistics are listed "not available". In the year 2009 China was listed as having a banknotes and coins of value $606.59 billion and $456 per capita using an exchange rate of 6.8282 RMB per USD.

Sweden is a wealthy country without much cash per capita compared to other countries (see Swedish krona).

History of the Bank for International Settlements

https://truthout.org/articles/history-of-the-bank-for-international-settlements/

BY Devon Douglas-Bowers,  Occupy.com  PUBLISHED October 17, 2015

The Bank for International Settlements (BIS) is an organization shrouded in mystery. While its purpose has changed and evolved over the decades, the BIS has always been a club for central bankers – and in many ways it has aided some countries more than others. (Photo: Andreina Schoeberlein / Flickr)

The Bank for International Settlements (BIS) is an organization shrouded in mystery. This may be due mainly to the fact that the majority of people don’t even know of its existence. According to the BIS itself, the main purpose of the Bank is “to promote the cooperation of central banks and to provide additional facilities for international financial operations,” and to “act as trustee or agent in regard to international financial settlements entrusted to it under agreements of the parties concern.”

What this means is that the BIS simply enables central banks to work with one another. While its purpose has changed and evolved over the decades, the BIS has always been a club for central bankers – and in many ways it has aided some countries more than others. The Bank has a Board of Directors that “may have up to 21 members, including six ex officio directors, comprising the central bank Governors of Belgium, France, Germany, Italy, the United Kingdom and the United States. Each ex officio member may appoint another member of the same nationality. Nine Governors of other member central banks may be elected to the Board.”

The BIS also has a management wing in the form of a General and Deputy General Manager, both of whom are responsible to the Board and supported by Executive, Finance, and Compliance and Operational Risk Committees. However, its purpose has changed and evolved over the decades, however, it has always been a club for central bankers, yet in many ways it can aid some countries more than others.

How It Started

The origin of the BIS is in the United States, specifically New York City. The individuals involved were international bankers who, despite past differences, “worked together to establish a world financial order that would incorporate the federal principle of the American central banking system.” Among them were figures like Owen D. Young, J. Pierpont Morgan, Thomas W. Lamont, S. Parker Gilbert, Gates W. McGarrah, and Jackson Reynolds, “who, in conjunction with the Federal Reserve Bank of New York, sought to extend the principle of central bank cooperation to the international sphere.”

Before delving further into the creation of the Bank and purpose it has served, and for whom, it’s wise to examine some of the more notable of these individuals to better understand why they got involved in the creation of an international bank.

Owen D. Young was already well placed for the US government; “with the cooperation of the American government and the support of GE, [he] organized and became chairman of the board of the Radio Corporation of America” and “in subsequent years he engineered a series of agreements with foreign companies that divided the world into radio zones and facilitated worldwide wireless communication.” Young had a strong belief that global radio service and broadcasting were important for the advancement of civilization. In 1922, he became chairman of General Electric, and along with GE President Gerard Swope, “urged closer business-government cooperation and corporate self-regulation under government supervision.”

During the 1920s, Young became involved in international diplomacy as the foreign affairs spokesman for the Democratic Party. At the behest of then-Secretary of State Charles Evan Hughes, Young and the banker Charles Dawes were recommended to the Allied Reparations Commission to deal with the breakdown in Germany’s reparations payments following World War I. The Commission resulted in the Dawes Plan, which allowed that “Germany’s annual reparation payments would be reduced, increasing over time as its economy improved; the full amount to be paid, however, was left undetermined. Economic policy making in Berlin would be reorganized under foreign supervision and a new currency, the Reichsmark, adopted.”

Young viewed improving the world financial structure as important to “the very survival of capitalism.” Furthermore, wrote Frank Costigliola in “The Other Side of Isolationism: The Establishment of the First World Bank, 1929-1930,” Young “sought rather the ‘economic integration’ of the world which would prepare the way for ‘political integration’ and lasting peace.”

John Pierpont Morgan, Jr. was already ensconced in the world of international banking, having inherited the JP Morgan Company from his father. During WWI, the House of Morgan worked hand-in-hand with the British and French governments, engaging in a number of tasks such as floating loans for the two countries, handling foreign exchange operations, and advising officials of each respective country.

Not only Young and Morgan, but each of the above mentioned individuals were heavily involved in politics and banking – and therefore had a personal interest in the creation of a global bank. The plan also fit into the US government’s own policies, writes Costigliola, as Washington wanted to “[keep] aloof from the political entanglements in Europe while safeguarding vital American interests by means of unofficial observers or participants.” The Federal Reserve was also interested in the creation of the BIS, as it would “[promote] both the ascendancy of New York City in world banking and the reconstruction of a stable and prosperous Europe able to absorb American exports.”

Thus, the idea of an international bank didn’t occur in a vacuum but rather, according to Beth A. Simmons, author of the article “Why Innovate? Founding the Bank for International Settlements,” its creation “was inextricably tied to the problem of German reparations in the context of Germany’s overall debt burden during the 1920s.” A slowdown in international lending to Germany began in 1928 as markets became extremely worried about the internal politics of the Weimar Republic. Due to the breakup of a center coalition government, and with the Social Democrats needing support from right-wing parties, the political situation began to fall apart as “government stability [was] threatened whenever budget debates exposed the basic social divide of unemployment insurance and increased industrial taxation on the one hand versus spending austerity and tax cuts on the other.”

Weimar’s budget problems came on the heels of the Reparations Commission determining that Germany’s total reparations came to $33 billion, which was twice the size of the country’s total economy in 1925. As long as foreign capital kept coming into Germany, things might have remained fine; but that situation changed in 1928. Between February 1929 and January 1930, negotiations were carried out to reschedule Germany’s reparations payments. “These negotiations were initiated by central bankers and private actors,” writes Simmons, “who were the first to link problems in the capital market with the need to reorganize Germany’s financial obligations.” Thus, it should come as no surprise that many of the individuals involved in creating the BIS were central bankers themselves, or engaged in international affairs and finance to some extent.

The idea for an international bank had already been explored to some extent by people like the economist John Maynard Keynes. But the idea for the bank truly took off during the Young Conference in 1929, when the Allies were attempting to exact Germany’s reparations debts for WWI. Belgian delegate Emile Franqui bought up the possibility of having a settlement organization to administer the reparations agreement, and the very next day, Hjalmar Schacht, president of the Reichsbank and chief German representative at the conference, presented a proposal to establish just such an organization.

The Bank for International Settlements would act as a lender to the German central bank in case the German currency weakened and the government found itself unable to make the reparations payment. In addition, it would give steps for how to proceed in the case of German default. According to Simmons, “if Germany did not resume payments within two years, the BIS would propose revisions collectively for the creditor governments (which would only go into effect with their approval)” and “the bank was responsible for surveillance and informing the creditor countries about economic and financial conditions in Germany.”

The US State Department had wanted a settlement to Germany’s reparations woes, as economic adviser Arthur N. Young observed that “a final reparations settlement [would] promote both political and economic stability in Europe, and thus tend to be of advantage to the United States.” But the US government as a whole didn’t want any type of linkage between reparations and war debts – due to the fact that, while each of the Allied nations were demanding reparations from Germany large enough to cover the country’s debts to the US, having such a linkage would mean that “Germany’s refusal or inability to pay that amount would put Washington in the position of having to agree to a debt reduction or bear the opprobrium and suffer the consequences of opening the door to financial chaos,” according to Costigliola.

However, several other countries had their own interests in stake in the creation of the BIS. French Prime Minister Raymond Poincare promised the French public that the reparations would cover the country’s debts to both the US and Britain, as well as cover the war damages. France was also interested in reaching an agreement on German debts, since they were developing trade interdependence with the Germans and stability was needed.

Britain also wanted to use the BIS as a means to ensure that the Germans would pay on their debts as scheduled. The Bank of England supported the creation of the BIS, wrote Simmons, “because of its potential role in stabilizing the position of the pound in the international monetary system. Britain’s relatively small gold reserves made it difficult to defend the pound without international monetary cooperation and the willingness of smaller powers to hold foreign exchange as reserves instead of gold.”

The meeting in Baden, Germany, in October of 1929 to draw up final plans for the BIS saw the heavy presence of US finance in the form of Melvin Traylor, from the First National Bank of Chicago, and Federick Reynolds, from the First National Bank of New York. There, the two men nominated Gates W. McGarrah, chairman of the board of the New York Reserve Bank, for the officer of BIS President. When the Bank of England leadership expressed anger, claiming the European public wouldn’t find the American domination of the Bank acceptable, they was effectively told that if they wanted American participation in the BIS, it would have to be on American terms. They agreed to appoint Pierre Quesnay of the Bank of France as the bank’s general manager, and the BIS was officially founded on May 17, 1930.

A Rocky Beginning

The role of the BIS quickly changed with the onset of the Great Depression, when it became unable to “play the role of lender of last resort, notwithstanding noteworthy attempts at organizing support credits for both the Austrian and German central banks in 1931.” Due to the Depression and Germany’s inability to pay, the issue of reparations went off the table. The crisis was further compounded when countries like Britain and the US began devaluing their currencies (i.e. printing more money). The BIS attempted numerous times to end the exchange rate instability by restoring the gold standard, and according the bank itself, “the BIS had little choice but to limit itself to undertaking banking transactions for the account of central banks and providing a forum for central bank governors to help them maintain contact.”

During the Second World War, all operations at the BIS were suspended. The situation again became dicey for the Bank once the guns stopped firing. Immediately after WWII, the global economic landscape had massively changed; a new system was needed, and in July of 1944 over 700 delegates from the Allied nations met at the Mount Washington Hotel in Bretton Woods, NH, for the United Nations Monetary and Financial Conference, which “agreed on the creation of the International Monetary Fund (IMF) and an International Bank for Reconstruction and Development (BRD), which became part of the World Bank,” writes Adam Lebor in his New York Public Affairs article “Tower of Basel.”

Under the agreements, the IMF would pay attention to exchange rates and lend reserve currencies to nations in debt. A new global currency exchange system was created where all currencies were linked to the US dollar and, in exchange, the US agreed to fix the price of gold at $35 an ounce. All of this meant that there would be no need for currency warfare or manipulation, – proving a threat to the BIS, because if the IMF was to be the center of the new global financial order, what need any longer was there for a BIS?

Wilhelm Keilhau, a member of the Norwegian delegation, even went so far as to propose a notion to eliminate the BIS. However, several other European nations noted the bank’s importance to finances on the European continent, and soon the move to eliminate it was rescinded.

Matters remained stable until the 1960s and 70s, but as the Bretton Woods system of “free currency convertibility at fixed exchange rates” coincided with a massive increase of international trade and economic growth, cracks began to show. The British currency was weak and, more importantly, the gold parity on the US dollar was straining due to “an insufficient supply of gold and from the weakening of the US balance of payments.” The Bretton Woods system collapsed in August of 1971, but the system of “managed floating” was created in its place, which allowed for flexibility of exchange rates within certain parameters. Later in the 1970s, the situation became still more dire with the creation of OPEC and the subsequent rise in oil prices, along with the Herstatt Bank failure.

The Herstatt Bank was central for processing foreign exchange orders, but German regulators withdrew the bank’s license forcing the bank to close up shop on June 26, 1974. Meanwhile, “it was still morning in New York, where Herstatt’s counterparties were expecting to receive dollars in exchange for Deutsche marks they had delivered” and when Hersttat’s clearing bank Chase Manhattan refused to fulfill the orders by freezing the Herstatt account, it caused a chain of defaults. It was this problem that led to the creation, in conjunction with the G-10 countries and Switzerland, of the Basel Committee on Banking Supervision, whose goal was to set the global standard for bank regulation and to provide a forum for bank supervisory matters.

Yet this newly created stability was short-lived as well. Oil prices had quadrupled in November of 1973, leading to stagflation, an increase in balance of payment imbalances, and major shocks in international banking. The Euro-currency markets grew as they began to be utilized more and more by OPEC countries – and oil-producing nations invested in European money markets, greatly increasing the money of European banks, which they thus could lend.

The European Coal and Steel Community began loaning money to developing nations at a faster and faster pace, and while this was largely beneficial to the world economy at the start, “it also implied that the international banking system was faced with an increase in country risk,” as many of the countries receiving loans were also getting more and more into debt. This concerned the then-BIS economic advisor Alexandre Lamfalussy, who warned of a threat of a crisis specifically focused on credit, saying in a 1976 speech that from “[looking at] the continuous growth of credits, the spread of risks to a large number of countries, and the change in the nature of credits, I draw the conclusion that the problem of risks has become a very urgent one.”

The Bank for International Settlements (BIS) is an organization shrouded in mystery.

While its purpose has changed and evolved over the decades, the BIS has always been a club for central bankers –

 and in many ways it has aided some countries more than others. ##

The Bank for International Settlements (BIS) is an organization shrouded in mystery. This may be due mainly to the fact that the majority of people don’t even know of its existence. According to the BIS itself, the main purpose of the Bank is “to promote the cooperation of central banks and to provide additional facilities for international financial operations,” and to “act as trustee or agent in regard to international financial settlements entrusted to it under agreements of the parties concern.”

What this means is that the BIS simply enables central banks to work with one another. While its purpose has changed and evolved over the decades, the BIS has always been a club for central bankers – and in many ways it has aided some countries more than others. The Bank has a Board of Directors that “may have up to 21 members, including six ex officio directors, comprising the central bank Governors of Belgium, France, Germany, Italy, the United Kingdom and the United States. Each ex officio member may appoint another member of the same nationality. Nine Governors of other member central banks may be elected to the Board.”

The BIS also has a management wing in the form of a General and Deputy General Manager, both of whom are responsible to the Board and supported by Executive, Finance, and Compliance and Operational Risk Committees. However, its purpose has changed and evolved over the decades, however, it has always been a club for central bankers, yet in many ways it can aid some countries more than others.

How the Bank of International Settlements (BIS) Started

The origin of the BIS is in the United States, specifically New York City. The individuals involved were international bankers who, despite past differences, “worked together to establish a world financial order that would incorporate the federal principle of the American central banking system.” Among them were figures like Owen D. Young, J. Pierpont Morgan, Thomas W. Lamont, S. Parker Gilbert, Gates W. McGarrah, and Jackson Reynolds, “who, in conjunction with the Federal Reserve Bank of New York, sought to extend the principle of central bank cooperation to the international sphere.”

Before delving further into the creation of the Bank and purpose it has served, and for whom, it’s wise to examine some of the more notable of these individuals to better understand why they got involved in the creation of an international bank.

Owen D. Young was already well placed for the US government; “with the cooperation of the American government and the support of GE, [he] organized and became chairman of the board of the Radio Corporation of America” and “in subsequent years he engineered a series of agreements with foreign companies that divided the world into radio zones and facilitated worldwide wireless communication.” Young had a strong belief that global radio service and broadcasting were important for the advancement of civilization. In 1922, he became chairman of General Electric, and along with GE President Gerard Swope, “urged closer business-government cooperation and corporate self-regulation under government supervision.”

During the 1920s, Young became involved in international diplomacy as the foreign affairs spokesman for the Democratic Party. At the behest of then-Secretary of State Charles Evan Hughes, Young and the banker Charles Dawes were recommended to the Allied Reparations Commission to deal with the breakdown in Germany’s reparations payments following World War I. The Commission resulted in the Dawes Plan, which allowed that “Germany’s annual reparation payments would be reduced, increasing over time as its economy improved; the full amount to be paid, however, was left undetermined. Economic policy making in Berlin would be reorganized under foreign supervision and a new currency, the Reichsmark, adopted.”

Young viewed improving the world financial structure as important to “the very survival of capitalism.” Furthermore, wrote Frank Costigliola in “The Other Side of Isolationism: The Establishment of the First World Bank, 1929-1930,” Young “sought rather the ‘economic integration’ of the world which would prepare the way for ‘political integration’ and lasting peace.”

John Pierpont Morgan, Jr. was already ensconced in the world of international banking, having inherited the JP Morgan Company from his father. During WWI, the House of Morgan worked hand-in-hand with the British and French governments, engaging in a number of tasks such as floating loans for the two countries, handling foreign exchange operations, and advising officials of each respective country.

Not only Young and Morgan, but each of the above mentioned individuals were heavily involved in politics and banking – and therefore had a personal interest in the creation of a global bank. The plan also fit into the US government’s own policies, writes Costigliola, as Washington wanted to “[keep] aloof from the political entanglements in Europe while safeguarding vital American interests by means of unofficial observers or participants.” The Federal Reserve was also interested in the creation of the BIS, as it would “[promote] both the ascendancy of New York City in world banking and the reconstruction of a stable and prosperous Europe able to absorb American exports.”

Thus, the idea of an international bank didn’t occur in a vacuum but rather, according to Beth A. Simmons, author of the article “Why Innovate? Founding the Bank for International Settlements,” its creation “was inextricably tied to the problem of German reparations in the context of Germany’s overall debt burden during the 1920s.” A slowdown in international lending to Germany began in 1928 as markets became extremely worried about the internal politics of the Weimar Republic. Due to the breakup of a center coalition government, and with the Social Democrats needing support from right-wing parties, the political situation began to fall apart as “government stability [was] threatened whenever budget debates exposed the basic social divide of unemployment insurance and increased industrial taxation on the one hand versus spending austerity and tax cuts on the other.”

Weimar’s budget problems came on the heels of the Reparations Commission determining that Germany’s total reparations came to $33 billion, which was twice the size of the country’s total economy in 1925. As long as foreign capital kept coming into Germany, things might have remained fine; but that situation changed in 1928. Between February 1929 and January 1930, negotiations were carried out to reschedule Germany’s reparations payments. “These negotiations were initiated by central bankers and private actors,” writes Simmons, “who were the first to link problems in the capital market with the need to reorganize Germany’s financial obligations.” Thus, it should come as no surprise that many of the individuals involved in creating the BIS were central bankers themselves, or engaged in international affairs and finance to some extent.

The idea for an international bank had already been explored to some extent by people like the economist John Maynard Keynes. But the idea for the bank truly took off during the Young Conference in 1929, when the Allies were attempting to exact Germany’s reparations debts for WWI. Belgian delegate Emile Franqui bought up the possibility of having a settlement organization to administer the reparations agreement, and the very next day, Hjalmar Schacht, president of the Reichsbank and chief German representative at the conference, presented a proposal to establish just such an organization.

The Bank for International Settlements would act as a lender to the German central bank in case the German currency weakened and the government found itself unable to make the reparations payment. In addition, it would give steps for how to proceed in the case of German default. According to Simmons, “if Germany did not resume payments within two years, the BIS would propose revisions collectively for the creditor governments (which would only go into effect with their approval)” and “the bank was responsible for surveillance and informing the creditor countries about economic and financial conditions in Germany.”

The US State Department had wanted a settlement to Germany’s reparations woes, as economic adviser Arthur N. Young observed that “a final reparations settlement [would] promote both political and economic stability in Europe, and thus tend to be of advantage to the United States.” But the US government as a whole didn’t want any type of linkage between reparations and war debts – due to the fact that, while each of the Allied nations were demanding reparations from Germany large enough to cover the country’s debts to the US, having such a linkage would mean that “Germany’s refusal or inability to pay that amount would put Washington in the position of having to agree to a debt reduction or bear the opprobrium and suffer the consequences of opening the door to financial chaos,” according to Costigliola.

However, several other countries had their own interests in stake in the creation of the BIS. French Prime Minister Raymond Poincare promised the French public that the reparations would cover the country’s debts to both the US and Britain, as well as cover the war damages. France was also interested in reaching an agreement on German debts, since they were developing trade interdependence with the Germans and stability was needed.

Britain also wanted to use the BIS as a means to ensure that the Germans would pay on their debts as scheduled. The Bank of England supported the creation of the BIS, wrote Simmons, “because of its potential role in stabilizing the position of the pound in the international monetary system. Britain’s relatively small gold reserves made it difficult to defend the pound without international monetary cooperation and the willingness of smaller powers to hold foreign exchange as reserves instead of gold.”

The meeting in Baden, Germany, in October of 1929 to draw up final plans for the BIS saw the heavy presence of US finance in the form of Melvin Traylor, from the First National Bank of Chicago, and Federick Reynolds, from the First National Bank of New York. There, the two men nominated Gates W. McGarrah, chairman of the board of the New York Reserve Bank, for the officer of BIS President. When the Bank of England leadership expressed anger, claiming the European public wouldn’t find the American domination of the Bank acceptable, they was effectively told that if they wanted American participation in the BIS, it would have to be on American terms. They agreed to appoint Pierre Quesnay of the Bank of France as the bank’s general manager, and the BIS was officially founded on May 17, 1930.

A Rocky Beginning

The role of the BIS quickly changed with the onset of the Great Depression, when it became unable to “play the role of lender of last resort, notwithstanding noteworthy attempts at organizing support credits for both the Austrian and German central banks in 1931.” Due to the Depression and Germany’s inability to pay, the issue of reparations went off the table. The crisis was further compounded when countries like Britain and the US began devaluing their currencies (i.e. printing more money). The BIS attempted numerous times to end the exchange rate instability by restoring the gold standard, and according the bank itself, “the BIS had little choice but to limit itself to undertaking banking transactions for the account of central banks and providing a forum for central bank governors to help them maintain contact.”

During the Second World War, all operations at the BIS were suspended. The situation again became dicey for the Bank once the guns stopped firing. Immediately after WWII, the global economic landscape had massively changed; a new system was needed, and in July of 1944 over 700 delegates from the Allied nations met at the Mount Washington Hotel in Bretton Woods, NH, for the United Nations Monetary and Financial Conference, which “agreed on the creation of the International Monetary Fund (IMF) and an International Bank for Reconstruction and Development (BRD), which became part of the World Bank,” writes Adam Lebor in his New York Public Affairs article “Tower of Basel.”

Under the agreements, the IMF would pay attention to exchange rates and lend reserve currencies to nations in debt. A new global currency exchange system was created where all currencies were linked to the US dollar and, in exchange, the US agreed to fix the price of gold at $35 an ounce. All of this meant that there would be no need for currency warfare or manipulation, – proving a threat to the BIS, because if the IMF was to be the center of the new global financial order, what need any longer was there for a BIS?

Wilhelm Keilhau, a member of the Norwegian delegation, even went so far as to propose a notion to eliminate the BIS. However, several other European nations noted the bank’s importance to finances on the European continent, and soon the move to eliminate it was rescinded.

Matters remained stable until the 1960s and 70s, but as the Bretton Woods system of “free currency convertibility at fixed exchange rates” coincided with a massive increase of international trade and economic growth, cracks began to show. The British currency was weak and, more importantly, the gold parity on the US dollar was straining due to “an insufficient supply of gold and from the weakening of the US balance of payments.” The Bretton Woods system collapsed in August of 1971, but the system of “managed floating” was created in its place, which allowed for flexibility of exchange rates within certain parameters. Later in the 1970s, the situation became still more dire with the creation of OPEC and the subsequent rise in oil prices, along with the Herstatt Bank failure.

The Herstatt Bank was central for processing foreign exchange orders, but German regulators withdrew the bank’s license forcing the bank to close up shop on June 26, 1974. Meanwhile, “it was still morning in New York, where Herstatt’s counterparties were expecting to receive dollars in exchange for Deutsche marks they had delivered” and when Hersttat’s clearing bank Chase Manhattan refused to fulfill the orders by freezing the Herstatt account, it caused a chain of defaults. It was this problem that led to the creation, in conjunction with the G-10 countries and Switzerland, of the Basel Committee on Banking Supervision, whose goal was to set the global standard for bank regulation and to provide a forum for bank supervisory matters.

Yet this newly created stability was short-lived as well. Oil prices had quadrupled in November of 1973, leading to stagflation, an increase in balance of payment imbalances, and major shocks in international banking. The Euro-currency markets grew as they began to be utilized more and more by OPEC countries – and oil-producing nations invested in European money markets, greatly increasing the money of European banks, which they thus could lend.

The European Coal and Steel Community began loaning money to developing nations at a faster and faster pace, and while this was largely beneficial to the world economy at the start, “it also implied that the international banking system was faced with an increase in country risk,” as many of the countries receiving loans were also getting more and more into debt. This concerned the then-BIS economic advisor Alexandre Lamfalussy, who warned of a threat of a crisis specifically focused on credit, saying in a 1976 speech that from “[looking at] the continuous growth of credits, the spread of risks to a large number of countries, and the change in the nature of credits, I draw the conclusion that the problem of risks has become a very urgent one.”

Devon Douglas-Bowers

Devon Douglas-Bowers is a Political Science major at Fairleigh Dickinson University. He runs a blog entitled, ‘What About Peace,’ and has contributed to Global Research. He is also on the External Advisory Group of The People’s Book Project.

Devon is currently undertaking a research project entitled, ‘The Prison Project,’ which seeks to expose the ‘prison industrial complex’ through an examination of the history of prisons, how they have changed over time, and the inherent dangers of their privatization.

His writings concern political happenings in the US and around the world, with analysis that aims for a critical, in-depth examination of events with the purpose of going beyond the headlines and getting to the heart of the issue.

The Mother Of All Central Banks Isn’t Happy

September 19, 2016 

https://www.finimize.com/wp/news/mother-central-banks-isnt-happy/

What's going on?

As we noted in our Weekly Preview, this is a huge week for central bankmeetings (the US and Japanese central banks both meet on Wednesday). So it’s particularly noteworthy to hear a stark warning from the world’s umbrella central bank: “central banks have been overburdened for far too long.” (tweet this)

What does this mean?

The Bank for International Settlements (BIS) is an international financial institution that acts as the bank for central banks (yes, even they need a bank…). In its most recent quarterly report, the BIS made some rather blunt assessments of market conditions as it called the recent rally “more stick than carrot, more push than pull, more frustration than joy.” It believes that markets have become dependent on central bank policies (e.g. historically low interest rates) and that new policies must be enacted by governments in order to create  “robust, balanced and sustainable” economic growth.

Why should I care?

The bigger picture: Like many central bankers, the BIS wants increased government spending and economic reform.
In a major report released in June, the BIS said governments in developed countries should increase government spending in the short-term in order to give the global economy a boost. It also said that it was even more important that “structural reforms” take place (things like being less reliant on borrowing to fuel economic growth and encouraging entrepreneurship and other activities that foster innovation).


For the markets: The warning is pretty darn clear.
Big, Swiss-based financial institutions are rarely so blunt: central banks are propelling markets and “it’s becoming increasingly evident that central banks have been overburdened for far too long.” Either someone else takes over, or the global economy is in trouble.

The Bank of International Settlements - BIS

https://www.bis.org/careers/offer.htm

Our mission is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.

Our recently launched medium-term strategy, Innovation BIS 2025, leverages technology and new collaboration channels to serve the central banking community in this fast-changing world.

In research and analysis, banking services and knowledge-sharing, we are continuously innovating to support our stakeholders in the pursuit of monetary and financial stability.

History of the Bank of International Settlements - BIS

https://www.bis.org/about/history_1foundation.htm

The Bank of International Settlements - BIS was established in 1930, the Bank for International Settlements is the oldest international financial institution. From its inception to the present day, the BIS has played a number of key roles in the global economy, from settling reparation payments imposed on Germany following the First World War, to serving central banks in their pursuit of monetary and financial stability. The timeline below outlines nearly 90 years of BIS history.

First_Building_of-the-BIS_1930-1977_The_Former_Hotel_Savoy_UNivers-at-Centralbahnstrasse-7-Basel-Switzerland_

Established in 1930, the BIS is owned by 60 central banks, representing countries from around the world that together account for about 95% of world GDP. Its head office is in Basel, Switzerland and it has two representative offices: in Hong Kong SAR and in Mexico City.

BIS foundation and crisis (1930-39)

The BIS  was created in 1930 at the Hague Conference. A convention respecting the establishment of the BIS was signed between Belgium, France, Germany, Italy, Japan and the United Kingdom on the one hand and Switzerland on the other.

History - foundation and crisis (1930-39)

Foundation of the BIS

The BIS was created in the context of the Young Plan, adopted on 20 January 1930 at the Hague Conference. A convention respecting the establishment of the BIS in Switzerland was signed on the same date between the governments of Belgium, France, Germany, Italy, Japan and the United Kingdom on the one hand and Switzerland on the other.

The Young Plan was intended to settle once and for all the question of reparation payments imposed on Germany (and to a lesser extent on other central European countries) by the Treaty of Versailles following the First World War. The BIS was set up to take over the functions previously performed by the Agent General for Reparations: managing the collection, administration and distribution of the annuities payable as reparations. The Bank's name is derived from this original role. 

Session_of-the-1929-30_Hague_Conference-at-which-the-Young_Plan-was-Adopted

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In addition, the BIS was appointed agent to the trustees and trustee, respectively, for the German government international loans of 1924 and 1930 (the so-called Dawes and Young Loans issued to help finance reparations). In execution of the Young Plan, the BIS reinvested part of the Young Loan proceeds in German bonds.

Finally, the BIS was tasked to promote central bank cooperation more generally.

The Great Depression

As a consequence of the Great Depression of the 1930s, the reparations issue quickly faded. The German financial and banking crisis of the summer of 1931 led first to a one-year moratorium on reparation payments (Hoover Moratorium of July 1931) and subsequently to their complete cancellation (Lausanne Agreement of July 1932).

With the reparations issue out of the way, the BIS focused its activities on the technical cooperation between central banks (including reserve management, foreign exchange transactions, international postal payments, gold deposit and swap facilities) and on providing a forum for regular meetings of central bank Governors and officials.

Of these meetings, the regular Board meeting weekends, which brought together the Governors of the main member central banks, were the most important (in the 1930s, the BIS Board consisted of the Governors and their alternates of the National Bank of Belgium, the Bank of France, the German Reichsbank, the Bank of Italy, the Netherlands Bank, the Swedish Riksbank, the Swiss National Bank and the Bank of England, as well as representatives for the Bank of Japan).

From early on, the BIS developed its own research in central banking and finance under the dynamic guidance of its first Economic Adviser, the Swede Per Jacobsson (1894-1963), and started collecting financial and banking statistics. The BIS research found its way into the Bank's Annual Report, which soon established itself as a leading publication in its field

History - the BIS during the Second World War (1939-48)

https://www.bis.org/about/history_2ww2.htm

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Declining business activity and controversial neutrality

In the late 1930s, effective international cooperation became more difficult because of the growing political and military tensions. During this period, the BIS was instrumental in shipping gold from Europe to the safety of New York, mostly on behalf of European central banks (more than 140 tonnes of gold were transported between June 1938 and June 1940).

With the declaration of war between Germany on the one hand and France and the United Kingdom on the other in September 1939, it was no longer possible for representatives of these belligerent countries to attend BIS meetings. Board members were nevertheless convinced that the BIS ought to be kept alive to assist in financial and monetary reconstruction after the war. The last prewar meeting of the Board of Directors took place in Basel in June 1939. After that further Board meetings were suspended for the duration of the war. 

The BIS adopted a neutrality declaration excluding banking operations that might benefit one belligerent party to the detriment of another, but decided to maintain its banking services to assist central banks and to fulfil the Bank's own obligations so far as was consistent with neutrality. The Bank's precarious position - having on its Board central bank representatives of countries that were at war with one another as well as of neutral countries, and being cut off from direct communications with many of its members - gave rise to a number of difficult decisions. The most controversial of these dated from before the war, when, in March 1939, the BIS decided to honour an order received from the Czechoslovak National Bank to transfer part of its gold reserves held in a BIS account at the Bank of England in London to a German Reichsbank account. The transfer order had been issued days after German troops had occupied Prague - as it later transpired, under duress.

From 1940 onward, the volume of BIS banking operations declined rapidly. However, throughout the war, the BIS continued to receive interest payments from the German Reichsbank in respect of the investments the BIS had made in German bonds back in 1930-31. The largest part of these interest payments were made in gold.

The legacy of the war

Investigations after the war revealed that the Reichsbank had used large quantities of gold stolen from central banks in the occupied territories to make wartime payments to a number of institutions including the Swiss National Bank and the BIS. This gold had been remelted at the Prussian mint to conceal its origin. In this manner, during the war, the BIS received 3.7 tonnes of gold from the Reichsbank which, it emerged from German records captured after the war, had originally been looted from the central banks of Belgium and the Netherlands. The BIS cooperated fully with the postwar investigations led by the Allied Tripartite Commission for the Restitution of Monetary Gold and returned 3.7 tonnes of gold to the Commission in 1948.

In July 1944, a United Nations conference met at Bretton Woods in the United States to discuss the postwar international monetary system. The Bretton Woods Conference adopted a resolution calling for the abolition of the BIS "at the earliest possible moment", because it considered that the BIS would have no useful role to play once the newly created World Bank and International Monetary Fund were operational. European central bankers held a different opinion, and successfully lobbied for maintaining the BIS. By early 1948, the BIS liquidation resolution had been put aside. It was understood that henceforth the BIS would focus foremost on European monetary and financial matters.

History - the BIS as a forum for European monetary cooperation (1947-93)

https://www.bis.org/about/history_3emu.htm

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Restoring multilateral payments and currency convertibility in Europe

Regular BIS Board meetings resumed in December 1946. In the aftermath of World War II, Europe's priority was stabilising the different national currencies before trade and foreign exchange restrictions could be gradually lifted.

When the Benelux countries, France and Italy concluded a first Agreement on Multilateral Monetary Compensation in November 1947, they turned to the BIS to act as the technical agent for this scheme. In September 1950, 18 European countries set up a European Payments Union (EPU) and appointed the BIS as its agent.

The goal of the EPU was to restore the free convertibility of European currencies in line with the Bretton Woods agreements. To achieve this, each country reported its bilateral trade deficits or surpluses with each of the other participating countries to the BIS on a monthly basis. The BIS then calculated the aggregate deficit or surplus of each country vis-à-vis the EPU as a whole. Initially, these deficits and surpluses did not have to be settled immediately, but were instead largely converted into debits and credits vis-à-vis the EPU. In that way, intra-European multilateral trade could be restored without putting undue pressure on the participating countries' currency positions and reserves. With time, the ratio of debits and credits granted by the EPU was gradually reduced. By the end of 1958, the EPU's goal was reached: European currencies achieved full current account convertibility, and the Union was dissolved.

In the 1960s, the BIS became involved in an entirely new chapter in European monetary cooperation. The 1958 Treaty of Rome, which created the European Economic Community (EEC), had called for closer coordination of monetary policies between the EEC member states. This was followed in 1964 by an EEC Council decision to create the Committee of the Governors of the Central Banks of the Member States of the European Economic Community ("Committee of Governors"). While the EEC Commission had wanted to see this committee based in Brussels, the Governors decided that it should meet at the BIS in Basel, as they were already meeting there regularly for the BIS Board meetings.

From 1964 until its dissolution at the end of 1993, the Committee of Governors met at the BIS, which also provided its secretariat. The European Monetary Cooperation Fund (1973) and the European Monetary System (1979) were operated from Basel, with the BIS providing the necessary technical support. In 1988-89 the Committee for the Study of Economic and Monetary Union, chaired by European Commission President Jacques Delors, convened in Basel and laid the technical groundwork for the European Council's decision to move towards full European monetary union, as approved by the 1992 Treaty of Maastricht.

With the implementation of the first phase of monetary union at the end of 1993, the Committee of Governors was replaced by the European Monetary Institute (EMI), which then moved from Basel to Frankfurt. In 1997, the EMI became the European Central Bank.

History - the BIS going global (1961- )

https://www.bis.org/about/history_4global.htm

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BIS_signing__Ceremony_Estabkishing_BIS_Representative_Office_Asia_7_Pacific_Hong_Kong_SAR_1998

BIS_Board_Meeting_Nov2002_MexicoCity_BIS_RepresentativeOffice_For_The_Americas

In support of the Bretton Woods system

The success of the European Payments Union in restoring currency convertibility in Europe in 1958 meant that the Bretton Woods system of freely convertible currencies at fixed exchange rates (based on the US dollar and gold) was finally operational throughout the western world. This system was supposed to be largely self-adjusting, with the IMF playing a global supporting and coordinating role. Nevertheless, a good deal of international cooperation was required to keep the Bretton Woods system running smoothly. 

The BIS played an important part in coordinating the response of the central banks to this challenge, mostly within the framework of the Group of Ten (G10, consisting of Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom and the United States, plus Switzerland as an associated member). From 1961, initiatives taken by the G10 central banks included the creation of a common Gold Pool to intervene in the private gold market (1961-68), the creation of a central banks' currency swaps network, and repeated joint currency support arrangements (for example, to shore up the pound sterling and the French franc). These measures helped to prolong the lifespan of the Bretton Woods system during a period of unprecedented economic growth (the "golden sixties"), but could not prevent its eventual demise. By the early 1970s, the value of the US dollar was in effect determined by the markets, marking the end of the fixed exchange rate regime and inaugurating the era of floating currencies.

In search of financial stability

The 1970s were characterised not only by floating exchange rates and high inflation, but also by the rapid growth of international financial markets and of cross-border money flows. As a result, financial stability issues came once again to the fore.

In 1974, the collapse of Bankhaus Herstatt in Germany and of Franklin National Bank in the United States highlighted the lack of efficient banking supervision of banks' international activities, and prompted the G10 central bank Governors to create the Basel Committee on Banking Supervision. The Latin American debt crisis of 1982 highlighted the danger of undercapitalised banks being over-exposed to sovereign risk. 

In 1988, the Basel Committee issued the Basel Capital Accord, introducing a credit risk measurement framework for internationally active banks that became a globally accepted standard. This Capital Accord has since been further refined in the Basel II (2004) and Basel III (2017) frameworks. Such standards aim to achieve a better and more transparent measurement of the various risks incurred by internationally active banks, limiting the possibility of contagion in case of a crisis and strengthening the global financial system overall.

Besides the Basel Committee, other BIS-based committees that have helped to promote monetary and financial stability are: the Markets Committee (since 1964), the Committee on the Global Financial System (CGFS, since 1971) and the Committee on Payment and Market Infrastructures (CPMI, since 1990).

With its economic, monetary and financial research, the BIS has continued to support the work of the Basel-based committees and of the central bank community more generally. The BIS has also developed into a hub for sharing statistical information among central banks, and for publishing statistics on global banking, securities, foreign exchange and derivatives markets. In 1999, the Financial Stability Institute (FSI) was created to promote dissemination of the work undertaken by the supervisory community, and to provide practical training to financial sector supervisors worldwide.

Given the BIS's increasingly global role since the 1960s, which was also reflected in the expansion of its banking business undertaken on behalf of a growing number of central banks, it had become clear by the early 1990s that the Bank's outreach and governance model had to evolve accordingly. From 1994 onward, membership of the BIS and of its Board of Directors was expanded in stages with the aim to include all systemically important emerging market economies. Private shareholding, a remnant from the BIS's foundation, was discontinued in 2001, with BIS shares being exclusively reserved for central banks (at 30 June 2018, 60 central banks worldwide were shareholding members of the BIS).

As an expression of its commitment to fostering global monetary and financial stability, the BIS has opened Representative Offices for Asia and the Pacific in Hong Kong SAR (1998) and for the Americas in Mexico City (2002).

History - the BIS in the new financial architecture (1997-)

https://www.bis.org/about/history_5new_fin_architecture.htm

BIS_Tower1_Basel_Switzerland_Owned-by_60_Member_CentralBanks_Making_UP-95%_World_GDP

Transforming the governance structure of the international financial system

The Asian crisis of 1997 and the Russian crisis of 1998 prompted further rethinking of the global financial architecture. In February 1999, the G7 Finance Ministers and Central Bank Governors created the Financial Stability Forum (FSF) - which became the Financial Stability Board (FSB) in 2009 - to coordinate at the international level the work of national financial authorities and international standard-setting bodies, and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability. BIS General Manager Andrew Crockett was appointed the first Chairperson of the FSF in a personal capacity (1999-2003) and the FSF's secretariat was based at the BIS in Basel. 

The outbreak of the global financial and banking crisis in 2007-08 accelerated the transformation of the governance structure of the international financial system. As a result, the G10, long the main organisational grouping in international financial policymaking (including at the BIS), was superseded by the G20 grouping of major advanced and emerging market economies. At the same time, the work carried out by the BIS, the IMF, the OECD and other organisations has become more integrated, not least thanks to the efforts of the FSB. Since the 1990s, the committees that meet at the BIS and the secretariats it hosts have all gone through this process of widening their membership and strengthening their cooperation with other international bodies and organisations, to remain globally representative.

A heightened emphasis on financial stability

The crisis that started in 2007-08 has had a major influence on BIS research and on the work of the Basel-based committees and secretariats. Even before that, BIS economists had issued warnings about the dangerous build-up of imbalances in the global financial system. The crisis has led to renewed and heightened emphasis on financial stability issues, particularly the need for a macroprudential approach to financial stability. The work of the Basel-based committees - the BCBS, CGFS, CPMI and Markets Committee - has been shaped by the need to address these challenges and has expanded accordingly.

Another focus has been on providing more timely and more relevant financial statistics. The BIS banking statistics have long provided a unique means of assessing key vulnerabilities. As part of continuous enhancement efforts, a central data hub was established at the BIS in 2012 to provide national supervisory authorities with improved data on the credit exposures of global systemically important banks.

Through these initiatives, the BIS aims to remain true to its historical and present mission, which is to serve the global central bank community, to foster cooperation between central banks and to promote monetary and financial stability. 

What the Bank of International Settlements offer to employees

Where perspectives meet

The BIS has a long tradition of welcoming staff from all over the world and you will work alongside colleagues from more than 60 different countries. We are not subject to nationality quotas and can hire in principle from anywhere in the world. We ensure that our salaries and benefits are competitive in the international market. Below is a brief outline of how your work and professional contribution will be rewarded.

For all staff

Competitive salary

The Bank's salary system seeks to facilitate the attraction, retention and motivation of high-quality staff. The Bank's salaries are targeted to be above the average salary in similar organisations, net of tax and after taking into account any relevant differences in cost of living.

In addition, the BIS offers a comprehensive benefits package, including:

Pension

A defined benefit pension system is in place. For staff leaving the Bank before being eligible for a BIS pension, a lump-sum indemnity is paid irrespective of the length of their employment at the Bank.

Health insurance

We have comprehensive health and accident insurance. The cover under this plan is worldwide and covers not only staff, but also their dependent family members.

Family allowances

To support those staff with a family, the BIS also offers a number of allowances. This includes the partial reimbursement of childcare costs for children under school age.

Work and life balance

We support staff in achieving a healthy work and life balance by offering family leave and flexible work arrangements. We also provide access to sports and leisure facilities.

Additional support for foreign nationals joining from abroad

We recognise that international job mobility comes with particular challenges and costs. Therefore the Bank provides a range of allowances to support your integration, including:

Schooling

Relocating your children at any phase in their education is a significant step, so choosing the right school is one of the most important decisions a family has to make when relocating. Switzerland's free public school system enjoys an excellent reputation. Although the curriculum is generally German-based, great effort is made to integrate children with different mother tongues.

In case you opt for one of the international schools in the Basel region, we reimburse an important portion of tuition fees for eligible staff.

Relocation and settling services

Together with our relocation partner, we offer comprehensive assistance at all stages of your relocation, including covering your removal expenses. Further, you will be supported in finding suitable housing, and in gaining familiarity with your new surroundings.

Partner support programme

We recognise that this will also be a very important move for your partner. An orientation programme is offered to partners with the aim of helping them to find employment and integrate locally.

Basel is home to the headquarters of several global pharmaceutical companies that also hire internationally. Commuting to a job in Zurich, Switzerland's principal financial centre, is also possible, with the journey being about one hour. Depending on your partner's profession, this may open up a range of opportunities.

Visa and permits

We will support you and your family in the process of applying for your work and residency permits as necessary.

Additional information

Fixed-term contract

All new staff members are recruited on a fixed-term basis without expectation either of any contract renewal or conversion. The contract may however be extended, or converted to an open-ended appointment at the end of the term, subject to organisational needs and individual performance.

Diversity

The BIS is fully committed to equal opportunity employment and strives for diversity among its staff. We particularly encourage applications from female candidates.