Bank for International Settlements

Definition

The Bank for International Settlements (BIS) is an international financial institution that serves as a bank for central banks, promoting monetary and financial stability worldwide. Established in 1930, the BIS facilitates cooperation among central banks and provides banking services to them, playing a vital role in the global financial system by supporting economic research and offering policy analysis.

5 Must Know Facts For Your Next Test

1. The BIS is headquartered in Basel, Switzerland, and is often referred to as the 'bank for central banks'.
2. One of the primary functions of the BIS is to facilitate international monetary and financial cooperation among its member central banks.
3. The BIS hosts regular meetings and conferences that allow central banks to discuss policies and share information on financial stability issues.
4. It acts as a lender of last resort to central banks facing liquidity issues, providing support during financial crises.
5. The BIS also conducts economic research and analysis to aid in understanding global economic trends and risks.

Review Questions

• How does the Bank for International Settlements support cooperation among central banks?
  • The Bank for International Settlements fosters cooperation among central banks by providing a platform for dialogue and collaboration on monetary policies and financial stability issues. It organizes meetings, conferences, and forums where central bank representatives can exchange ideas and share best practices. This cooperation helps align monetary policies globally, ensuring a more stable international financial system.
• What role does the BIS play during financial crises, particularly in relation to member central banks?
  • During financial crises, the BIS plays a crucial role by acting as a lender of last resort to its member central banks. This means that when central banks face liquidity shortages or other urgent financial needs, they can turn to the BIS for emergency funding. By providing this support, the BIS helps stabilize the global financial system and prevents potential contagion effects that could arise from individual country crises.
• Evaluate the impact of the Bank for International Settlements on global monetary policy and financial stability over the years.
  • The impact of the Bank for International Settlements on global monetary policy and financial stability has been significant. By facilitating communication and cooperation among central banks, the BIS has helped create more coordinated responses to global economic challenges. Its research initiatives provide valuable insights into monetary policy effectiveness, allowing central banks to make informed decisions. Additionally, by acting as a stabilizing force during crises through liquidity support, the BIS contributes to overall confidence in the international financial system, ultimately fostering greater economic stability across countries.

Related terms

Central Bank: A national institution that manages a country’s currency, money supply, and interest rates, often overseeing the commercial banking system.

Monetary Policy: The process by which a central bank controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and economic growth.

Financial Stability: A condition in which the financial system operates effectively, allowing institutions to withstand shocks and providing a foundation for economic growth.