What is BIS? - Yonsei GSIS

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What is BIS? - Yonsei GSIS
Bank for International Settlements
- Organizational Assessment
Kim Hyunjung
Kim Jeeyoung
Hur Se Won
Yun Hankyoung
Song Wei
International Economic Organizations
Spring Semester 2006
Prof. Moon Hiwhoa
What is BIS?
• The central bank’s bank
• Founded in 1930
• Operating under the mandates of
international law
• Fostering cooperation among central
banks and other agencies in pursuit of
monetary and financial stability
• Headquartered in Basel, Switzerland
• Two representative offices in Hong
Kong and Mexico city
“Tower" building
Centralbahnplatz 2, Basel, Switzerland
Organization and Operating structure
 The General Meeting of Member Central Bank
• Currently
552 staff
from 49 countries
 The Board
of Directors
• Three
important of
decision-making
bodies
 Themost
Management
the Bank
– The General Meeting of Member Central Bank
– The Board of Directors
– The Management of the Bank
Organization and Operating structure
•
•
 The General Meeting of Member Central Bank
 The Board of Directors
Annually late Jun./ early Jul.
 The Management of the Bank
Currently 55 member central bank entitled to be represented and
vote in the General Meeting
• Voting power is proportionate to the number of BIS shares
• Focus on :
- Distribution of the dividend and profit
- Approval of the ann. report, and the accounts of the Bank
- Adjustments in the allowances paid to Board members
- Selection of the Bank’s external auditors
Organization and Operating structure
 The General Meeting of Member Central Bank
ex
The
Board
of Directors
• Six
officio
directors
:
 The Management of the Bank
- Five governors of the central banks
- The Chairman of the Board of Governors of the US Federal
Reserve System
• Each ex officio member may appoint another member of the
same nationality
• Responsible for :
- Determining the strategic and policy direction of the BIS
- Supervising the management
- Fulfilling the specific tasks
Organization and Operating structure
 The General Meeting of Member Central Bank
 The Board of Directors
General
The Management
• the
Manager :of the Bank
(Malcolm D KNIGHT)
- Carrying out the policy by
the Board of Directors
- Being responsible to the
Board for the management of
the Bank
Goals and Objectives
A forum to promote
discussion and policy
analysis among central
banks and within the
international financial
community
A center for economic and
monetary research
A prime counterparty
for central banks in
their financial
transaction
Agent or trustee in
connection with
international financial
operations
Key Activities
Arranges
Acts
Arranges
Holds
international forums and meeting for
central banks and its senior officials
Serves
Key Activities
Acts
Holds
Acts as a center for monetary
Serves and
economic research
- a hub for sharing and publishing
statisticalArranges
information
Key Activities
Holds
Serves
Holds
Arranges
seminars and workshops
designed to
disseminate recent work undertaken
by the supervisory community
Acts
Key Activities
Serves
Arranges
as a financial consultant,
Serves
Actsassisting
central banks and other official
monetary institutions in managing
their foreign
reserves
Holds
Priority Issues
 Two major features - lower and less volatile inflation
- growing external and internal ‘imbalance’
 Due to the structural changes
1. the spread of liberalization throughout the global economy
2. the development of a more complete financial market
3. the increased focus of central banks on low inflation
 Suggestions : through an evolutionary adaptation
of current policy framework, both the domestic and
international macro-financial stabilization
framework need more systematic attention.
BIS Capital Adequacy Ratio
BIS capital adequacy ratio indicates the solvency of a bank
BIS ratio = risk bearing capital / risk-weighted assets
Banks are regarded as “healthy” when the ratio goes above a prescribed
minimum international standard, 8 percent.
6.16% ?
9.32% !!!
Weakness of BIS Ratio
weakness
Prescribed by BIS,
but conducted by
the individual financial
institution
Overvalue or
undervalue
Possibility of
manipulation
Facilitation of
fraudulent activity
Current related issue : the suspicion against Lone Star
of fabricating the data of Korean Exchange Bank
Evaluation and Criticism
• Positive evaluation on…
 keen prediction about regional and national economic crisis in the
world. (e.g. the downturns of the Mexican peso and Asian currency crises
of the 1990s)
 a sound record of being accurate in its economic forecast.
 efforts toward any Y2K computer problems
Evaluation and Criticism
• Criticism on…
 Unsuccessful relief results of the work with other
organizations : the economic crises of Asia, Latin America, and
Russia.
 The connection of Wall Street creditors
: especially in the case of Brazilian economic problems of the 1990s.
 The secrecy of the organization
Future Development
 Continuation of its effort to improve the efficiency and stability of the
international monetary and financial system
1. Illegal money laundering within the international financial system
2. the hedge fund/reinsurance firm connection
3. the use of captive offshore insurance firms
4. the absence of financial transparency in company and bank operations
 Developing ability to cope with innovations in financial system
 Promoting new rules for financial supervisory authorities
 Finding a solution to the secrecy issue
Conclusion
 The BIS, as a principal architect in the development of the global financial
market, carries out its aims and functions though encouraging financial
stability and international prosperity in the face of global change.
 BIS’s leading attempts establish harmonized international financial
reporting standards as providing consolidated banking data as a source of
market-share information .
 Greater Emphasis on disclosure of risk profiles of individual financial
institutions
THANK YOU

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