Full Form of BIS – Bank for International Settlements
The full form of BIS is Bank for International Settlements. BIS refers to the international financial institution which is established in the year 1930 under auspices of the international law, and its aim is serving the central banks in promoting the monetary as well as the financial stability, fostering the international cooperation, and acting as the bank for the different central banks along with facilitating the collaboration among those central banks.
- The Bank for International Settlements was founded in the year 1930. It was established due to the Hague Agreement in the 1930s among the world’s different countries, which includes Germany, the United Kingdom, the United States, Belgium, France, Italy, Japan, and Switzerland. Initially, it was established as a clearinghouse for the German war reparations, but the reparations discontinued shortly after the bank’s establishment. However, after that, it became an international forum for the cooperation and counterparty for the transactions happening among the central banks.
- The first office of the Bank for International Settlements was opened on May 17, 1930, with the main aim of collecting, administrating, and distributing the reparations which the German government imposed by the treaty of the Versailles after World War I. During World War II, the bank was neutral officially, but at the war’s end, it was agreed by the Allies to shut down the BIS but decided for this was not implemented. After that, it played an important role during the Bretton woods agreement concerning maintaining the international currency convertibility.
- In the year 1973, Bank for International Settlements became an agent for the European monetary cooperation fund established by members of the European Union. So from the date of establishment and to date, It remained an important international financial institutionFinancial InstitutionFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. . Presently head office of the BIS is in Basel, Switzerland. Along with this, BIS has two representative offices located in the Hong Kong SAR and Mexico City.
The different roles performed by the bank for international settlements are as follows:
- It fosters discussion among the different central banks, along with facilitating the collaboration between them.
- It regulates the capital adequacy by setting different capital adequacy requirements, which presently is one of the challenging tasks among the central banks.
- It serves as an agent concerning international financial operations.
- It conducts policy analysis and carries out research on the different issues relevant to money and financial stability.
- It acts as the prime counterparty for the central banks for all of their financial transactions.
- It supports different dialogue with authorities that are responsible for promoting monetary and financial stability.
- It generally performs all types of global banking activities apart from holding the current accounts for the individuals or governments, thereby competing directly with the other financial institutions for all these banking activities.
How Does BIS Work?
- The ownership of the BIS is restricted only to central banks or the equivalent monetary authorities, which means that private shareholders are not allowed to hold the shares in BIS. The administration of the BIS is done by the board of directors that consisting of the governors of the central banks along with the other appointed members. The statutes of BIS are presided over mainly by the three bodies that include the central banks’ general meetings: its members, its board of directors, and its management.
- All the decisions regarding the functioning of BIS are taken at each level based on the weighted voting arrangement. They operate as per the different international financial laws, like the Bretton Woods Agreement, Treaty of Versailles, etc. The Bank for International Settlements performs all the global banking activities apart from holding the current accounts for the individuals or governments and competes directly with the other financial institutions for all these banking activities by offering various premium services and providing the security by maintaining the abundant equity capital.
- It also ensures the abundant equity capital by offering them buybackBuybackShare buyback refers to the repurchase of the company’s own outstanding shares from the open market using the accumulated funds of the company to decrease the outstanding shares in the company’s balance sheet. This is done either to increase the value of the existing shares or to prevent various shareholders from controlling the company. of the different instruments from them that are tradable in the market and helps provide emergency funds to the troubled nations. It also offers a high return on the investment of the funds and other various services to attract its clients, i.e., central banks.
The different functions performed by the bank for international settlements are as follows:
#1 – Banks for Central Banks
Wide ranges of financial services are provided by the Bank for International Settlements to the central banks and the other financial institutions. It can also be called as the lender of the last resort. It assists in the management of the foreign reserves, providing the liquidityLiquidityLiquidity shows the ease of converting the assets or the securities of the company into the cash. Liquidity is the ability of the firm to pay off the current liabilities with the current assets it possesses. to the banks as and when required by way of offering them buyback of the different instruments from them that are tradable in the market, providing emergency funding when required by the troubled nations, making foreign exchange transactions as well as gold transactions for or with the central banks, etc. Along with this, it helps in promoting monetary and financial stability as it acts as the trustee with respect to the international financial operations
#2 – Research and Policy Analysis
For promoting monetary and financial stability, Bank for International Settlements publishes related analyses as well as statics pertaining to international banking and the financial matter, thereby facilitating better policymaking, academic research, and helping member central banks in their proper functioning and decision making.
#3 – Seminars
The BIS also organizes various seminars with the focus on a focus on international financial issues.
BIS is the global center for the economy and the finances. It has always played a crucial role in the development of the global financial marketFinancial MarketThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces.. It acts as a stabilizing force that encourages financial stability and prosperity in the international platform in such a dynamic world. It is designed so that the independent body is not accountable as such to any of the national government.
This has been a guide to the Full Form of BIS (Bank for International Settlements) and its definition. Here we learn how does BIS work with its history, role, and functions. You may refer to the following articles to learn more about finance –