The Bank for International Settlements was established as an international financial institution for central bank cooperation on 17 May 1930, following the First World War. Its primary purpose at the time was concerned with the reparation payments imposed on Germany by the Treaty of Versailles, which included the collection, administration and distribution of annuities payable as reparations (and hence the name "Bank for International Settlements").
As the need for its reparations function ceases, the BIS takes up a role of a banker to the central banks and other international financial organizations, and provides a forum for promoting international cooperation, dialogue, as well as policy analysis among central banks and within the international financial community. Furthermore, it also acts as a centre for economic and monetary research
Its head office is in Basel, Switzerland and there are two representative offices: in the Hong Kong Special Administrative Region of the People's Republic of China
2. Main Functions
The Bank for International Settlements (BIS) is an international organization which fosters monetary and financial cooperation and serves exclusively as a bank for central banks. Therefore, it does not accept deposits from, or provide financial services to, private individuals or corporate entities. The BIS fulfils its mandate by acting as:
2.1 A forum to promote discussion and policy analysis among central banks and within the international financial community
Bimonthly meetings of the Governors and other senior officials of the BIS member central banks to discuss monetary and financial matters are instrumental in pursuing this goal. The standing committees located at the BIS support central banks, and authorities in charge of financial stability more generally, by providing background analysis and policy recommendations. These committees also help formulate international standards and best practices on the relevant matters. The committees comprise:
2.2 A prime counterparty for central banks in their financial transactions and an agent or trustee in connection with international financial operations
The BIS offers a wide range of financial services to assist central banks and other official monetary institutions in the management of their foreign reserves. BIS financial services are provided out of two linked trading rooms: one at its Basel head office and the other at its office in Hong Kong SAR.
In addition to standard services such as sight/notice accounts and fixed-term deposits, the Bank has developed a range of more sophisticated financial products which central banks can actively trade with the BIS to increase the return on their foreign assets. The Bank also transacts foreign exchange and gold on behalf of its customers.
The BIS also offers a range of asset management services in sovereign securities or high-grade assets. These may be either a specific portfolio mandate negotiated between the BIS and a central bank or an open-end fund structure. Furthermore, the BIS extends short-term credits to central banks, usually on a collateralized basis, and coordinates emergency short-term lending to countries in financial crisis.
For more detailed information on the BIS banking products and services, please visit http://www.bis.org/banking/finserv.htm
2.3 A centre for economic and monetary research
The economic, monetary, financial and legal research of the BIS supports its meetings and the activities of the Basel-based committees. The BIS is also a hub for sharing statistical information amongst central banks, and for publishing statistics on global banking, securities, foreign exchange and derivatives markets.
3. Organization Structure
The three most important decision-making bodies within the Bank are: the General Meeting of member central banks, the Board of Directors (http://www.bis.org/about/board.htm) and the Management (http://www.bis.org/about/officials.htm) of the Bank. Decisions taken at each of these levels concern the running of the Bank and as such are mainly of an administrative and financial nature, related to its banking operations, the policies governing internal management of the BIS and the allocation of budgetary resources to the different business areas.
The BIS currently has 55 member central banks (http://www.bis.org/about/orggov.htm), all of which are entitled to be represented and vote in the General Meetings. Voting power is proportionate to the number of BIS shares issued to each country.
4. Relationship with Thailand
The Bank of Thailand initially held 3,000 shares in the BIS since 2000. In 2005, the BOT took up another 211 shares following the change in the BIS regulation requiring shares to be held only by central banks. The 3,211 shares held by the BOT represent approximately 0.6% of total ownership (547,125 shares of issued capital).
As a shareholder, representatives from the BOT are invited to attend regular meetings of Governors held every two months in Basel. These gatherings provide an opportunity for participants to discuss the world economy and financial market developments, and to exchange views on topical issues of central bank interest or concern. The main result of these meetings is an improved understanding by participants of the developments, challenges and policies affecting various countries and markets.
In addition, the BIS organizes frequent meetings of experts on monetary and financial stability issues as well as on more technical issues such as legal matters, reserve management, IT systems, internal audit and technical cooperation. Though targeted mostly at central banks, BIS meetings sometimes involve senior officials and experts from other financial market authorities, the academic community and market participants.
International Affairs Team Monentary Policy Gruop
Tel. 0-2283-5124 or 0-2356-7245