Bank for International Settlements Essay ⋆ Business Essay Examples ⋆ EssayEmpire

The Bank for International Settlements (BIS) is an organization that provides services for many central banks, nations, and other official monetary institutions around the world. However, the bank does not provide financial services to corporations or individuals.

The Bank for International Settlements is responsible for promoting monetary and financial stability in the world, and it meets on a bimonthly basis to discuss monetary and financial matters. The organization is composed of four major committees: the Basel Committee on Banking Supervision, the Committee on the Global Financial System, the Committee on Payment and Settlement Systems, and the Markets Committee. In addition, there are several independent organizations involved in international cooperation in the area of financial stability, and these organizations have their secretariats at the Bank of International Settlements. These organizations are the Financial Stability Forum, the International Association of Insurance Supervisors, and the International Association of Deposit Insurers.

The Basel Committee on Banking Supervision provides an avenue for the banking industry to discuss banking supervisory matters. The overall objective of this entity is to increase knowledge and understanding of key supervisory issues and improve the quality of banking supervision worldwide. In January 1999 the Basel Committee proposed a new concept, which became known as Basel II, and a final version was distributed in June 2004. Basel II has three main principles, which are minimum capital requirements, supervisory review, and market discipline.

The Basel Committee has made two major contributions since its beginning. The first contribution occurred in 1975 when the committee took a lead role in making sure that countries share responsibilities when making international banking transactions. The Basel Concordat was an agreement that established the foundation for this process. The first stipulation was that the parent and host authorities shared responsibility for the supervision of the foreign banking establishments. The second stipulation stated that the host authorities had primary responsibility for supervision of liquidity. The third stipulation suggested that the solvency of foreign branches and subsidiaries was the primary responsibility of the home authority of the parent and the host authority. The second major contribution was a standard that would assist in (1) adequately measuring a bank’s capital and (2) establishing minimum capital standards.

Although Basel II became effective in December 2006, it was not as widely embraced as the first Basel. The purpose of Basel II was to achieve the European regulators’ goals of addressing shortcomings in the original accord’s treatment of credit risk, incorporating operational risk, and harmonizing capital requirements for banks and securities firms. Although the banks in Europe have applied Basel II, regulators in the United States still have not embraced it. Although they share the same goal of addressing shortcomings in the original accord’s treatment of credit risk, there is a belief that the existing bank supervision in the United States already addresses operational risk.

In addition, harmonization has never been a priority for U.S. regulators. Their perception is that Basel II is more relevant for international banking activities. Therefore, only 10 of the largest banks in the United States have applied Basel II, and an additional 10 banks have the option to join in. However, the other banks in the United States will remain subject to the current U.S. regulations, especially those rules that were adopted under the original Basel. The future of further implementation of Basel II remains unclear at this time. The Committee reorganized in October 2006, and is being operated by four main subcommittees. These subcommittees are the Accord Implementation Group, the Policy Development Group, the Accounting Task Force, and the International Liaison Group.

The Committee on the Global Financial System is responsible for monitoring developments in global financial markets for the central bank Governors of the G10 countries. The Committee on Payment and Settlement Systems serves as a forum for central banks to monitor and analyze developments in domestic payment, settlement, and clearing systems as well as in cross-border and multicurrency settlement schemes.

The Markets Committee was established in 1962 following the initiation of the Gold Pool. When the Gold Pool arrangements collapsed in 1968, members continued to meet at the BIS in order to exchange views. However, the focus has shifted toward coverage of recent developments in foreign exchange and related financial markets, an exchange of views on possible future trends, and consideration of the short term implications of particular current events for the functioning of these markets.

Bibliography:

James C. Baker, The Bank of International Settlements, Evolution and Evaluation (Quorum Books, 2002);
Permanent Court of Arbitration, Bank of International Settlements Arbitration Awards of 2002 and 2003 (Asser Press, 2007);
Gianni Toniolo and Piet Clement, Central Bank Cooperation at the Bank of International Settlement, 1930–1973 (Cambridge University Press, 2007).

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