At the heart of the global financial ecosystem are players whose influence is as decisive as their name is unknown to the general public. The Bank for International Settlements (BIS) is one such entity. Often overshadowed by the International Monetary Fund or the World Bank, it is nonetheless a key player in financial regulation. As a forum for cooperation between central banks and a centre for standard-setting, the BIS quietly but surely shapes the rules that govern finance on a global scale. Understanding its role is essential if we are to grasp the underlying dynamics of economic stability, an issue that concerns governments and businesses alike. The BIS is part of a wider set of international institutions.international financial institutions who are working for regulation and global stability.
History and founding missions of the bri
Creation and original functions (repairs, central bank cooperation)
The Bank for International Settlements is the oldest international financial institution, founded in 1930 following the Hague Conference. It was created as part of the Young Plan, an agreement to reschedule the war reparations imposed on Germany by the Treaty of Versailles. Its first task was therefore to administer the collection and distribution of these annuities. Alongside this transactional function, the BIS was entrusted from the outset with a second, more long-term objective: to promote cooperation between central banks. Faced with the Great Depression and the economic turbulence of the 1930s, the issue of reparations quickly lost its urgency. The BIS then concentrated its efforts on its technical cooperation mission, becoming a privileged forum for central bankers to discuss issues such as foreign exchange reserve management and gold transactions.
Current mission: to promote international monetary and financial stability
Today, the BIS's original mission of cooperation has evolved into its central and assertive role. With 63 member central banks, representing around 95 % of world GDP, its main purpose is to promote monetary and financial stability on an international scale. It does not act as a supranational supervisory authority that imposes its decisions, but rather as a catalyst and facilitator. Its action is aimed at strengthening cooperation between monetary and financial authorities, improving understanding of economic issues and encouraging the adoption of sound and harmonised prudential practices throughout the world.
Support role for national financial supervisors
The "bank of central banks": exclusive financial services
One of the most concrete facets of the BIS is its banking activity. It does not deal with private individuals or companies, but acts as a bank exclusively dedicated to central banks and certain international organisations. As such, it offers them a range of highly specialised financial services. These services mainly include the management of their foreign exchange reserves and gold holdings. By placing part of their reserves with the BIS, central banks benefit from the institution's solidity and neutrality, while having access to high-quality financial instruments for managing their portfolios. This function, although technical, is fundamental to liquidity and confidence in the global financial system.
Forum for dialogue and cooperation between regulators
Beyond its banking services, the BIS is above all a forum. It provides a neutral and confidential setting where central bank governors and senior officials from financial supervisory authorities can meet and exchange views freely. Meetings are organised very regularly, usually every two months in Basel, Switzerland. These meetings provide an opportunity to discuss economic and financial developments, share information on potential vulnerabilities and forge a common vision of the challenges ahead. This ongoing dialogue is a powerful tool for anticipating crises, coordinating monetary policies where necessary and converging supervisory practices, without encroaching on the sovereignty of national institutions.
The Financial Stability Institute and the dual transition
To strengthen its support for national authorities, the BIS created the Financial Stability Institute (FSI) in 1998. The FSI's mission is to assist supervisors around the world in implementing international regulatory standards and improving their supervisory practices. It organises seminars and workshops and publishes practical guides on technical subjects. More recently, the BIS has positioned itself as a key player in supporting the dual transition - environmental and digital - of the financial sector. Through its Innovation Hub, it is exploring the implications of new technologies such as blockchain and central bank digital currencies (CBDCs). At the same time, it is analysing the financial risks associated with climate change, helping regulators to adapt their supervisory frameworks to these major new challenges.
Monitoring and standards production activities
Strategic analysis and specialist committees
The BIS is also a leading centre for economic research and analysis. Working closely with its members, it produces in-depth studies on issues affecting financial stability. Its work is not limited to immediate problems; it also focuses on long-term trends that are transforming the financial landscape. To carry out this mission, the BIS relies on several specialised committees. The Committee on the Global Financial System (CGFS), for example, analyses market developments and identifies sources of risk. The Committee on Payments and Market Infrastructures (CPMI) focuses on the safety and efficiency of payment systems. Finally, the Irving Fisher Committee on Central Bank Statistics works to improve the quality and comparability of statistical data, an essential prerequisite for any relevant analysis.
Production of international financial standards ("standard-setters")
One of the BIS's most influential functions is its role as a standard-setter. Through the committees it hosts, it produces international financial standards. These are not laws in the strict legal sense of the term. These standards are principles, methodologies and best practices that are not legally binding under international public law. However, their influence is immense. The member countries of the committees make a moral commitment to transpose these standards into their national law. As a result, these standards are widely respected and implemented by authorities, institutions and financial companies around the world, creating a de facto harmonisation of regulations.
bri committees (comité de bâle, cpmi, central bank governance group)
The BIS hosts several committees that are essential to global financial regulation. The most famous is undoubtedly the Basel Committee on Banking Supervision (BCBS). It is this committee that draws up the famous "Basel Accords" (Basel I, II and III), which define the capital requirements for banks in order to guarantee their soundness. These agreements form the backbone of prudential rules and banking supervision throughout the world. Alongside it, the Committee on Payments and Market Infrastructures (CPMI) sets standards for the security of payment, clearing and settlement systems, which are the 'highways' of the financial system. Finally, the Central Bank Governance Group focuses on the organisational structure and operation of the central banks themselves, promoting good governance practices.
The standards issued by the committees hosted by the BIS, although not directly binding, inform all national and European legislation. For players in the banking and financial sector, understanding and anticipating changes in these standards is a strategic necessity to ensure compliance and control risks. If you would like an analysis of the impact of these regulations on your business or support in implementing them, please contact us, our banking and finance law firm is at your disposal.
Sources
- BIS, The BIS, Promoting global monetary and financial stability through international cooperation
- Basel Committee on Banking Supervision, Basel Committee Charter
- Basel Committee, Basel III: Finalising post-crisis reforms, 7 Dec. 2017
- Financial Stability Institute (FSI), About the FSI