Bank for International Settlements
The Bank for International Settlements (BIS)
is the world’s oldest international financial institution. The body was established in 1930 in Basel, as a result of the Hague agreements. The purpose of the organization is to foster international monetary and financial cooperation and to serve as a bank for all central banks. Besides the head office in Basel, there are two representative offices located in Hong Kong and Mexico City. The Bank’s customers are solely central banks and international financial institutions, and hence the body does not provide services to private or corporate clients.
The Bank’s main goal is to guarantee transparency and predictability of monetary policies
among its 55 member central banks
. The organization executes two functions – regulates adequacy of capital and encourages transparency of reserve requirements.
The regulation of capital adequacy is conducted for the purpose of preventing overvaluation of capital and equity assets. The bank requires from central banks to keep their capital and asset ratio above a certain predetermined international threshold, thus minimizing the possibility of speculative lending, resulting from insufficient underlying capital as well as different liability rules among countries. The bank requirements` relate to two main capital categories – the so-called Tier I capital, which includes the stock’s book value plus all retained earnings, and the total capital which includes Tier I capital plus loan-loss reserves and the amount of subordinated debt. According to the requirements, the Tier I capital should stand at 4 percent or more of all risk-weighted assets. At the same time, the total capital should represent 8 or more percent of the assets. This division is done for the purpose of limiting the credit amount that the central banks may issue.
On the other hand, in order to make borrowing and bank deposits secure for people, banks should keep reserves. This precautionary measure arises from the banks’ necessity to insure liquidity and limited liability to all industries and regions. Standardization of reserve policy is more difficult to achieve for the BIS than regulation of capital requirements, because reserve requirements are significantly dependent on industry or region specifications.
The bank had been initially established as an institution that eases the money transfers for German reparation payments arising from World War I. The inaugural board of directors included two Nazi officers appointed directly by Adolph Hitler.
Past the war, the Bank became a controversial point of discussion between the US and British delegations at the conference in Breton-Woods, as the latter attempted to place a veto over the bank’s dissolution. During the World War II, the bank had been accused of helping Germans to acquire assets held by the occupied countries, and was recommended for liquidation by the UN Monetary and Financial Conference. However in 1945, Great Britain along with US President Harry Truman made a move to stop the dissolution.
The Bank has been a target of numerous allegations by different plurality groups such as anti-globalists, anti-capitalists, and conspiracy theorists, some of which portray the institution as a tool through which wealthy individuals control the world. The bank is managed by a Board of Directors, which appoints a General Manager to oversee and control the activities of the institution. From April 1st, 2009 the General Manager of the Bank is Mr. Jaime Caruana, who succeeded his predecessor Mr. Malcolm D. Knight.
As of 31.12.2007 the Bank’s total assets amounted to more than 410 billion USD, which also included 150 tones of gold.
From 2004 onwards, the Bank has begun publishing the organizational accounts with regard to the Special Drawing Rights, thus the Gold Franc became its account unit.
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