BIS – the Forum of Central Banks
the global financial system is a network of financial institutions that directly influence the world economy, with the support of major national central banks. among these is the bank for international settlements (bis), known as the “forum of central banks,” which sets standards for financial stability. alongside the bis and the world bank, which focus on financing development projects and poverty reduction, the international monetary fund (imf) stands as another major player in this global system.
the imf monitors the global economy of its 190 member countries and provides financial assistance to nations facing balance of payments crises, conditional on implementing strict economic reforms.
acting as the global financial “traffic policeman,” the imf aims to prevent financial crises and maintain the stability of the international monetary system.
in addition, the us federal reserve is the world’s most influential central bank, as changes in us interest rates directly impact global borrowing costs, capital flows, and exchange rates.
less influential are the european central bank, the people’s bank of china, the bank of japan, and the bank of england, which was once the most prominent of the central banks.
the bis is the world’s oldest international financial institution, with a rich and complex history. based in switzerland, it was founded in 1930 in the aftermath of world war i. the bis played a controversial role in managing german war reparations imposed on the defeated countries under the treaty of versailles.
this role became essential after the reparations negotiations showed remarkable progress without an institution to oversee the restructuring of german payments. initially, the bis’s purpose was very specific: to collect, administer, and distribute german war reparations.
following its initial success, the bank was assigned broader, more forward-looking responsibilities and became a trustee of international loans, along with its primary role of promoting cooperation among global central banks.
this sub-goal eventually became the bis’s permanent mission, supported by its commitment to neutrality, unique position, and ability to continue operating despite conflicts among global powers, and despite scandals involving its facilitation of laundering gold looted by the nazis from central banks of occupied countries, most notably czechoslovakia.
during the bretton woods era, the bis served as a tool for european monetary cooperation. its role became more defined following the collapse of that system in the early 1970s and the subsequent rise of cross-border global banking.
in 1974, the basel committee was established to develop prudential standards for banks, introducing comprehensive regulations primarily aimed at ensuring that banks maintain sufficient capital to absorb unexpected losses, thereby strengthening the stability of the global financial system.
the bis is now widely recognized as the “forum of central banks.” its historical evolution is reflected in its core functions - serving as a platform for cooperation among central bank governors and financial regulators worldwide. it is also a leading hub for research in global finance, banking, and monetary policy.
it offers financial services to central banks, including the management of foreign exchange reserves and other essential functions.
email: a.alsarraf@alqabas.com.kw
