The 72nd Annual Report of the Bank for International Settlements for the financial year which began on 1 April 2001 and ended on 31 March 2002 was submitted to the Bank's Annual General Meeting held in Basel on 8 July 2002.
Introduction: unexpected resilience to unexpected events
The global economy and financial system have shown, over the last year or so, enormous resilience in the face of successive shocks. Taken as individual events, the continuing stock market correction, the attacks of 11 September, the war against terrorism, the failure of Enron, the collapse of Argentina's currency board and the conflict in the Middle East might each have been expected to have unpleasant economic side effects. Taken together, their cumulative impact could have been far more serious - interactions frequently generate outcomes greatly exceeding the sum of the parts. Moreover, these events came on top of a global economic downturn that, for a time, threatened to gather significant momentum.
Compared with what might have been expected, it is remarkable how well the system has coped. Far from continuing to contract, the global economy appears to have begun expanding again. And it is the United States that seems once more to be leading the way, in spite of its many perceived imbalances. The financial sector too has responded flexibly to these recent developments. Payment and settlement systems coped well, even with such an extreme event as the terrorist attack on the New York financial district itself. Credit has also generally continued to flow freely, albeit more expensively to those now judged to be less creditworthy. Explanations for this good performance would certainly include supportive macroeconomic policies, notably monetary policy. But we should also acknowledge the possibility that the many years of effort put into promoting financial stability have at last begun to bear fruit. In particular, the infrastructure underpinning the global financial system, and associated plans for continuity and backup, were vastly improved as a result of the attention they received prior to the turn of the millennium.
The views expressed here do not necessarily reflect the views of the BIS member central banks.