With immense please we are presenting “BANK FOR INTERNATIONAL
SETTLEMENTS” Project report as part of the curriculum of ‘PGDM’. We wish to
thank all the people who gave us unending support.
I express my profound thanks to Mr.Rahul Magan , project guide and all
those who have indirectly guided and helped us in preparation of this project.
I also like to extend our gratitude to all staff and our colleagues of College
of Management, who provided moral support, a conductive work environment
and the much-needed inspiration to conclude the project in time and a special
thanks to my friends who are integral part of the project.
Assistant General Manager
Deputy General Manager
Deputy Managing Director
Janata Bank Limited, Farmgate Corporate
Janata Bank Deposit and Pension Scheme
Savings Bank Account
Small and Medium Enterprises
Senior Principal Officer
Short Term Deposit
3. Executive Summary
The Bank for International Settlements (BIS) (in French, Banque des règlements
internationaux (BRI)) is an international organizations of central banks which
"fosters international monetary and financial cooperation and serves as a bank
for central banks”. As an international institution, it is not accountable to any
single national government.
The BIS carries out its work through subcommittees, the secretariats it hosts and
through an annual general meeting of all member banks. 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
As an organization of central banks, the BIS seeks to make monetary policy more
predictable and transparent among its 58 member central banks. While monetary
policy is determined by each sovereign nation, 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 58 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
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
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.
4. Registered offices of the BIS
The BIS maintains no office, branch, or affiliate other than those listed below.
(+41 61) 280 8080
(+41 61) 280 9100 and
(+41 61) 280 8100
Representative Office for Asia and the Pacific
78th floor, Two International Finance Centre
8 Finance Street, Central
Special Administrative Region of the People's Republic of China
5. About BIS
The mission of the Bank for International Settlements (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.
In broad outline, the BIS pursue its mission by:
promoting discussion and facilitating collaboration among central banks;
supporting dialogue with other authorities that are responsible for promoting financial stability;
conducting research on policy issues confronting central banks and financial supervisory
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 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 and in Mexico City.
Established on 17 May 1930, the BIS is the world's oldest international financial organization.
As its customers are central banks and international organizations, the BIS does not accept
deposits from, or provide financial services to, private individuals or corporate entities. The BIS
strongly advises caution against fraudulent schemes.
6. Organization and governance
The BIS's people
The BIS currently employs 647 staff from 54 countries.
All members of staff are required to behave in accordance with general principles laid down in
the staff code of conduct . The BIS Compliance Charter describes the guiding principles for
managing compliance at the Bank.
The governance of the Bank is determined by its Statutes, which were last revised in June 2005
following a review of the governance of the Bank by three leading independent legal experts.
The three most important decision-making bodies within the Bank are:
the General Meeting of member central banks
the Board of Directors
the Management 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 Bank's administrative and budgetary rules apply to the committees hosted by the BIS.
Other aspects of the committees' governance are the responsibility of the body to which each
7. General Meetings
The BIS currently has 60 member central banks, 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
in the country of each member represented at the meeting.
At the Annual General Meeting, key decisions by member central banks focus on distribution of
the dividend and profit, approval of the annual report and the accounts of the Bank,
adjustments in the allowances paid to Board members, and selection of the Bank's external
auditors. The Annual General Meeting is held in late June/early July.
Extraordinary General Meetings must be called in order to amend the Statutes of the Bank,
change its equity capital or liquidate the Bank.
Member central banks
Members are the central banks or monetary authorities of:
Algeria, Argentina, Australia, Austria, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada,
Chile, China, Colombia, Croatia, the Czech Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Hong Kong SAR, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy,
Japan, Korea, Latvia, Lithuania, Luxembourg, Macedonia (FYR), Malaysia, Mexico, the
Netherlands, New Zealand, Norway, Peru, the Philippines, Poland, Portugal, Romania, Russia,
Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland,
Thailand, Turkey, the United Arab Emirates, the United Kingdom and the United States, plus the
European Central Bank.
8. Board of Directors
The Board is responsible for determining the strategic and policy direction of the BIS,
supervising the management, and fulfilling the specific tasks given to it by the Bank's Statutes. It
meets at least six times a year.
Four advisory committees assist the Board in its work:
The Administrative Committee reviews key areas of the Bank's administration, such as budget and
expenditures, HR policies and IT. The Committee's Chairman is Jens Weidmann.
The Audit Committee meets with internal and external auditors, as well as with the compliance
unit. Inter alia, it examines matters related to the Bank's internal control systems and financial
reporting. The Committee is chaired by Luc Coene.
The Banking and Risk Management Committee reviews and assesses the Bank's financial
objectives, the business model for BIS banking operations, and the risk management frameworks
of the BIS. The Committee's Chairman is Stefan Ingves.
The Nomination Committee deals with the appointment of members of the BIS Executive
Committee and is chaired by the Board's Chairman, Christian Noyer.
The Board of Directors 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.
In addition, one member of the Economic Consultative Committee serves as observer to BIS
Board meetings, on a rotating basis. The observer participates in the Board's discussions and
may be a member of one or more of the four committees which assist the Board in its work.
The Board of Directors elects a Chairman from among its members for a three-year term and
may elect a Vice-Chairman.
The Board has adopted Codes of Conduct for members of the Board of Directors and for the
observer at meetings of the Board of Directors.
9. General Managers
April 2009 – present
Malcolm D. Knight
April 2003 – September 2008
Sir Andrew Crockett
United Kingdom January 1994 – March 2003
May 1985 – December 1993
1981 – May 1985
10. BIS activities
A meeting place for central banks
Currently more than 5,000 senior executives and officials from central banks and supervisory
agencies participate in meetings organized by the BIS every year.
The most important meetings held at the BIS are the regular meetings of Governors and senior
officials of member central banks. Held every two months in Basel, these gatherings provide an
opportunity for participants to discuss the world economy and financial markets, 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 or markets. An atmosphere of openness, frankness and
informality amongst participants is critical to the success of BIS meetings.
Other meetings of senior central bank officials focus on the conduct of monetary policy, the
surveillance of international financial markets and central bank governance issues.
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.
Research and statistics
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.
Research is carried out primarily by BIS staff, supplemented by visiting researchers from central
banks and the academic community. From time to time, the BIS organises special meetings and
conferences with central bank researchers and academics.
This research finds its way into the Bank's regular publications, such as the Annual
Report and Quarterly Review, and into its BIS Papers and Working Papers series, as well as
external publications such as professional journals.
Seminars and workshops
Through seminars and workshops organised by its Financial Stability Institute (FSI), the BIS
promotes dissemination of the work undertaken by the supervisory community. The FSI not
only familiarises financial sector supervisors worldwide with the recommendations of the Basel
Committee on Banking Supervision , but also provides practical training for senior participants.
Cooperation with regional central bank groupings also helps to make information about BIS
activities more widely known. This cooperation takes the form of participation in meetings by
regional central bank groups and the organisation of ad hoc joint meetings or workshops.
11. Banking services for central banks
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. Some 140 customers,
including various international financial institutions, currently make use of these services. BIS
financial services are provided out of two linked trading rooms: one at its Basel head office and
one at its office in Hong Kong SAR.
12. BIS History
The establishment of the BIS
The Bank for International Settlements was established in 1930. It is the world's oldest
international financial institution and remains the principal centre for international central bank
The BIS was established in the context of the Young Plan (1930), which dealt with the issue of
the reparation payments imposed on Germany by the Treaty of Versailles following the First
World War. The new bank was to take over the functions previously performed by the Agent
General for Reparations in Berlin: collection, administration and distribution of the annuities
payable as reparations. The Bank's name is derived from this original role. The BIS was also
created to act as a trustee for the Dawes and Young Loans (international loans issued to finance
reparations) and to promote central bank cooperation in general.
The reparations issue quickly faded, focusing the Bank's activities entirely on cooperation
among central banks and, increasingly, other agencies in pursuit of monetary and financial
The changing role of the BIS
Since 1930, central bank cooperation at the BIS has taken place through the regular meetings in
Basel of central bank Governors and experts from central banks and other agencies. In support
of this cooperation, the Bank has developed its own research in financial and monetary
economics and makes an important contribution to the collection, compilation and
dissemination of economic and financial statistics.
In the monetary policy field, cooperation at the BIS in the immediate aftermath of the Second
World War and until the early 1970s focused on implementing and defending the Bretton
Woods system. In the 1970s and 1980s, the focus was on managing cross-border capital flows
following the oil crises and the international debt crisis. The 1970s crisis also brought the issue
of regulatory supervision of internationally active banks to the fore, resulting in the 1988 Basel
Capital Accord and its "Basel II " revision of 2001-06. More recently, the issue of financial
stability in the wake of economic integration and globalisation, as highlighted by the 1997 Asian
crisis, has received a lot of attention.
Apart from fostering monetary policy cooperation, the BIS has always performed "traditional"
banking functions for the central bank community (eg gold and foreign exchange transactions),
as well as trustee and agency functions. The BIS was the agent for the European Payments
Union (EPU, 1950-58), helping the European currencies restore convertibility after the Second
World War. Similarly, the BIS has acted as the agent for various European exchange rate
arrangements, including the European Monetary System (EMS, 1979-94) which preceded the
move to a single currency.
13. Finally, the BIS has also provided or organised emergency financing to support the international
monetary system when needed. During the 1931-33 financial crisis, the BIS organised support
credits for both the Austrian and German central banks. In the 1960s, the BIS arranged special
support credits for the French franc (1968), and two so-called Group Arrangements (1966 and
1968) to support sterling. More recently, the BIS has provided finance in the context of IMF-led
stabilisation programmes (eg for Mexico in 1982 and Brazil in 1998).
The BIS archives are open to the public. Under the BIS open archive rules, all records relating to
the Bank's business and operational activities which are over 30 years old are available for
consultation, with the exception of a limited number of records.
The 1930s and 1940s
Despite the breakdown of the international
monetary system caused by the Great
Depression and growing political tensions in
the 1930s, central bank Governors continued
to meet in Basel each month up until the
beginning of the Second World War. Although
the scope for effective international
cooperation was limited during this period,
the BIS offered an environment in which
central bankers could maintain active contact
and exchange views.
Participants of the first BIS Annual General
Cartoon showing central bank Governors
parading at the 1933 London World
Economic Conference before conference
president Ramsay MacDonald. Members
14. of the BIS Management are depicted in the The Bank continued to offer a range of financial
services to central banks and quickly acquired a
solid reputation for economic research and analysis.
The Second World War
With the outbreak of war in 1939, it was no longer possible for representatives of belligerent
countries to attend BIS meetings, even in neutral Switzerland. But Board members were
convinced that the BIS needed to be kept alive to assist in financial and monetary
reconstruction after the war.
To provide for the Bank's survival, the Board decided to suspend all Board meetings for the
duration of the war. It also adopted a neutrality declaration excluding banking operations that
might benefit one belligerent party to the detriment of another. The BIS maintained its banking
services to assist central banks and fulfil the Bank's own obligations so far as was consistent
Wartime conditions and the constraints of the neutrality declaration
resulted in a rapid decline in BIS banking operations. Monthly
turnover plummeted to a small fraction of prewar activity.
Throughout the war, the BIS continued to collect interest payments
due by Germany in respect to the investments the BIS had made in
the German economy in 1930/31.
Investigations after the war revealed that the German 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. During
the war, the BIS received, by way of German interest payments, 3.7
Press clipping, 1940
tonnes of such gold which, it later emerged, had been taken from
the central banks of Belgium and the Netherlands. The BIS cooperated fully with the postwar
investigations and returned all this gold by 1948.
15. Postwar and Bretton Woods
The postwar period
The Bretton Woods Agreement of 1944 called for the abolition of the BIS. There was
widespread suspicion about BIS wartime activities and some felt that there was little scope for
the BIS to play a useful role within the Bretton Woods framework alongside the International
Monetary Fund (IMF) and the World Bank.
In reaction, central banks, particularly in Europe, came out
strongly in favour of keeping the BIS alive - it was, after all,
their institution, not an institution in the hands of
governments. The BIS's credibility was further restored by its
full cooperation with the investigation into the looted gold
issue and full restitution of all such gold found in its
It became apparent soon after the war that the BIS had an
important part to play in the financial reconstruction of
Europe. As East-West relations deteriorated into the cold
war, the BIS provided a valuable point of contact between
central bankers on both sides of the Iron Curtain.
The Bretton Woods era
Central bank cooperation at the BIS between the end of the
Second World War and the early 1970s focused on
Swedish economist Per Jacobsson
implementing and defending the Bretton Woods
international monetary system, which was based on freely
BIS Economic Adviser 1931-1956,
convertible currencies at fixed but adjustable exchange
Managing Director of the IMF
Courtesy of Öffentliche Bibliothek,
16. In the 1950s, as Agent of the European Payments Union (EPU), the BIS played a significant
technical role in helping European countries make their currencies fully convertible. After the
Second World War, foreign exchange controls were in place in all European countries. These
controls were a serious obstacle to free trade. The EPU was a mechanism designed to gradually
do away with these exchange restrictions and to make European currencies freely convertible
on the international markets. It was highly successful, so much so that at the end of 1958 full
convertibility was restored across Europe and the EPU was wound up.
After 1958, the Bretton Woods system of freely convertible currencies at fixed exchange rates
was fully operational. But it soon became apparent that it required a good deal of international
cooperation to keep it running smoothly. The BIS now began to play an important part in
coordinating crisis management among central banks, whenever the gold price, the position of
the reserve currencies (the dollar and the pound sterling) or other monetary imbalances
threatened to undermine the international monetary system. These efforts - Gold Pool, swaps
network, sterling support arrangements, etc - were coordinated at the BIS in the context of the
newly established Group of Ten (G10) They helped to prolong the lifespan of the Bretton
Woods system during a period of unprecedented economic growth, the "silver fifties" and the
"golden sixties", but could not prevent its eventual breakdown. By the early 1970s the value of
the dollar was in effect determined by the markets, marking the end of the Bretton Woods
system. Various attempts to restore the system of fixed exchange rates proved short-lived and
by 1973 the era of floating currencies had begun.
Despite this lack of enduring success, the efforts which took place over these years to manage
and sustain the Bretton Woods system established a lasting framework of institutionalised
cooperation among central banks. Much of this took place in the informal and discreet
environment of the BIS, enhancing its role as a forum for central bank cooperation.
17. Towards European Monetary Union
For more than 30 years the BIS was closely associated with the
process of European monetary integration, not only providing a
venue for discussions among European central bankers but also
contributing to the technical infrastructure for European
exchange rate arrangements.
In 1964, the Committee of Governors of the Central Banks of
the Member States of the European Economic Community
began to meet regularly at the BIS to discuss the coordination
and integration of monetary policy at EEC level. In the early
1970s, when the Bretton Woods system was breaking down,
Signing the European
the Committee of Governors agreed to put limits on exchange Monetary System agreement
rate fluctuations between participating European currencies as at the BIS, 13 March 1979
a first step towards closer integration (the so-called "Snake"). A
European Monetary Cooperation Fund was set up in 1973 to support the operation of the
"Snake" mechanism and the BIS was appointed Agent for it.
With the introduction of the European Monetary
System in 1979, these responsibilities were
significantly extended and the BIS continued to
fulfil them, at times in turbulent market conditions,
until the establishment of European monetary
Over time, the Committee of EEC central bank
Governors, supported by a BIS secretariat,
developed into a cohesive body for policy exchange
and coordination. In 1988/89 some of its members
served in a personal capacity on the Delors
Jean-Claude Trichet, President of the
Committee, which issued a report in 1989 setting
European Central Bank, 2005
out a model for an independent central bank
committed to price stability. Their recommendations decisively influenced the framework for
European economic and monetary union set out in the Maastricht Treaty of 1992.
18. The BIS and the pursuit of global financial stability
The growth and globalisation of financial markets during the final decades of the 20th century
shaped the nature of central bank cooperation at the BIS. The BIS has assisted - and continues
to assist - the pursuit of global monetary and financial stability in two main ways:
by providing emergency financial assistance to central banks in case of need; and
by supporting experts from national central banks and supervisory agencies in proposing
measures and developing standards aimed at strengthening the international financial
architecture, and in particular international banking supervision.
Central bank assistance
From its very first days, the BIS has acted as
an agent for the central banking community
in providing short-term emergency support,
helping to address financial crises threatening
the stability of the international financial
system as a whole.
Early on, during the financial crisis of 1931-33,
the BIS organised support credits for,
amongst others, the Austrian and German central banks. Later, in the 1960s, the BIS arranged
special support credits for the pound sterling, including two so-called Sterling Group
Arrangements, and for the French franc. More recently, the BIS has provided emergency
finance for IMF-led stabilisation programmes, eg for Mexico in 1982 and Brazil in 1998.
The BIS is able to make these large credits available very quickly thanks to the substantial
foreign exchange deposits its banking services attract from central bank customers worldwide.
In advancing funds to address a financial crisis, the BIS operates on behalf of a group of
participating central banks which provide the necessary backing and ultimate guarantee of
19. Banking supervision and financial stability
The growth of international financial markets and of cross-border money flows in the 1970s
highlighted the lack of efficient banking supervision on an international level. National banking
supervisory authorities basically regulated domestic banks and the domestic activities of
international banks, while the international activities of these banks were not always closely
supervised. The collapse in 1974 of Bankhaus Herstatt in Germany and of the Franklin National
Bank in the US prompted the G10 central bank Governors to set up the Basel Committee on
In 1988 this Committee issued the Basel
Capital Accord, introducing a credit risk
measurement framework for internationally
active banks that became a globally accepted
standard. A revision of this Capital Accord,
known as Basel II, is being implemented
worldwide. 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 infrastructure overall.
Besides the Basel Committee on Banking Supervision, other BIS-based committees that help
promote monetary and financial stability are: the Committee on the Global Financial System
(CGFS - since 1971), the Committee on Payment and Settlement Systems (CPSS - since 1990)
and the Markets Committee (since 1964).
With its economic, monetary and financial research, the BIS supports the work of these Baselbased committees and organisations. 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. 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 for financial sector supervisors worldwide.
20. The BIS's Basel buildings
Grand Hôtel ET Savoy Hôtel Univers 1930-77
The BIS originally rented the Grand Hôtel et Savoy
Hôtel Univers at Centralbahnstrasse 7, Basel for only
two years. As it turned out, the Bank remained there
until 1977, spreading out into offices in several
adjacent buildings as more space was needed.
The BIS briefly left these premises during the Second
World War. The Swiss authorities had made evacuation
plans for border areas such as Basel in the event of
invasion. In May 1940, as this threat from Germany
appeared imminent, the BIS moved its headquarters to Château d'Oex (Vaud), remaining there
until that October.
Eventually it became clear that the original premises
could no longer accommodate the Bank's expanding staff
and activities. Between 1966 and 1972 the BIS
progressively acquired the land upon which the Tower
stands today. In 1969 the Bank's architect, Martin
Burckhardt, submitted three designs for a new building to
the BIS Board of Directors from which they selected a
round tower, 82 metres in height comprising 24 storeys.
This design, however, was never implemented. The Basel
chapter of the Schweizer Heimatschutz (Swiss Heritage
Society) objected that the height of the proposed tower
would disturb Basel's historic skyline. The original design
had to be modified, reducing the height to 69.5 metres
and the number of floors above ground to 20. In a public
referendum in 1971, 69% of voters favoured the new design. The BIS opened for business in the
Tower in March 1977.
A substantial increase in the BIS’s activities, membership and staff has continued to put
pressure on office space. In 1997, an architectural competition for a possible redesign of the
Tower and other properties on the site was won by the Japanese firm Toyo Ito and Associates.
Plans for redeveloping the Tower site were not initiated, however, as a new opportunity arose
for resolving BIS office constraints with far less disruption to daily activities.
21. The Botta building
In 1998 UBS sold its building on Aeschenplatz, Basel, to
the BIS, together with the connected neo-baroque villa.
After extensive internal renovation, BIS banking, risk
control and IT services were transferred to the new
premises in 1999.
The building was designed by the renowned Swiss
architect Mario Botta for a competition held in 1986 to
develop new premises in Basel for UBS. His design
takes the form of a "Rundecke", a "rounded corner" set back from the street to avoid
dominating the airy and open Aeschenplatz. The building has six storeys above ground, hiding
another six below.
22. Basic Structure of the BIS
A. Decision-Making Bodies of the BIS
The BIS is governed by three decision-making bodies. The first decision-making body consists of
representatives, or Governors, of the fifty-five member central banks. The Governors hold
general meetings every two months to vote on key banking regulatory and governance issues.
The second governing body of the BIS is its Board of Directors. The Board determines the
strategic and policy direction of the bank. Board members include Governors of the central
banks of Belgium, France, Germany, Italy, and the United Kingdom, as well as the Chairman of
the Board of Governors of the U.S. Federal Reserve System. The BIS Governors may elect
additional, but not more than nine, Board members from other member central banks. The
Board elects a Chairman and Vice Chairman and meets at least six times a year. The third
decision-making body of the BIS is the Bank Management. The Bank Management carries out
the policies determined by the Board and oversees the bankís day-to-day activities. The
Management consists of a General Manager, who acts as the bankís chief executive officer,
department heads, other senior officials, and Chief Representatives from the two
B. Committees Under the BIS
The BIS governs several committees, most of which were formed by the Group of Ten, or G-10.
(The G-10 is actually a group of eleven industrialized nations—Belgium, Canada, France,
Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the
United States—that meet once a year to consult and cooperate on economic, monetary, and
financial matters.) Under the guidance of the BIS, these committees conduct analysis and
provide policy recommendations to support central banks and other agencies. This section
describes the four main committees under the BIS and how they work to further the BISí
overarching goals of ensuring international financial cooperation and stability.
23. 1. Basel Committee on Banking Supervision (BCBS)
Responding to the 1974 failure of two internationally active banks—Herstatt Bank in Germany
and Franklin National Bank in New York!=—central bank governors of the G-10 established the
BCBS in 1975. The BCBS, governed by the BIS, consists of senior representatives of bank
supervisory authorities and central banks from Belgium, Canada, France, Germany, Italy, Japan,
Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom, and the United
States. The main duty of the BCBS is to regulate capital adequacy of internationally active banks
and improve the quality of global banking supervision.
The BCBS formulated and published twenty-five Core Principles for Effective Banking
Supervision (Core Principles) in 1997. These principles were outlined under the topics of
Licensing and Structure, Prudential Regulations and Requirements, Methods of Ongoing Bank
Supervision, and Cross-Border Banking. The main impetus for issuing these proposals was to
ensure that all countries were implementing banking supervision techniques used by developed
countries. Due to an increase in cross-border financial transactions, the BCBS realized a need to
revise its Core Principles. Therefore, the BCBS published revised Core Principles in October
2006, which gave more focus on cross-border issues and sound risk management and corporate
In addition to the Core Principles, the BCBS has also focused on creating capital adequacy
guidelines for internationally active banks. The amount a bank holds as ìcapitalî is calculated by
subtracting the bankís liabilities from its assets. The term ìcapital adequacyî refers to the level
of capital banks must hold in regards to riskiness and liquidity of some of its assets. The BCBS
published its first set of capital adequacy guidelines, known as Basel I, in 1998. Basel I was
developed to calculate the capital adequacy of internationally active banks in relation to credit
risk (the risk debtors will not fulfill their obligations repay their loans). However, Basel I had its
disadvantages. One major complaint about Basel I was that it failed to sufficiently measure
risks, since the scheme only took into account credit risks and failed to consider other risks,
such as operational risks (risks associated with inadequate or failed internal processes, people,
or systems). Therefore, with input from significant players in the international financial
community, the BCBS revised its framework and published Basel II in June 2006. The goal in
enacting Basel II was to establish an international banking framework to further a sound, stable
international banking system by making sure that banks enjoy consistent capital adequacy
regulation, calculated to measure all associated risks. The BCBS also enacted Basel II to ensure
that minimum capital requirements would not create inequality among internationally active
banks. Basel II is currently in various implementation stages in several countries around the
world. In a newsletter published in May 2007, the BCBS reported that a ìsignificant numberî of
countries have implemented the Basel II Framework and several other nations have established
the proper infrastructure and are preparing for implementation in 2008 and 2009.
24. 2. Committee on the Global Financial System (CGFS)
The CGFS was established in 1971 as the Euro-currency Standing Committee. The committeeís
original mandate was to monitor international banking markets. However, due to an increase in
off-shore banking activities, the G-10 Governors changed its name and revised its mandate in
1999. Now, the CGFS is charged with identifying and assessing potential sources of stress in
global financial markets. The committee also works to further the understanding of the
structural underpinnings of financial markets by publishing many papers on a variety of topics,
such as monetary policy. Additionally, the committee works to improve the functionality and
stability of financial markets. The CGFS hosts quarterly discussions with its member nations and
publishes numerous reports on important issues.
3. Committee on Payment and Settlement Systems (CPSS)
The CPSS was created in 1990 as a forum for the central banks of G-10 nations to monitor and
analyze developments in payment systems and coordinate central banksí oversight functions
with regards to payment systems. In essence, the role of the CPSS is to promote sound and
efficient payment and settlement systems. The CPSS conducts detailed studies on payment and
settlement systems and publishes reports on its findings to help member countries develop the
most efficient payments systems. The CPSS has developed important standards, codes, and
best practices for the banking industry by its publications of Core Principles for Systematically
Important Payments Systems, Recommendations for Securities Settlement Systems, and
Recommendations for Central Counterparties.
4. Markets Committee
The Markets Committee was established in 1962 as the Committee on Gold and Foreign
Exchange with the creation of the Gold Pool—an effort to stabilize the price of gold. When the
Gold Pool collapsed in 1968, members continued to meet and the Markets Committee
developed as a result of those meetings. Over the last few decades, the committee has become
a forum for discussions about recent developments foreign exchange and other financial
markets, possible future trends, and implications current events have on the financial markets.
The Markets Committee meets during the bimonthly meetings of the BIS member central
25. Current Role of the BIS
With background on the structure of the BIS, you can better understand how the BIS functions
today. Its functions have greatly evolved since its early days of managing Germanys reparation
payments. In its current operations, the BIS focus on two main goals: (1) to foster international
monetary and financial cooperation; and (2) to maintain monetary and financial stability.
A. Fostering international monetary and financial cooperation
One of the bankís main duties is to foster international monetary and financial cooperation,
especially for its member central banks. In order to achieve this goal, the BIS operates in four
different ways, all of which are described below.
1. A forum to promote discussion and facilitate decision-making processes among central
banks and within the international financial community
The BIS holds regular meetings of the BIS Governors, central bank officials, and experts in
monetary and financial stability. The meetings of the Governors and senior officials of central
banks are held every two months at the BIS headquarters. These meetings facilitate discussions
regarding the world economy and financial markets. Through these meetings, the BIS creates a
forum for discussion that allows participants to share information and make policy decisions
that affect the international financial community as a whole. The bank also sponsors meetings
with experts in specific, often highly technical, financial issues. Such meeting topics have
included internal audit and technical cooperation and IT systems for the financial community.
2. A principal counterparty for central banks in their financial transactions
The BIS offers numerous financial services to over 140 customers, including central banks and
other international financial institutions. Such services include central banks investing their
global foreign exchange reserves (assets of central banks held in currencies other than their
nationís currency) with the BIS. Over the past few years, central banks have invested
approximately 6% of their foreign exchange reserves with the BIS. Additionally, the BIS offers
fixed-term deposits as well as other more complicated financial instruments, including money
market instruments, tradable instruments, and foreign exchange and gold services. The BIS also
offers asset management services, such as fixed income portfolios invested in government
bonds or high-grade credit securities, to central banks. Moreover, the BIS offers short-term
credits to central banks either secured with collateral or, in times of financial crises, secured by
a group of supporting central banks.
26. 3. A center for economic and monetary research on important global issues
The BIS has a broad research agenda, which is divided into the following six key areas: (1)
monetary and financial stability; (2) monetary policy and exchange rates; (3) financial
institutions and infrastructure; (4) financial markets; (5) central bank governance; and (6) legal
issues. The purpose of BIS research is to assist with the Governorsí meetings and help BIS
committees focus their work on the important issues affecting the international banking
To disseminate its research, the BIS distributes regular publications in the form of Annual
Reports, Quarterly Reviews, BIS Papers, and Working Papers. The BIS distributes its Annual
Report in June of each year and each report covers several topics, such as issues in emerging
market economies, foreign exchange markets, and the global economy. Additionally, the BIS
distributes Quarterly Reviews, which provide detailed information on developments in
international banking and financial markets within a three-month time span. The BIS Papers are
documents prepared for various meetings within the BIS; accordingly, topics vary widely. For
example, Evolving banking systems in Latin American and the Caribbean: challenges and
implications for monetary policy and financial stability was published in February 2007 in
preparation for a BIS-hosted meeting of central bankers in Kingston, Jamaica. The purpose of
this paper was to highlight the ways in which smaller economies of Latin America and the
Caribbean have dealt with the changes in their financial systems during the previous decade.
Like the BIS Papers, Working Papers cover a variety of topics. However, the Working Papers
differ in that they are written by BIS economists and do not necessarily represent the views of
the BIS as a whole, just those of the authors.
In addition to its publications, the BIS also disseminates its research via seminars and
workshops organized by the BISí Financial Stability Institute (FSI). The main role of the FSI is to
help supervisors in the financial community strengthen their financial systems. The FSI sponsors
over fifty events each year. For example, the FSI conducts seminars in Switzerland to educate
senior supervisors on the leading concepts of financial sector supervision and regulation.
Additionally, the FSI works with regional financial supervisor groups to conduct regional
seminars on various topics geared toward specific financial issues in the region. These seminars
are especially helpful to the banking systems of emerging nations. One such regional event was
the FSI-sponsored seminar on Practical Skills in Risk-Based Supervision in Cairo for supervisors
in the Arab Monetary Fund.
27. 4. An agent or trustee in connection with selected international financial operations
The BIS often assists in the execution of various international financial agreements. For
example, the BIS acted as the agent for the European Currency Union Clearing and Settlement
System from 1986 until 1998. Additionally, the BIS assumed responsibilities in rescheduling
Brazilian external debt during the countryís financial crisis of 1994. During the Brazilian financial
crisis, the BIS served as collateral agent to hold and invest bonds in U.S. dollars issued by Brazil
under its rescheduling agreements.
B. The BIS Plays an Important Role in Maintaining Global Monetary and Financial Stability
1. The BIS provides emergency financial assistance when needed
One way in which the BIS helps to stabilize the monetary and financial markets is to provide
emergency financial assistance to central banks in times of need. The BIS accomplishes this by
working very closely with the IMF, which is charged with assisting countries in financial crises by
making short-term loans to the governments in need. While the IMF focuses on the financial
health of the country as a whole, the focus of the BIS is narrow, focusing on an individual
countryís central banking operations. For the IMF to succeed in helping a nation out of a
financial crisis, the BIS must be present to oversee the nationís banking system and to
coordinate funding from other central banks.
For example, the BIS worked with the United States, Canada, and the IMF to collect an
estimated $48.8 billion to assist Mexico when its pesoís devaluation triggered a devastating
crisis during 1994-95. A portion of this $48.8 billion included a $10 billion short-term facility
raised by the BIS to help Mexico overcome its short-term liquidity crises. With the support of
several central banks, the BIS also funded one-half of a $12 billion swap facility, which was
designed to help Mexico get through its August 1995 presidential election. The
28. 2. The BIS supports standards and policies to strengthen the international financial
Another way the BIS works to stabilize the monetary and financial markets is by supporting
central banks and supervisory agencies by proposing measures and developing standards to
strengthen the international financial architecture. For example, the BISí support of the BCBS
was significant in the promulgation of the Core Principles and enacting Basel I and Basel II. The
BISí involvement and guidance to the other committees discussed above are further examples
of the BISí work to maintain international monetary and financial stability.
The BIS also works with other multilateral financial institutions in its endeavor to strengthen the
international financial community. The BIS works closely with the IMF, the World Bank, and the
regional development banks to create international standards in several areas including the
following: data dissemination; fiscal, monetary, and financial policy transparency; banking
regulation and supervision; securities and insurance regulation; accounting, auditing, and
bankruptcy; and corporate governance. For example, the BIS and the IMF worked with central
banks, financial agencies and other banks to create a Code of Good Practices on Transparency
in Monetary and Financial Policies.
Another example of the BISí cooperation with other multilateral financial institutions is its work
with the World Bank in formulating principles for international remittances. Remittances—
transfers of funds from immigrant workers in developed countries to their families still living in
their native developing nations—have increased significantly during the past decade. This
increase in remittances created a need for the development of principles to guide recipient
countries in order to improve the market for these transfers. Therefore, in January 2007, the
BIS and World Bank published a report that analyzed remittances and set forth five general
principles recipient countries should follow. According to the report, the principles abide by the
public policy concerns regarding remittances and strive to create a safe and efficient market for
29. Monetary & financial stability
Promoting monetary and financial stability is one key objective of the BIS. 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.
The committees are:
the Basel Committee on Banking Supervision
the Committee on the Global Financial System
the Committee on Payment and Settlement Systems
the Markets Committee
the Central Bank Governance Forum
the Irving Fisher Committee on Central Bank Statistics
The BIS secretariats prepare the meetings of the committees, draw up background papers and
reports and publish the work of the groups they serve.
In addition, several independent organisations involved in international cooperation in the area
of financial stability have their secretariats at the BIS:
the Financial Stability Board
the International Association of Insurance Supervisors
the International Association of Deposit Insurers.
30. Basel Committee on Banking Supervision
The Basel Committee on Banking Supervision provides a forum for regular cooperation on
banking supervisory matters. Its objective is to enhance understanding of key supervisory issues
and improve the quality of banking supervision worldwide.
The Committee's members come from Argentina, Australia, Belgium, Brazil, Canada, China,
France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico,
the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland,
Turkey, the United Kingdom and the United States. The present Chairman of the Committee is
Mr Stefan Ingves, Governor of Sveriges Riksbank.
Public consultation is an integral element of the Basel Committee's standard setting
process. See the list of the Committee's proposals that are currently open for comment.
International regulatory framework for banks (Basel III)
"Basel III" is a comprehensive set of reform measures, developed by the Basel Committee on
Banking Supervision, to strengthen the regulation, supervision and risk management of the
banking sector. These measures aim to:
improve the banking sector's ability to absorb shocks arising from financial and economic stress,
whatever the source
improve risk management and governance
strengthen banks' transparency and disclosures.
The reforms target:
bank-level, or microprudential, regulation, which will help raise the resilience of individual
banking institutions to periods of stress.
macroprudential, system wide risks that can build up across the banking sector as well as the
procyclical amplification of these risks over time.
These two approaches to supervision are complementary as greater resilience at the individual
bank level reduces the risk of system wide shocks.
31. Basel III is part of the Committee's continuous effort to enhance the banking regulatory
framework. It builds on the International Convergence of Capital Measurement and Capital
Standards document (Basel II).
Compilation of documents that form the global regulatory framework for capital and
liquidity (Basel II, Basel 2.5 and Basel III)
Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools
The Basel Committee has issued the full text of the revised Liquidity Coverage Ratio (LCR)
following endorsement on 6 January 2013 by its governing body - the Group of Central Bank
Governors and Heads of Supervision (GHOS). The LCR is an essential component of the Basel III
reforms, which are global regulatory standards on bank capital adequacy and liquidity endorsed
by the G20 Leaders.
The LCR is one of the Basel Committee's key reforms to strengthen global capital and liquidity
regulations with the goal of promoting a more resilient banking sector. The LCR promotes the
short-term resilience of a bank's liquidity risk profile. It does this by ensuring that a bank has an
adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into
cash easily and immediately in private markets to meet its liquidity needs for a 30 calendar day
liquidity stress scenario. It will improve the banking sector's ability to absorb shocks arising
from financial and economic stress, whatever the source, thus reducing the risk of spillover
from the financial sector to the real economy.
32. The LCR was first published in December 2010. At that time, the Basel Committee put in place a
rigorous process to review the standard and its implications for financial markets, credit
extension and economic growth. It committed to address unintended consequences as
The revisions to the LCR incorporate amendments to the definition of high-quality liquid assets
(HQLA) and net cash outflows. In addition, the Basel Committee has agreed a revised timetable
for phase-in of the standard and additional text to give effect to the Committee's intention for
the stock of liquid assets to be used in times of stress. The changes to the definition of the LCR,
developed and agreed by the Basel Committee over the past two years, include an expansion in
the range of assets eligible as HQLA and some refinements to the assumed inflow and outflow
rates to better reflect actual experience in times of stress.
Once the LCR has been fully implemented, its 100% threshold will be a minimum requirement
in normal times. During a period of stress, banks would be expected to use their pool of liquid
assets, thereby temporarily falling below the minimum requirement. The GHOS agreed that the
LCR should be subject to phase-in arrangements which align with those that apply to the Basel
III capital adequacy requirements.
Specifically, the LCR will be introduced as planned on 1 January 2015, but the minimum
requirement will begin at 60%, rising in equal annual steps of 10 percentage points to reach
100% on 1 January 2019. This graduated approach is designed to ensure that the LCR can be
introduced without disruption to the orderly strengthening of banking systems or the ongoing
financing of economic activity.
Minimum LCR requirement
The GHOS agreed that, during periods of stress it would be entirely appropriate for banks to use
their stock of HQLA, thereby falling below the minimum. Moreover, it is the responsibility of
bank supervisors to give guidance on usability according to circumstances.
The GHOS also agreed that, since deposits with central banks are the most - indeed, in some
cases, the only - reliable form of liquidity, the interaction between the LCR and the provision of
central bank facilities is critically important. The Committee will therefore continue to work on
this issue over the course of 2013.
33. Mervyn King, Chairman of the GHOS and Governor of the Bank of England, said, "The Liquidity
Coverage Ratio is a key component of the Basel III framework. The agreement reached today is
a very significant achievement. For the first time in regulatory history, we have a truly global
minimum standard for bank liquidity. Importantly, introducing a phased timetable for the
introduction of the LCR, and reaffirming that a bank's stock of liquid assets are usable in times
of stress, will ensure that the new liquidity standard will in no way hinder the ability of the
global banking system to finance a recovery."
Committee on the Global Financial System
The Committee on the Global Financial System (CGFS), which is chaired by William C
Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New
York, monitors developments in global financial markets for central bank Governors.
The Committee has a mandate to identify and assess potential sources of stress in global
financial markets, to further the understanding of the structural underpinnings of financial
markets, and to promote improvements to the functioning and stability of these markets. It
fulfils this mandate by way of regular monitoring discussions among CGFS members, through
coordinated longer-term efforts, including working groups involving central bank staff, and
through the various reports that the CGFS publishes. The CGFS also oversees the collection of
the BIS international banking and financial statistics.
The CGFS, formerly known as the Euro-currency Standing Committee, was established in 1971
with a mandate to monitor international banking markets. Its initial focus was on the monetary
policy implications of the rapid growth of off-shore deposit and lending markets, but attention
increasingly shifted to financial stability questions and to broader issues related to structural
change in the financial system. Reflecting this change in focus, the G10 Governors decided on 8
February 1999 to rename the Committee and to revise its mandate. As of January 2010, the
Chairman of the CGFS reports to the Global Economy Meeting, which comprises a group of 31
central bank Governors as members.
Fact sheet: Committee on the Global Financial System
The Committee on the Global Financial System is a central bank forum for the monitoring and
examination of broad issues relating to financial markets and systems. It helps to elaborate
appropriate policy recommendations to support the central banks in the fulfilment of their
responsibilities for monetary and financial stability. In carrying out this task, the Committee
places particular emphasis on assisting central bank Governors in recognising, analysing and
responding to threats to the stability of financial markets and the global financial system.
Members are deputy governors, other senior officials of central banks, and the Economic
Adviser of the BIS. Member institutions are:
Reserve Bank of Australia
Bank of Korea
National Bank of Belgium
Central Bank of Luxembourg
Central Bank of Brazil
Bank of Mexico
Bank of Canada
People's Bank of China
Monetary Authority of Singapore
European Central Bank
Bank of Spain
Bank of France
Swiss National Bank
Hong Kong Monetary Authority
Bank of England
Reserve Bank of India
Board of Governors of the Federal Reserve System
Bank of Italy
Federal Reserve Bank of New York
Bank of Japan
35. Committee on Payment and Settlement Systems
The Committee on Payment and Settlement Systems (CPSS) contributes to strengthening the
financial market infrastructure through promoting sound and efficient payment, clearing and
The CPSS is a standard setting body for payment, clearing and securities settlement systems. It
also serves as a forum for central banks to monitor and analyse developments in domestic
payment, clearing and settlement systems as well as in cross-border and multicurrency
The CPSS undertakes specific studies in the field of payment and settlement systems at its own
discretion or at the request of the Governors of the Global Economy Meeting. Working groups
are set up as required.
Through the publication of the CPSS/IOSCO Principles for financial market infrastructures, which
replaces the three previous sets of international standards set out in the Core principles for
systemically important payment systems (CPSS, 2001); the Recommendations for securities
settlement systems (CPSS-IOSCO, 2001); and the Recommendations for central
counterparties (CPSS-IOSCO, 2004), the Committee has contributed to the set of standards,
codes and best practices that are deemed essential for strengthening the financial architecture
The Committee publishes various reports covering large-value funds transfer systems, securities
settlement systems, settlement mechanisms for foreign exchange transactions, clearing
arrangements for exchange traded and over-the-counter derivatives and retail payment
instruments, including electronic money. The 'Red Book' on payment, clearing and settlement
systems, which provides extensive information on the most important systems in the CPSS
countries, is periodically revised and a statistical update of the data it contains is published each
36. Irving Fisher Committee on Central Bank Statistics
The Irving Fisher Committee on Central Bank Statistics (IFC) is a forum of central bank
economists and statisticians, as well as others who want to participate in discussing statistical
issues of interest to central banks. The IFC is established and governed by the international
central banking community and operates under the auspices of the Bank for International
Settlements (BIS). It is associated with theInternational Statistical Institute (ISI).
The IFC has adopted the name of Irving Fisher, an internationally renowned economist and
statistician, for his work on economic measurement and many other topics related to monetary
and financial stability of interest to central banks. His wide-ranging contributions to economics
and statistics and his multi-disciplinary approach serve as an example for the IFC's objectives
Fact sheet - Irving Fisher Committee on Central Bank Statistics
The objective of the IFC is to promote the exchange of views amongst central bank economists,
statisticians and policy makers as well as others who want to participate in discussing statistical
issues of interest to central banks, including those relating to economic, monetary and financial
stability. The IFC in particular strives to strengthen the relationship between compilers of
statistics and the community of users and analysts of statistical information, both in and
outside central banks.
The IFC has four categories of members:
Full institutional members, comprise central banks or international and regional organisations
formally involved in central banking issues;
Associate institutional members, comprise central banks, central bank related institutions, or
international and regional organisations formally involved in central banking issues, which do not
wish to become full institutional members;
Associate individual members, consist of economic or statistical experts from public and private
sector organisations and from the academic community, including members from ISI sections and
committees. In order to be accepted as an associate individual member, a person should meet a
number of selection criteria. Applications for associate individual membership should be
addressed to the IFC Secretariat
Honorary members, are elected in recognition of their outstanding contributions to the work of
The IFC is currently chaired by Dato' Muhammad bin Ibrahim, the Central Bank of Malaysia. The
Committee is composed of the designated representatives of the full institutional members. It
elects the Executive which manages the affairs of the IFC in accordance with the Statutes and
the decisions and guidelines of the Committee.
The BIS provides the Secretariat of the Committee. Paul Van den Bergh, Assistant Head of
Statistics and Research Support, is the senior BIS official responsible for IFC matters. The
Secretariat is also supported by Christian Dembiermont and Claudia Huber.
The Financial Stability Institute (FSI)
The Bank for International Settlements and the Basel Committee on Banking Supervision jointly
created the Financial Stability Institute (FSI) in 1999 to assist financial sector supervisors around
the world in improving and strengthening their financial systems.
The FSI's objectives are to:
promote sound supervisory standards and practices globally, and to support full implementation
of these standards in all countries.
provide supervisors with the latest information on market products, practices and techniques to
help them adapt to rapid innovations in the financial sector.
help supervisors develop solutions to their multiple challenges by sharing experiences in seminars,
discussion forums and conferences.
assist supervisors in employing the practices and tools that will allow them to meet everyday
demands and tackle more ambitious goals.
The FSI achieves its objectives through the following main activities:
Events for financial sector supervisors such as conferences, high level meetings, and seminars held
in Switzerland and globally
FSI Connect, an online learning tool and information resource for financial sector supervisors
Publications such as occasional papers and a quarterly newsletter
38. Banking services for central banks
The BIS offers a wide range of financial services specifically designed to assist central banks and
other official monetary institutions in the management of their foreign exchange reserves.
Some 140 customers, including various international financial institutions, currently make use
of these services and on average, over the last few years, some 4% of global foreign exchange
reserves have been invested by central banks with the BIS. BIS financial services are provided
out of two linked trading rooms: one at its Basel head office and one at its office in Hong Kong
The Bank continually adapts its product range in order to respond more effectively to the
evolving needs of central banks. Besides 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.
In addition, the BIS offers a range of asset management services in sovereign securities or highgrade assets. These may be either a specific portfolio mandate negotiated between the BIS and
a central bank or an open-end fund structure - the BIS Investment Pool (BISIP) - allowing
customers to invest in a common pool of assets. The two Asian Bond Funds (ABF1 and ABF2)
are administered by the BIS under the BISIP umbrella: ABF1 is managed by the BIS and ABF2 by
a group of external fund managers.
The BIS extends short-term credits to central banks, usually on a collateralised basis. From time
to time, the BIS also coordinates emergency short-term lending to countries in financial crisis.
In these circumstances, the BIS advances funds on behalf of, and with the backing and
guarantee of, a group of supporting central banks.
The Bank's Statutes do not allow the Bank to open current accounts in the name of, or make
advances to, governments. The BIS does not accept deposits from, or generally provide
financial services to, private individuals or corporate entities.
39. Financial statements
The BIS publishes audited annual financial statements as at 31 March each year in its Annual
Report, which provides a comprehensive overview and analysis of the Bank's balance sheet and
profit and loss account, together with other financial, capital adequacy and risk management
disclosures in line with international accounting frameworks. It also publishes unaudited semiannual financial statements as at 30 September each year.
The BIS balance sheet amounted to SDR 212.0 billion at 31 March 2013, a decrease of SDR 43.7
billion since its financial year end in March 2012.
The size of the BIS balance sheet is in normal circumstances driven by placements from
customers. On 31 March 2013, customer placements (excluding repurchase agreements)
amounted to SDR 183.8 billion, compared with SDR 215.4 billion at the previous financial year
end in March 2012.
Around 90% of customer placements are denominated in currencies, with the remainder in
gold. Currency deposits decreased from SDR 195.8 billion at 31 March 2012 to SDR 166.2 billion
at end-March 2013. The share of currency placements denominated in US dollars was 75%,
whereas euro-denominated funds accounted for 8%. Gold deposits amounted to SDR 17.6
billion at 31 March 2013, a decrease of SDR 2.0 billion over the year.
The assets held by the BIS consist of government and quasi-government securities, reverse
repurchase agreements and investments with highly rated commercial banks of international
standing. In addition, the Bank owned 115 tonnes of fine gold at 31 March 2013. The Bank
manages its credit exposure in a prudent manner, with more than 94% of the Bank's credit
exposure rated A- or higher as at 31 March 2013.
Statement of Account
The Statement of Account gives a current overview of the Bank's assets, liabilities and equity. It
is produced monthly, as required by Article 49 of the Bank's Statutes.
40. About BIS statistics
The BIS international financial statistics are a unique source of information on various elements
of the global financial system. They include data on:
the cross-border lending and borrowing of internationally active banks in key financial centres,
including offshore centres (banking statistics)
issuing activity in international and domestic securities markets (securities statistics)
activity in over-the-counter and exchange-traded derivatives markets (derivatives
statistics and Triennial Survey)
effective exchange rate (EER) indices for 58 economies (effective exchange rates)
activity in the global foreign exchange markets (foreign exchange statistics)
external debt positions of individual countries based on BIS banking and securities statistics as
well as on data from other international organisations (external debt statistics)
payment and settlement systems in major financial centres (payment statistics)
residential property, commercial property and land price indices for 54 economies (property price
long series on credit to private non-financial sectors for 40 economies (statistics on credit to the
indicators developed to monitor global liquidity conditions (global liquidity indicators)
47. Release calendar of BIS statistics
Publication dates* (for data period shown in brackets)
April 2014 May 2014 June 2014
Effective exchange rates
Credit to private sector
Data are released no later than the specified date.
48. Debt securities statistics
International debt securities for Q3 2013, and domestic and total debt securities for Q2 2013,
were released on 8 December 2013.
Statistics on signed international syndicated credit facilities have been discontinued.
The BIS debt securities statistics are harmonized with the recommendations in Part 1
of the Handbook on Securities Statistics, which sets out an internationally agreed framework for
classifying debt securities issues. The data are published quarterly, and their compilation is
explained in an article in the December 2012 BIS Quarterly Review.
The BIS compiles and publishes three sets of statistics on derivatives markets:
notional amounts outstanding and gross market values of OTC derivatives, from the semiannual
survey and Triennial Survey,
turnover of OTC derivatives, from the Triennial Survey, and
turnover and open interest of exchange-traded derivatives, from commercial data sources
The objective of the semiannual survey is to obtain comprehensive and internationally
consistent information on the size and structure of the largest OTC derivatives markets. They
provide data on notional amounts outstanding and gross market values and permit the
evolution of particular market segments to be monitored. In conjunction with the banking and
securities statistics, they offer a more comprehensive picture of activity in global financial
markets as well.
Following the initiative from the Committee on the Global Financial System (CGFS), central
banks of the G10 countries started in June 1998 reporting to the BIS semiannual OTC
derivatives statistics on forwards, swaps and options of foreign exchange, interest rate, equity
and commodity derivatives. As of end-June 2004, the BIS also releases statistics on
concentration measures, back to June 1998. The data include concentration measures for
foreign exchange, interest rate and equity-linked derivatives. Finally, as of end-December 2004
the BIS releases semiannual data on credit default swaps (CDS) including notional amounts
outstanding and gross market values for single- and multi-name instruments. Additional
information on CDS by counterparty, sector and rating has been made available as of December
As of end-June 2010 more granular information is published on CDS counterparties (eg CCPs,
SPVs and Hedge Funds as well as on Index products in the multi-name CDS instruments).
49. BIS effective exchange rate indices
The BIS effective exchange rate (EER) indices now cover 61 economies (including individual euro
area countries and, separately, the euro area as an entity). The most recent weights are based
on trade in 2008-10 and the indices' base year is 2010.
Two basket compositions are available:
Broad indices comprising 61 economies, with data from 1994
Narrow indices comprising 27 economies, with data from 1964
Nominal EERs are calculated as geometric weighted averages of bilateral exchange rates. Real
EERs are the same weighted averages of bilateral exchange rates adjusted by relative consumer
prices. The weighting pattern is time-varying, and the most recent weights are based on trade in
2008-10 (see broad and narrow weights). The EER indices are available as monthly averages.
Joint BIS-IMF-OECD-World Bank statistics on external debt
The BIS banking and securities market statistics are an important element in the Joint BIS-IMFOECD-World Bank statistics on external debt. These include quarterly data from creditor and
market sources available from the four participating international organizations. Although the
joint statistics do not provide a fully comprehensive and consistent measure of total external
debt in each country, they bring together timely and international comparative data in this
area. They also provide a breakdown by instrument and, importantly, show measures of shortterm debt not easily available from other sources.
The data are available from a joint website in the format of tables and an online database. The
four international organizations have improved the debt statistics, which are provided, together
with external debt data published by national sources, through an electronic joint external debt
Payment and settlement systems are a core element of the financial infrastructure at the
national as well as the international level. TheCommittee on Payment and Settlement
Systems periodically publishes reference works on payment arrangements in various countries,
widely known as Red Books. The Red Book refers to the publication on Payment and settlement
systems in selected countries – the CPSS countries. The statistics included in the Red Book are
updated yearly and published separately.
The statistics include indicators of retail payment systems and payment instruments as well as
of wholesale systems used amongst banks. Moreover, they include data on trading platforms,
clearing houses and settlement systems for securities as well as on the systems used to perform
cross-border transactions. All data are national data collected by the central banks participating
in the exercise.
50. Property price statistics
The property price statistics bring together data from different countries. The BIS, with the
assistance of its member central banks, 1 has obtained approval of various national data
providers to disseminate the statistics as long as the original national sources are clearly
indicated. The sources and any relevant disclaimers are listed separately (sources of data).
Copyright in these data must be honored.
The property price statistics currently include data from 54 countries, and are available at
different frequencies. The data differ significantly from country to country, for instance in terms
of type of property, area covered, property vintage, priced unit, detailed compilation methods
and seasonal adjustment. This reflects two facts. Firstly, that the processes associated with
buying and selling a property and hence data available, vary between countries and secondly,
that there are currently no specific international standards for property price statistics.
However, Eurostat has is taking the lead in drafting a Handbook on Residential Property Price
Indices under the aegis of the Inter-Secretariat Working Group on Price Statistics. This
handbook will give recommendations on best practice for compiling residential property price
indices and will present these in the context of the different user needs for such indices. A draft
of the Handbook is available for public comment. The Handbook builds on work undertaken at
a number of international meetings over recent years to identify the requirements for
improved data on property prices from an economic, monetary and financial stability
Sources of data
Austrian National Bank
Australian Bureau of Statistics
· Federal Public Service, Directorate General Statistics and Economic
· STADIM (Study and Advice in Real Estate)
National Statistics Institute
Banco Central do Brasil
Wüest und Partner
51. CN China
National Bureau of Statistics of China
Central Bank of Cyprus
CZ Czech Republic
Czech Statistical Office
Deutsche Bundesbank, based on data provided by BulwienGesa AG
Statistiches Bundesamt, VDPResearch
Bank of Spain
· National Institute of Statistics and Economic Studies
· Ministère de l'Equipement (Ministère de l'Écologie, de l'Énergie, du
Développement durable et de la Mer (Meeddm))
· Fédération Nationale de l'Immobilier
GB United Kingdom
· Series M:GB:0:1:0:2:0:0 and Q:GB:3:1:0:2:0:0: Halifax (original series
IUMHXPU and IUQGLHXPU)
· Series Q:GB:0:1:2:1:0:0, M:GB:0:1:0:1:0:0 and Q:GB:0:1:0:1:0:0: - Office for
National Statistics (original series WMPS and WMPQ). It may be used if the
credit "© Crown copyright 2008 Land Registry" is included with the data
Bank of Greece
HK Hong Kong SAR
Census and Statistics Department
Croatian National Bank
· Hungarian Central Statistical Office
· Magyar Nemzeti Bank
· Series Q:IE:0:1:1:3:0:0, Q:IE:2:1:1:3:0:0, Q:IE:1:1:2:3:0:0 and
Q:IE:2:1:2:3:0:0: Department of the Environment, Heritage and Local
· Series M:IE:0:1:0:1:0:0, M:IE:0:2:1:1:0:0, M:IE:0:8:1:1:0:0, M:IE:1:1:0:1:0:0,
M:IE:1:2:1:1:0:0, M:IE:2:1:0:1:0:0, M:IE:2:2:1:1:0:0 and M:IE:2:8:1:1:0:0 Central
The Central Bureau of Statistics
Icelandic Property Registry
Bank of Italy, based on data provided by Consulente Immobiliare, Bank of Italy
· Japan Real Estate Institute (JREI)
· Ministry of Land Infrastructure, Transport, Tourism
KR Korea, Republic of Kookmin Bank in Korea
Centre of Registers
STATEC (Institut National de la Statistique et des Etudes Economiques du
Grand-Duché du Luxembourg)
MK Macedonia, FYR
National Bank of the Republic of Macedonia
Central Bank of Malta
Sociedad Hipotecaria Federal, Valuation Databases
Central Bank of Malaysia
The Dutch Land Registry Office (Kadaster)
· Statistics Norway
· Norges Bank
· Norwegian Associatian of Real Estate Agents (NEF)
NZ New Zealand
Quotable Value Limited
53. PE Peru
Banco Central de Reserva
Colliers International Philippines
· Central Statistics Office
· National Bank of Poland
Inteligência de Imobiliário
Romania National Institutue of Statistics
Federal State Statistics Service
Urban Redevelopment Authority
Statistical Office of The Republic of Slovenia
SK Slovak Republic
National Bank of Slovakia
Bank of Thailand
Central Bank of the Republic of Turkey
US United States
· US Census Bureau
· Federal Housing Finance Agency
XM Euro area
European Central Bank
ZA South Africa
ABSA Group Limited
Disclaimer: Series can be used provided it is attributed as being sourced from
ABSA. The information has been derived from sources believed to be accurate
and reliable, is of a general nature only, does not constitute advice and may not
be applicable to all circumstances. Detailed advice should be obtained in
individual cases. No responsibility for any error, omission or loss sustained by
any person acting or refraining from acting as a result of the material is
accepted by Absa Group Limited and/or the authors of such material.
54. Long series on credit to private non-financial sectors
The BIS has constructed long series on credit to the private non-financial sector for 40
economies, both advanced and emerging. Credit is provided by domestic banks, all other
sectors of the economy and non-residents. The "private non-financial sector" includes nonfinancial corporations (both private-owned and public-owned), households and non-profit
institutions serving households as defined in the System of National Accounts 2008. The series
have quarterly frequency and capture the outstanding amount of credit at the end of the
reference quarter. In terms of financial instruments, credit covers loans and debt securities.
The BIS consulted its member central banks in this endeavor, and is very thankful for the
assistance received. 1 The BIS has made every reasonable effort to ensure that the long series
on credit are accurate, but no guarantees are made.
To encompass as long a period as possible, the construction of the long series required
combining data from several sources, such as the financial accounts by institutional sector, the
balance sheets of domestic banks, international banking statistics, and the balance sheets of
non-bank financial institutions. In turn, some of these statistics were compiled in past periods
according to earlier methodological frameworks (eg the System of National Accounts 1968,
which was replaced by the System of National Accounts 1993). Where original data were
published at annual frequency, the intra-annual observations were interpolated.
The combination of different sources and data from various methodological frameworks
resulted in breaks in the series. The BIS is therefore, in addition, publishing a second set of
series adjusted for breaks, which covers the same time span as the unadjusted series. The
break-adjusted series are the result of the BIS's own calculations, and were obtained by
adjusting levels through standard statistical techniques described in the special feature on the
long credit series of the March 2013 issue of the BIS Quarterly Review.
The data for each country include i) credit to private non-financial sectors by domestic banks
and ii) total credit to private non-financial sectors. Moreover, for most countries, total credit is
broken down into iii) credit to non-financial corporations and iv) credit to households and nonprofit institutions serving households.
58. Domestic Bank Credit of India
59. Offshore and Onshore market
Definition of 'Offshore'
1. Located or based outside of one's national boundaries. The term offshore is
used to describe foreign banks, corporations, investments and deposits. A
company may legitimately move offshore for the purpose of tax avoidance or to
enjoy relaxed regulations. Offshore financial institutions can also be used for illicit
purposes such as money laundering and tax evasion.
2. Offshore can also refer to oil and gas drilling operations that are conducted in
Many countries, territories and jurisdictions have offshore financial centers
(OFCs). These include well-known centers like Switzerland,Bermuda and
the Cayman Islands, and less-well-known centers likeMauritius, Dublin and Belize.
The level of regulatory standards and transparency differs widely among OFCs.
Supporters of OFCs argue that they improve the flow of capital and facilitate
international business transactions.
Definition of 'ONSHORE’
It is based in the home country , especially referring to a company that is
registered in the country in which it conducts most of its business , or to funds or
activities that are held or located in the home country
60. Differences between Onshore and Offshore Futures Markets
Diverse Trading Choices
Mainland China's (onshore) futures markets transact via electronic trading,
while futures markets outside mainland China (offshore) transact alternatively
through electronic trading or open outcry systems, or both methods
Types of Futures Contracts
Currently, onshore futures markets only have 25 types of futures contracts
available for trading, of which 24 are commodity futures and one is stock index
futures. There's no options trading. Offshore futures markets, on the other
hand, cover all types of products from major exchanges around the world,
including futures and options trading of metals, forex, indexes, energy,
agricultural products and interest rates, which can satisfy trading needs of
different investors with their various investment strategies.
Onshore futures markets are open only 4 hours a day. In contrast, offshore
futures markets allow nearly 24-hour trading each day because of the dual
trading systems including electronic trading and open outcry that are adopted
alternatively or simultaneously. This helps eliminate the risk of pricing gaps at
Rules of Position Opening and Squaring
Offshore futures markets only have buy and sell orders, and do not deploy the
creation and close-out orders that exist in onshore markets. If a customer
places transactions of the same underlying asset with contracts in the same
month but in an opposite direction, the system will automatically square and
close out the positions, instead of forming hedging positions. (London Metal
Exchange's swaps trading is an exception.)
Limit-Up and Limit-Down Mechanism
Offshore futures markets do not have a limit-up/limit-down mechanism in
place for most futures contracts. Some products carry a fuse mechanism,
which is triggered when the price hits a certain level. At that time, trading may
be either suspended and or is allowed to only fluctuate within a certain range.
(For details, please see transaction rules.)
61. Margins and Fees
In offshore futures markets, margins are typically a fixed amount, while
margins in onshore markets are based on a percentage of the contract's value.
There are initial margin and maintenance margin. An initial margin is the
equity required to initiate a futures position. A maintenance margin emerges
when a customer faces a loss and reaches a certain risk level. At this point, the
Company would give a margin call to customers or it would enforce liquidation
and close out the position. (The Company will make adjustments to margin
requirements in the case that exchanges adjust margins according to market
conditions.) Fees of offshore futures markets are a fixed amount, with the
exception of LME metals, which charge fees on a pro rata basis.
Criticisms of the BIS
Although the BIS is the oldest operating international financial institution and has been a
valuable asset in creating and maintaining economic stability, the bank is not without its critics.
Some critics view the BIS as an organization through which a wealthy elite controls the world.
Critics are concerned that since control in the BIS is in the hands of a handful of developed
countries central banks, it may have the power to shift billions of dollars too easily. Examples of
such complaints include the way in which the BIS and the IMF have responded to financial
crises. Although the IMF bears the brunt of the criticism for these bailouts, the BIS has also
been criticized for its involvement. Critics believe that the wealthy ìWall Street creditors who
fund the bailouts have too much input into the monetary policies enforced in the countries in
crisis. To alleviate this problem, some suggest that international financial institutions, such as
the BIS, should have formal representation from developing countries, which have experienced
growing importance in the global economy.
Another major criticism of the BIS is its obscurity and secrecy. These critics call for an increase
in transparency in the BIS operations. Proponents of the BIS is secrecy, however, insist that
some confidentiality is necessary when the BIS facilitates transactions between central banks.
For example, if the impact of certain transactions in foreign exchange or gold is made public,
then severe consequences could occur in the international financial markets. Other critics call
for the BIS to take a greater leadership role in increasing transparency in other financial and
banking transactions across the world. They warn that such transparency is necessary to
decrease the unfairness to consumers and investors that occurs when the proper information is
not made public. Although the Code of Good Practices on Transparency in Monetary and
Financial Policies promulgated with the IMF (discussed above) is a good start, critics believe
that it will take more than general principles to encourage the necessary transparency. The BIS,
62. with its affiliations with other multilateral financial institutions and its connection with the
central banks, is in a great position to take the lead in this endeavor.