Foreword to the BIS Annual Report 2020/21 by the BIS General Manager

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It is my pleasure to present the BIS Annual Report for 2020/21. This report highlights the great strides made to deliver our Innovation BIS 2025 strategy and how the BIS has responded over the past year to the unprecedented challenges presented by the Covid-19 pandemic.

In the year that marked our 90th anniversary, the world experienced a health crisis unlike anything we have seen before in our lifetimes. Central banks have been at the front line of the economic policy response, leveraging the full scope of their tools and expertise. Working together with governments, they have prevented the pandemic's dramatic financial and economic shock from spiralling into a worst case scenario.

Even though the global economy is not out of the woods yet, there are good reasons for optimism, largely because central banks and their determined efforts have laid the foundations for economic recovery. But, even though the global recession has been milder than expected, economic conditions have diverged significantly across sectors and countries.

Continued international dialogue and cooperation are crucial in a crisis of this magnitude, underscoring the BIS's essential role as the global forum for central banks. The BIS has risen to the challenge alongside central banks, adapting and innovating to meet central banks' evolving needs.

We have continued to implement our Innovation BIS 2025 strategic vision, without sacrificing any of our original ambition. The strategy's focus on embracing innovation in order to respond to our stakeholders' needs proved to be vital for the BIS to meet the challenges of the pandemic.

We have strengthened our data tools, expanded our outreach and enhanced our resilience, and we are on target to achieve all of our goals in the next phase of the strategy. We have also made changes to promote a more agile way of working, including modernising our digital support and human resources framework, establishing the three lines of defence model for operational risk management and streamlining our governance for risk and IT management.

The BIS Innovation Hub, one of the cornerstones of Innovation BIS 2025, aims to foster innovation and collaboration among the central banking community to enhance understanding of financial technology and aid development of innovative solutions to benefit and enhance the financial system. Last year we opened Hub Centres in Hong Kong SAR, Switzerland and Singapore in partnership with the local central banks. This year the BIS launched a strategic partnership in New York. Hub Centres will open this summer in London and Stockholm, with new Centres in Toronto and Frankfurt/Paris to follow, making the BIS Innovation Hub a global force for innovation. Along with the Innovation Hub's geographic expansion, we have published our thematic work programme and launched the BIS Innovation Network.

Our economic analysis explored and assessed the pandemic's implications for financial markets, the real economy and policymakers. The shift to a more digitalised economy, accelerated by the pandemic, has intensified our analysis around the potential for central bank digital currencies, including what they imply for the payment systems of the future. Through the new publications we launched early on in the pandemic, we provided timely analysis of fast-moving developments in financial markets, monetary policymaking and regulation.

Our banking services weathered the challenges of the past year very successfully. Leveraging our three interlinked dealing rooms covering all time zones, customer deposits reached new records, and the valuation losses seen at the beginning of the pandemic were quickly reversed. As a result, net profits increased to SDR 1.2 billion by end-March 2021, while total comprehensive income amounted to SDR 1.1 billion. We began offering new banking products and services to meet the evolving needs of our global customer base. In addition, we responded to the growing demand for sustainable investments with the launch of euro- and US dollar-denominated green bond funds.

In terms of engagement and direction for the institution, our Representative Offices in Hong Kong SAR and Mexico leverage their regional presence and expertise to anticipate and respond proactively in Asia and the Americas to meet central banks' emerging needs. In addition, our Cyber Resilience Coordination Centre supports central banks in anticipating and countering cyber threats, now via virtual exercises and webinars. And the Financial Stability Institute has started offering crisis simulation exercises and has further enhanced the activities of its Informal Suptech Network for experts at financial authorities.

Along with the growing demand for sustainable investments, central banks and supervisory authorities are seeking to improve their understanding of climaterelated risks that could impact individual institutions and the financial system. The BIS supports these efforts through our participation in international forums discussing the financial stability implications of climate change and our research on related topics.

Throughout the year, our staff showed extraordinary resourcefulness and energy in supporting our mission in the face of Covid-19 challenges. Their efforts and adaptability made possible the achievements described in this report. Thanks to their commitment, we have successfully navigated the pandemic and will emerge as resilient as ever.

Although Covid-19 is casting a longer shadow than initially anticipated, the BIS is adjusting its strategies accordingly, and preparing to adapt to a rapidly changing world. As always, the BIS remains vigilant and ready to reinvent itself in order to meet our stakeholders' needs as we continue to support them in their pursuit of monetary and financial stability.

Agustín Carstens