BIS holds Annual General Meeting and releases its 75th Annual Report
“So far, so good”, said the Bank for International Settlements (BIS) in its 75th Annual Report, released today. Recent economic and financial developments have been broadly consistent with a number of trends in the global economy over the last two decades or so. Lower and less volatile inflation, accompanied by higher and less volatile output growth, are welcome features. Less welcome are growing external and internal imbalances, the latter leading to more frequent periods of financial stress often associated with rapid increases in credit, asset prices and investment. According to the BIS, optimists see no good reason why the favourable aspects of these developments should not continue. Pessimists focus rather on the imbalances and see the potential for trouble ahead.
Nout Wellink, Chairman of the Board of Directors and BIS President, addressing representatives of more than 100 central banks and international institutions attending the Bank’s Annual General Meeting in Basel, Switzerland, said: “with world growth at almost 5%, 2004 was the best year in nearly three decades, with emerging market economies performing especially strongly”. He added that “near-term prospects appear, on balance, good”.
Nevertheless, echoing the analysis in the Annual Report, Mr Wellink cautioned that a closer look revealed some disturbing signs. The geographical distribution of growth has been very uneven, with the euro area and Japan in particular lagging behind, with evident effects on external imbalances. The composition of demand has also been less than ideal: household demand has been very strong, driving a rise in household debt. And, while fiscal and monetary stimulus has played a key role in supporting growth, the latter has also contributed, through a widespread search for yield in financial markets, to exceedingly accommodative financial conditions and frothy property prices.
Looking forward, Mr Wellink said that, in the absence of policy action, a more disruptive market-driven adjustment to imbalances might take place. He called for fiscal consolidation in those countries where medium-term trends are worrisome, a return of monetary policy to a more neutral stance where conditions allow, the implementation of growth-enhancing structural policies in Europe and Japan in particular, and a greater degree of exchange rate flexibility and further structural changes to reduce vulnerabilities in emerging market economies.
Malcolm Knight, the BIS General Manager, reporting on the Bank’s activities to the BIS shareholders, noted that “the Bank’s basic mission ‘to promote the co-operation of central banks and to provide additional facilities for international financial operations’ - stated in Article 3 of our Statutes - is still as relevant today as it was 75 years ago”.
The BIS reported a balance sheet total of SDR 180.5 billion, or nearly USD 273 billion, at the end of 31 March 2005, and a net profit of SDR 370.9 million. Of the latter, SDR 114.4 million will be paid as dividend and the remainder will be transferred to reserves. A full dividend of SDR 235 per share will be paid on 470,073 shares held by the Bank’s 55 shareholding central banks.1 This dividend represents a 4.4% increase over the dividend for the previous financial year.
1 The number of issued and paid-up shares is 547,125. Some treasury shares were redistributed during the financial year and will be subject to a dividend on a pro rata basis according to the relevant value date of redistribution. The shares held in treasury at the end of March 2005 will not be eligible for a dividend payment.