DEFINITION of 'Bank for International Settlements - BIS'

The Bank for International Settlements is an international financial institution that aims to promote global monetary and financial stability.

BREAKING DOWN 'Bank for International Settlements - BIS'

The Bank for International Settlements (BIS) is often called the "central bank for central banks" because it provides banking services to institutions such as the European Central Bank and Federal Reserve. These services include conducting gold and currency transactions, as well as making short-term collateralized loans.

The BIS also encourages cooperation among central banks. The Basel Committee for Banking Supervision (BCBS), while technically separate from the BIS, is a closely associated international forum for financial regulation that is housed in the BIS' offices in Basel, Switzerland. The BCBS is responsible for the Basel Accords, which recommend capital requirements and other banking regulations that are widely implemented by national governments. The BIS also conducts research into economic issues and publishes reports.

History of the BIS

The BIS was founded in 1930 as a clearinghouse for German war reparations imposed by the Treaty of Versailles. The original members were Germany, Belgium, France, Britain, Italy, Japan, the U.S. and Switzerland. Reparations were discontinued shortly after the bank's founding, and the BIS became a forum for cooperation and a counterparty for transactions among central banks.

The bank was officially neutral during World War II, but it was widely seen as abetting the Nazi war effort, beginning with its transfer of Czechoslovakian national bank gold to Germany's Reichsbank in early 1939. At the end of the war the Allies agreed to shut the BIS down, but the decision was not implemented, partly at John Maynard Keynes' urging. While the Bretton Woods agreement remained in effect, the BIS played a crucial role in maintaining international currency convertibility. It also acted as the agent for the 18-country European Payments Union, a settlement system that helped restore convertibility among European currencies from 1950 to 1958.

When the world transitioned to floating exchange rates in the 1970s, the BIS and BCBS focused on financial stability, developing capital requirements for banks based on the riskiness of their financial positions. The resulting Basel Accords have been adopted widely by national governments to regulate their banking systems. Negotiations on Basel III, an update to previous accords that came as a response to the financial crisis, were completed in December 2017.

RELATED TERMS
  1. IRS Publication 901

    A document published by the Internal Revenue Service (IRS) that ...
  2. Concentration Bank

    A financial institution that is the primary bank of an organization, ...
  3. Bank

    A financial institution licensed as a receiver of deposits. There ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European ...
  5. Group of Ten - G10

    Eleven industrialized nations that meet on an annual basis to ...
  6. Basel Committee on Banking Supervision

    The Basel Committee on Banking Supervision is an international ...
Related Articles
  1. Personal Finance

    What Is The Bank For International Settlements?

    Get the scoop on the structure and functions of the oldest global financial institution.
  2. Insights

    How the Fed Profits From Quantitative Easing

    Central Banks including the U.S. Federal Reserve are making rich profits from stimulative measures such as Quantitative Easing (QE).
  3. Insights

    Should Central Banks Be Independent?

    Find out why more and more experts are calling for an end to central bank independence, any why such provocative calls may be just as dangerous.
  4. Investing

    The Legacy of Basel I

    Basel I refers to a set of international banking rules enacted in 1988 by the Basel Committee on Bank Supervision.
  5. Insights

    Understanding the Bank Rate

    Bank rate is a term describing the interest rate a country’s central bank charges its domestic banks on loans it makes to them.
  6. Trading

    Why Negative Interest Rates Are Not Working

    Find out why negative interest rate policies are failing because bond buyers do not want a negative yield and saturated borrowers want to pay off debts.
  7. Investing

    What is Basel III?

    The purpose of the Basel accords is to improve the worldwide bank regulatory framework.
  8. Investing

    Basel II Accord To Guard Against Financial Shocks

    Problems with the original accord became evident during the subprime crisis in 2007.
  9. Financial Advisor

    Inflation & Interest Rates: Have Central Banks Lost the Plot?

    Economists debate the role of central banks at the 2017 Cayman Alternative Investment Summit.
RELATED FAQS
  1. How are international investment banking practices regulated?

    See which international organizations are responsible for overseeing and regulating global investment banks, including the ... Read Answer >>
  2. How do central bank decisions affect volatility?

    Using an aggregate, macroeconomic perspective, take a look at how some of the ways central bank decisions can impact market ... Read Answer >>
  3. What economic indicators are important to consider when investing in the banking ...

    Find out which economic indicators are most useful for investors in the banking sector, especially those influenced by central ... Read Answer >>
  4. Who determines interest rates?

    In countries using a centralized banking model, interest rates are determined by the central bank. In the first step of interest ... Read Answer >>
  5. What average annual growth rate is typical for the banking sector?

    Learn the typical average annual growth rate for the banking sector and why regulatory requirements have a profound effect ... Read Answer >>
  6. The Difference Between the International Monetary Fund and the World Bank

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ... Read Answer >>
Hot Definitions
  1. Asset Allocation

    An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's ...
  2. IRR Rule

    A measure for evaluating whether to proceed with a project or investment. The IRR rule states that if the internal rate of ...
  3. Short Covering

    Short covering is buying back borrowed securities in order to close an open short position.
  4. Covariance

    A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns ...
  5. Liquid Asset

    An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally ...
  6. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
Trading Center