The BIS was created as an international organisation, and also as a bank. As a bank, its clients are exclusively central banks and other international organisations. The BIS provides reserves management services to its clients. Historically, it has also played a role in providing liquidity in times of financial crisis.
Bank for International Settlements shares certificate, American issue, 1931.
Reparations, the Great Depression and financial cooperation.
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- The BIS Banking Department is established to manage the Bank's capital and to offer financial services to BIS member central banks. This includes opening sight accounts for BIS member central banks and offering gold custody services.
- During the 1931 financial crisis, the BIS organises and contributes to the emergency credits granted to the central banks of Austria, Hungary, Germany, Danzig and Yugoslavia.
- German reparation payments are suspended, first, temporarily through the Hoover moratorium (July 1931), and then permanently by the Lausanne Agreement (July 1932). As a result, the BIS's role in settling reparation payments comes to an end, and its balance sheet shrinks by more than half.
- As from July 1934, Germany suspends further payments through the BIS for the service of the Dawes and Young "reparation" loans (transfer moratorium). Disregarding the role of the BIS as Trustee, Germany instead concludes bilateral clearing agreements with the creditor nations.
The steamship SS Normandie enters the port of New York in the 1930s. In the late 1930s, ocean liners like this one regularly transported central bank gold from Europe to the safety of the United States at the behest of the BIS. (photo © - Keystone)
Wartime.
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- In the autumn of 1938, in the wake of the Sudetenland crisis, European central banks make use of the BIS's services to ship their gold reserves from Europe to the United States. Between 1938 and 1940, the BIS ships more than 140 tonnes of gold to the safety of New York on behalf of member central banks.
- On 18 March 1939, the BIS executes a transfer order received from the Czechoslovak National Bank to transfer its gold reserves, held on a BIS account at the Bank of England, to a German Reichsbank account. It soon transpires that the order, dated three days after the entry of German troops in Prague, has been issued under duress. It should therefore never have been executed.
- From the outbreak of the Second World War in September 1939, the volume of BIS banking operations declines rapidly. However, throughout the war, the BIS continues to receive interest payments from the German Reichsbank in respect of the investments the BIS had made in German bonds back in 1930-31. The largest part of these interest payments were made in gold. After the war, it transpired that most of the gold used by the Reichsbank for these payments had been looted in the German-occupied territories.
- Faced with orders received from the central banks of the Baltic states to transfer their gold holdings with the BIS first to the German Reichsbank and later to the State Bank of the Soviet Union, the BIS decides not to execute these orders and to freeze these assets. These same gold holdings will be released 50 years later to the respective central banks when the Baltic states regain independence from the Soviet Union.
Monthly overview summarising Switzerland's balance of payments position vis-à-vis other EPU member states, December 1958. The BIS provided accounting services to the EPU and acted as its agent.
Supporting postwar reconstruction in Europe.
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- In September 1950, the BIS assumes its functions as paying agent for the European Payments Union.
- The London Agreement on German Debts, signed in February 1953, provides for the resumption of German payments in respect of the Dawes and Young Loans, reinstating the BIS as trustee for both loans (this role comes to an end in 2010, when the last bonds are redeemed).
Signature of a BEF 100 million loan agreement on behalf of the European Coal and Steel Community (ECSC), 20 December 1957. The BIS acted as bank agent and depositary for a number of ECSC loans, thereby fulfilling its statutory object of acting as
Shoring up the Bretton Woods monetary system.
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- In March 1961, following tensions on the foreign exchange markets, the central bank governors convened at the BIS conclude the Basel Agreement on mutual support. Short-term credits are granted to the Bank of England to shore up the pound.
- In November 1961, to counter price fluctuations on the free gold market, seven European central banks and the US Federal Reserve create a "Gold Pool" to sell and buy gold on the London market with the aim of defending the official gold price. The Gold Pool is managed by the BIS and the Bank of England.
- In 1962, the BIS and a number of central banks join the swap network inaugurated by the Federal Reserve Bank of New York, opening reciprocal credit lines that can be drawn upon in the central banks' respective currencies in order to ease pressure on the exchange markets. The central banks swap network will be very active, growing steadily throughout the 1960s and 1970s, to be revived in the wake of the 2007-09 Great Financial Crisis.
- The weakness of pound sterling on the exchange markets poses a threat to the stability of the Bretton Woods system. The BIS coordinates support for the pound through a number of central bank credits and two so-called Sterling Group Arrangements (1966 and 1968). In July 1968, the BIS coordinates a short-term credit arrangement to the Bank of France in support of the French franc. A third Sterling Group Arrangement follows in 1977.
In the late 1980s, the BIS inaugurated a state-of-the-art banking dealing room to better serve its central bank customers.
Providing facilities to central banks and supporting European monetary cooperation.
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- On 1 June 1973, the European Monetary Cooperation Fund is created. It is run by the Committee of EEC Governors and the BIS is appointed as its agent.
- In the wake of the 1982-83 sovereign debt crisis in emerging market economies, the BIS coordinates and contributes to standby credits to the central banks of a number of eastern European and Latin American central banks - usually to bridge the gap until an IMF arrangement can be put in place.
- In March 1986, through an agreement with the ECU Banking Association, the BIS becomes the agent of the private ECU clearing and settlement system created by a number of European private banks. This function comes to an end with the euro's debut in 1999.
- In the wake of the 1995 sovereign debt crisis in emerging market economies and the 1997-98 Asian crisis, the BIS arranges joint central bank facilities in support of some of the affected central banks.
Staff members working in the BIS dealing room. There are dealing rooms in Basel as well as in the Representative Offices in Hong Kong SAR and Mexico City.
Providing banking services to the global central bank community.
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- From January 1999, the BIS Banking Department offers a new medium-term instrument (MTI) to provide central banks with a longer-dated liquid investment. The MTI complements the FIXBIS, the Bank's existing tradable short-term investment instrument.
- From October 2000, the BIS Representative Office for Asia and the Pacific in Hong Kong SAR opens a dealing room to conduct banking transactions with regional central banks within their own time zones.
- Immediately after the September 11 terrorist attacks in 2001, the BIS offers a US dollar facility to central banks in order to help them sustain dollar liquidity on the market.
- From April 2003, the BIS changes its unit of account from the gold franc (in use since 1930) to the IMF's Special Drawing Rights (SDRs).
- In 2003-04, the BIS, in partnership with Eastern Asian central banks, launches two Asian Bond Funds, aimed at further deepening Asia's capital markets.
- In the wake of the 2007-09 Great Financial Crisis, the BIS Banking Department takes measures to avoid a sudden influx of deposits, thereby reducing the Bank's balance sheet exposure to the crisis.
- In March 2014, the BIS, in close cooperation with the People's Bank of China, launches a renminbi government-bond fund, which in its first five years attracts investments of nearly $5 billion from 24 central banks.
- In May 2020, the BIS Representative Office for the Americas in Mexico City opens a dealing room to conduct banking transactions with regional central banks within their own time zones. With banking operations conducted from Hong Kong, Basel and Mexico the BIS Banking Department can now serve its central bank clients globally across all time zones.
- In February 2022, the BIS, under the guidance of the BIS Asian Consultative Council and in close collaboration with the Asian Development Bank, launches an Asian Green Bond Fund to help channel central bank reserves to environmentally friendly investments in the Asia-Pacific region.
- In June 2022, the BIS in cooperation with the People's Bank of China, launches a Renminbi Liquidity Arrangement (RMBLA) to provide liquidity to participating central banks from the Asia-Pacific region through a reserve pooling scheme.
