The growth and globalisation of financial markets during the final decades of the 20th century shaped the nature of central bank cooperation at the BIS. The BIS has assisted – and continues to assist – the pursuit of global monetary and financial stability in two main ways:
Central bank assistance
From its very first days, the BIS has acted as an agent for the central banking community in providing short-term emergency support, helping to address financial crises threatening the stability of the international financial system as a whole.
Early on, during the financial crisis of 1931-33, the BIS organised support credits for, amongst others, the Austrian and German central banks. Later, in the 1960s, the BIS arranged special support credits for the pound sterling, including two so-called Sterling Group Arrangements, and for the French franc. More recently, the BIS has provided emergency finance for IMF-led stabilisation programmes, eg for Mexico in 1982 and Brazil in 1998.
The BIS is able to make these large credits available very quickly thanks to the substantial foreign exchange deposits its banking services attract from central bank customers worldwide. In advancing funds to address a financial crisis, the BIS operates on behalf of a group of participating central banks which provide the necessary backing and ultimate guarantee of repayment.
Banking supervision and financial stability
The growth of international financial markets and of cross-border money flows in the 1970s highlighted the lack of efficient banking supervision on an international level. National banking supervisory authorities basically regulated domestic banks and the domestic activities of international banks, while the international activities of these banks were not always closely supervised. The collapse in 1974 of Bankhaus Herstatt in Germany and of the Franklin National Bank in the US prompted the G10 central bank Governors to set up the Basel Committee on Banking Supervision.
In 1988 this Committee issued the Basel Capital Accord, introducing a credit risk measurement framework for internationally active banks that became a globally accepted standard. A revision of this Capital Accord, known as Basel II, is due to be implemented worldwide from end-2006. Such standards aim to achieve a better and more transparent measurement of the various risks incurred by internationally active banks, limiting the possibility of contagion in case of a crisis and strengthening the global financial infrastructure overall.
Besides the Basel Committee on Banking Supervision, other BIS-based committees that help promote monetary and financial stability are: the Committee on the Global Financial System (CGFS - since 1971), the Committee on Payment and Settlement Systems (CPSS - since 1990) and the Markets Committee (since 1964).
With its economic, monetary and financial research, the BIS supports the work of these Basel-based committees and organisations. The BIS is also a hub for sharing statistical information amongst central banks, and for publishing statistics on global banking, securities, foreign exchange and derivatives markets. In 1999, the Financial Stability Institute (FSI) was created to promote dissemination of the work undertaken by the supervisory community, and to provide practical training for financial sector supervisors worldwide.
 Towards
European Monetary Union | The BIS's Basel buildings  |
| For more on the BIS's history, read Gianni Toniolo (with Piet Clement), Central Bank Cooperation at the Bank for International Settlements, 1930-1973, Cambridge University Press, Cambridge-New York, 2005. |