Towards European Monetary Union

Signing the European Monetary System agreement at the BIS, 13 March 1979
Signing the European Monetary System agreement at the BIS, 13 March 1979

For more than 30 years the BIS was closely associated with the process of European monetary integration, not only providing a venue for discussions among European central bankers but also contributing to the technical infrastructure for European exchange rate arrangements.

In 1964, the Committee of Governors of the Central Banks of the Member States of the European Economic Community began to meet regularly at the BIS to discuss the coordination and integration of monetary policy at EEC level. In the early 1970s, when the Bretton Woods system was breaking down, the Committee of Governors agreed to put limits on exchange rate fluctuations between participating European currencies as a first step towards closer integration (the so-called "Snake"). A European Monetary Cooperation Fund was set up in 1973 to support the operation of the "Snake" mechanism and the BIS was appointed Agent for it.

Jean-Claude Trichet speaking at the European Central Bank, 2005
Jean-Claude Trichet, President of the European Central Bank, 2005

With the introduction of the European Monetary System in 1979, these responsibilities were significantly extended and the BIS continued to fulfil them, at times in turbulent market conditions, until the establishment of European monetary union.

Over time, the Committee of EEC central bank Governors, supported by a BIS secretariat, developed into a cohesive body for policy exchange and coordination. In 1988/89 some of its members served in a personal capacity on the Delors Committee, which issued a report in 1989 setting out a model for an independent central bank committed to price stability. Their recommendations decisively influenced the framework for European economic and monetary union set out in the Maastricht Treaty of 1992.

The European Monetary Institute, precursor of the European Central Bank, was located at the BIS until its move to Frankfurt in 1994.

Bretton Woods Global financial stability
For more on the BIS's history, read Gianni Toniolo (with Piet Clement), Central Bank Cooperation at the Bank for International Settlements, 1930-1973, Cambridge University Press, Cambridge-New York, 2005.