Bank for International Settlements (BIS)

Definition

The Bank for International Settlements (BIS) is an international financial institution that serves as a bank for central banks, providing a platform for monetary and financial cooperation. It plays a crucial role in fostering international monetary stability and facilitating cooperation among central banks through its various functions, including serving as a forum for policy discussions and promoting financial stability across borders.

5 Must Know Facts For Your Next Test

1. The BIS was established in 1930 and is headquartered in Basel, Switzerland, making it the oldest international financial institution.
2. It serves as a bank for central banks by providing them with financial services such as deposit accounts and liquidity support.
3. The BIS hosts meetings and conferences for central bank governors and provides research on global economic issues, fostering collaboration among member countries.
4. It plays a key role in implementing international banking standards, particularly through its involvement in the Basel Committee on Banking Supervision.
5. The BIS's activities aim to promote global monetary stability, which is vital in the context of increasing interconnectedness in the world economy.

Review Questions

• How does the BIS facilitate international monetary cooperation among central banks?
  • The BIS facilitates international monetary cooperation by serving as a forum for central bank governors to discuss economic policies and share insights. It organizes meetings where these leaders can collaborate on issues related to monetary policy, financial regulation, and economic stability. By providing research and analysis on global economic trends, the BIS helps central banks make informed decisions that align with international objectives.
• What are some key functions of the BIS that contribute to maintaining financial stability in the global economy?
  • The BIS maintains financial stability through several key functions, including acting as a bank for central banks, providing liquidity support during times of crisis, and promoting the implementation of international banking standards. By offering deposit accounts and other financial services to central banks, the BIS ensures that these institutions have access to necessary resources during challenging times. Additionally, its involvement with the Basel Committee helps create regulatory frameworks that enhance the resilience of financial systems worldwide.
• Evaluate the impact of the BIS on global monetary policy spillovers and how it helps mitigate risks associated with international financial integration.
  • The BIS has a significant impact on global monetary policy spillovers by facilitating communication and cooperation among central banks regarding their policies. This coordination helps mitigate risks associated with international financial integration by allowing countries to understand how their monetary decisions may affect others. Through its research and analysis, the BIS highlights potential spillover effects and encourages member countries to consider these impacts when formulating policies, thereby promoting a more stable global economy.

Related terms

Central Bank: A national bank that provides financial and banking services for its country's government and commercial banking system, often responsible for implementing monetary policy.

Monetary Policy: The process by which a central bank manages the supply of money, interest rates, and inflation to achieve economic goals such as stable prices and full employment.

Financial Stability:

A condition in which the financial system operates effectively, characterized by stable asset prices, sound institutions, and a resilient economy.