Introduction to BIS
The Bank for International Settlements (BIS) is an international financial institution that provides banking services to central banks across the globe and helps in promoting financial stability through better coordination and interaction between all the international financial institutions.
Understanding the Bank for International Settlements
Headquartered in Switzerland, the BIS was founded in 1930 and is one of the oldest financial institutions that has been constantly modifying its role in the global market as per the needs of the global financial community. While the main aim of BIS is to ensure monetary cooperation and financial stability, it also acts as a bank to central banks like the Federal Reserve by providing services like currency transactions and lending collateralized loans for short periods of time. Thus, it acts as a stabilizing force that brings about financial stability and growth despite the dynamic nature of international politics and the global economy.
Working of the BIS
The BIS acts as a bank to the central banks and provides them several banking facilities like offering to buy back tradable instruments from banks, thereby ensuring liquidity and also offer great returns on the investments made by central banks. Previously, individuals could also invest and hold a share in the BIS but this practice was put to an end in 2001 and the private shareholders were compensated accordingly. Now, the Bank for International Settlements is headed by the board of directions, the general meeting of member central banks and the management. These three bodies vote and decide on the functions of the BIS.
Functions of the BIS
As mentioned earlier, the Bank for International Settlements keeps evolving as the needs of the global financial markets change but here are some basic functions that it performs:
*Provides liquidity *It acts as a lender of last resort as it provides credit services and purchases tradable financial instruments from central banks who want immediate liquidity. It also takes up the role of a trustee for international financial operations to ensure financial and monetary stability across the world.
*Organises workshops and publishes findings * The BIS hosts workshops and sessions which address financial issues, provide insights on stability and showcases work done by the Basel Committee on Banking Supervision through FSI (Financial Stability Institute). BIS also publishes the research done by its staff on foreign exchange, securities and the market as these help in decision-making and better functioning.
