What Is Full Form Of BIS?
The full form of BIS is Bank for International Settlements. BIS refers to the international financial institution which was 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.
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 governments.
- The BIS is an international financial institution that serves as a bank for central banks and fosters international monetary and financial cooperation.
- The BIS facilitates communication and collaboration among central banks and other international organizations to promote global financial stability and sound monetary policies.
- The BIS conducts research, provides banking services, and acts as a forum for central banks to exchange information and discuss policy matters.
- The BIS plays a crucial role in promoting financial stability, monitoring global financial risks, and providing guidance on regulatory and supervisory frameworks.
Full Form Of BIS Explained
BIS, which is the Bank for International Settlement, is the global center for the economy and the finances. And it serves as a bank for the central banks with the purpose to promote financial stability and wellbeing throughout the world.
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 consists 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 directorsBoard Of DirectorsBoard of Directors (BOD) refers to a corporate body comprising a group of elected people who represent the interest of a company’s stockholders. The board forms the top layer of the hierarchy and focuses on ensuring that the company efficiently achieves its goals. , 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 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 fundsEmergency FundsAn emergency fund is a source of money that you refrain from spending and store away safely to use in the time of need. Since it is readily available for withdrawal, savings invested in the emergency fund act as a savior during unforeseen circumstances. The emergencies can be a sudden job loss, emergency medical issues, or big losses in the financial market. 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.
Let us study the history of the organization right from its beginning.
- The Bank for International Settlements was founded in 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 international currency convertibility.
- In 1973, the 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.
Thus, the above details give us a glimpse of when and how the organization was formed and its how it works.
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.
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 the lender of last resortLender Of Last ResortA lender of last resort (LoLR) refers to an institution that provides liquidity or emergency credit to banks experiencing financial difficulties.. It assists in the management of the foreign reserves, providing the liquidityLiquidityLiquidity is the ease of converting assets or securities into cash. 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 international financial issues.
Frequently Asked Questions (FAQs)
The primary purpose of the BIS is to promote global monetary and financial stability. It serves as a platform for central banks worldwide to collaborate, conduct research, and share information, addressing common challenges in the international financial system.
The BIS is owned by 63 member central banks, representing countries from around the world. These member central banks contribute to the BIS’s capital and participate in its governance through the General Meeting of its shareholders.
The BIS produces a wide range of research papers, publications, and statistical reports covering various topics related to global finance and economics. These publications encompass areas such as monetary policy, financial stability, banking supervision, and international financial markets.
The BIS does not possess direct regulatory authority over individual banks. Instead, it collaborates with central banks and other regulatory bodies to establish international standards and guidelines for banking supervision and financial regulation. National regulators are responsible for implementing and enforcing these standards within their respective jurisdictions.
This has been a guide to what is Full Form of BIS. We explain it with its history, role in developing financial stability and functions that it performs. You may refer to the following articles to learn more about finance –