International Basel: the BIS and the Global Standard Setters — a part of the book Basel as an International Financial Centre by Dr Alexander Ressos.
Part F leaves the domestic financial centre and turns to the institutions that have made the name of Basel familiar to bankers, supervisors and finance ministers around the world. Few people outside Switzerland could locate the city on a map, yet the expressions "Basel I", "Basel II" and "Basel III" belong to the everyday vocabulary of every bank treasurer, risk manager and banking lawyer. The reason is the Bank for International Settlements, which has had its seat in Basel since 1930 and has hosted, since the 1970s, a growing family of committees and associations that set international standards for banking supervision, payment systems, insurance supervision and financial stability. A city of fewer than two hundred thousand inhabitants thus lends its name to the rules that govern capital, liquidity and risk management in the largest banks of the world.
What makes Basel a capital of international finance is therefore a concentration of governance, since the city hosts no large international market and no global banking group of its own. The central banks of the world meet there every two months, the supervisors draft their standards in its meeting rooms. Research produced at the Centralbahnplatz shapes the debate on monetary policy and financial stability. The legal framework that makes this possible deserves the attention of the lawyer, because the BIS combines the form of a company limited by shares with the status of an international organisation. Its relationship with Switzerland rests on a treaty of 1930 and a Headquarters Agreement of 1987.
The five chapters of Part F examine this international Basel. Chapter I describes the Bank for International Settlements itself: its legal foundations, its status under international and Swiss law, its shareholders, its governance and its functions as a bank for central banks and as a forum for their cooperation. Chapter II turns to the Basel Committee on Banking Supervision and the three generations of the Basel Accords. Chapter III examines how Switzerland has implemented Basel III and how the collapse of Credit Suisse has reopened the debate on the capital of systemically important banks. Chapter IV describes the Financial Stability Board, the International Association of Insurance Supervisors, the Committee on Payments and Market Infrastructures and the BIS Innovation Hub. Chapter V considers Basel as a brand of global governance, from the Basel Institute on Governance to the Basel Convention on hazardous wastes.
This part belongs to Basel as an International Financial Centre by Dr Alexander Ressos, published here in full, section by section.
The Bank for International Settlements: Foundation, Status and Governance — conclusion
The Bank for International Settlements has travelled a long way from the reparations bank of 1930. Read more Basel · International BaselThe oldest international financial institution
The Bank for International Settlements is the oldest international financial institution in the world. Read more Basel · International BaselThe founding charter in brief
Since Part D has described in detail how the BIS came into being, a short summary suffices here. Read more Basel · International BaselFrom reparations bank to central bankers' club
The reparations, the original raison d'être of the BIS, collapsed with the Hoover Moratorium of June 1931 and were effectively ended by the Lausanne Conference of 1932. Read more Basel · International BaselThe Basel arrangements of the 1960s
The defence of the Bretton Woods system of fixed exchange rates gave the governors' meetings in Basel their first great test. Read more Basel · International BaselThe new agenda of the 1970s
In 1971 the governors of the Group of Ten established the Euro-currency Standing Committee, which monitored the offshore markets in dollar deposits that had grown in London and other centres beyond… Read more Basel · International BaselEurope in Basel
For thirty years Basel was also a centre of European monetary integration. In 1964 the member states of the European Economic Community created the Committee of Governors of the Central Banks of the… Read more Basel · International BaselThe Headquarters Agreement of 1987
The Constituent Charter of 1930 regulated the status of the BIS under Swiss law in a fragmentary manner. Read more Basel · International BaselAn international organisation in the form of a company
The legal nature of the BIS has puzzled lawyers since 1930. The bank was incorporated as a company limited by shares under a special Swiss charter. Read more Basel · International BaselThe Statutes and the shareholders
The constitution of the BIS is laid down in its Statutes, which were annexed to the Constituent Charter of 1930 and have been amended many times since. Read more Basel · International BaselThe withdrawal of the private shareholders
When the BIS was founded in 1930, not all the shares ended up in the hands of central banks. The American shares were subscribed by a group of commercial banks led by J. P. Read more Basel · International BaselThe Hague arbitration
Several former private shareholders challenged the repurchase. Some of them, among them the investment fund First Eagle and individual shareholders, brought proceedings before the Commercial Court of… Read more Basel · International BaselGeneral Meeting, Board and Management
The governance of the BIS follows the pattern of a company limited by shares adapted to its public character. Read more Basel · International BaselThe General Managers
The list of General Managers reflects the evolution of the bank. The first General Manager, the Frenchman Pierre Quesnay, served from 1930 until his death in 1937, and was succeeded by Roger Auboin,… Read more Basel · International BaselA bank for central banks
The banking business of the BIS attracts little public attention, although it remains the source of its income and of its independence. Read more Basel · International BaselResearch, statistics and the Monetary and Economic Department
The Monetary and Economic Department is the intellectual centre of the BIS. Its economists analyse monetary policy, financial markets, banking and the international monetary system. Read more Basel · International BaselThe Representative Offices in Hong Kong and Mexico City
As its membership widened, the BIS opened offices outside Basel. The Representative Office for Asia and the Pacific opened in Hong Kong in July 1998, at the height of the Asian financial crisis,… Read more Basel · International BaselThe Tower at the Centralbahnplatz
For almost half a century the BIS worked in the converted hotel at the Centralbahnplatz opposite the railway station. In the 1970s the bank built its own headquarters on a nearby site. Read more Basel · International BaselThe Basel Process
The term "Basel Process" describes the way in which the BIS hosts and supports international groups that pursue financial and monetary stability. Read more Basel · International BaselThe BIS, the city and the Confederation
The relationship between the BIS and its host city has been close but discreet. The bank has contributed to the international character of Basel and has attracted a stream of high-ranking visitors to… Read more Basel · International BaselCriticism: accountability and transparency
The BIS has always attracted criticism. Its role during the Second World War, examined in Part D, has given rise to a literature that questions its neutrality and its relationship with the… Read more Basel · International BaselThe Basel Committee and the Basel Accords — conclusion
The Basel Committee began in 1974 as a modest forum for the exchange of information among supervisors who had seen how the failure of a Cologne bank could disrupt payments in New York. Read more Basel · International BaselA committee without a treaty
Few institutions have shaped the daily work of banks across the world as deeply as the Basel Committee on Banking Supervision, although it possesses neither a founding treaty nor legal personality… Read more Basel · International BaselHerstatt, Franklin National and the founding of the Committee
The immediate trigger for the Committee's founding was a series of bank failures in 1974 that exposed the gaps in the supervision of internationally active banks. Read more Basel · International BaselThe Concordat of 1975 and its revision after Banco Ambrosiano
The first substantive product of the Committee was a short paper approved by the G10 governors in December 1975, which became known as the Concordat. Read more Basel · International BaselFrom the Cooke Committee to the Capital Accord of 1988
The work on capital adequacy grew out of a different set of concerns. During the late 1970s and early 1980s, the capital ratios of large international banks declined steadily while their lending to… Read more Basel · International BaselThe market risk amendment and internal models
The Accord of 1988 addressed credit risk alone. As the trading activities of large banks expanded rapidly during the early 1990s, the losses that could arise from movements in interest rates,… Read more Basel · International BaselThe Core Principles for Effective Banking Supervision
The financial crises in Mexico in 1994 and 1995 and in Asia in 1997 drew attention to the weakness of banking supervision in emerging markets. Read more Basel · International BaselBasel II: three pillars and the turn to internal ratings
By the late 1990s, the crudeness of the 1988 risk weights had become a source of distortion. Read more Basel · International BaselCritiques of Basel II and the problem of procyclicality
Criticised from the outset, Basel II attracted a critique that grew in intensity as the framework neared implementation. The first objection concerned complexity. Read more Basel · International BaselThe crisis of 2007–2009 and Basel 2.5
The global financial crisis that began in the summer of 2007 with the turmoil in the US subprime mortgage market and reached its peak after the failure of Lehman Brothers in September 2008 was, among… Read more Basel · International BaselBasel III: capital quality, buffers and the leverage ratio
The core of the post-crisis reforms was published in December 2010 under the title "Basel III: A global regulatory framework for more resilient banks and banking systems", with a revised version in… Read more Basel · International BaselLiquidity standards: LCR and NSFR
Before the crisis, liquidity regulation had been left almost entirely to national authorities, with the Committee publishing only guidance on sound practices. Read more Basel · International BaselSystemically important banks
The crisis demonstrated that the failure of a large, complex and interconnected bank could threaten the entire financial system and that governments therefore felt compelled to rescue such banks. Read more Basel · International BaselThe finalisation of 2017 and the output floor
After the core of Basel III had been agreed, the Committee turned to the calculation of risk-weighted assets. Read more Basel · International BaselImplementation divergences: the EU, the UK and the US
The agreement of December 2017 required transposition into the law of each member jurisdiction. It is in this phase that the consensus of Basel has proved fragile. Read more Basel · International BaselMonitoring consistency: the RCAP
As its standards became more detailed, the Committee recognised that their value depended on consistent implementation. Read more Basel · International BaselMembership, Charter and the legal nature of the standards
For most of its existence, the Committee was a club of the G10 countries plus Switzerland, Luxembourg and later Spain. Read more Basel · International BaselLegitimacy debates and academic critiques
The legal informality of the Committee has prompted a long debate about its legitimacy. Read more Basel · International BaselNew frontiers: crypto-assets and digital assets and climate-related financial risks
Since 2019, the Committee has extended its work to risks that did not exist or were not recognised when the earlier accords were drafted. Read more Basel · International BaselChairs, secretariat and the Basel location
The Committee's chairs have come from the central banks and supervisory authorities of member countries. Read more Basel · International BaselSwiss Implementation of Basel III and the Post-Credit Suisse Debate — overview and summary
The previous chapter followed the Basel Committee on Banking Supervision from its foundation in 1974 to the completion of Basel III in December 2017. Read more Basel · International BaselA standard without force of law
The Basel Committee has no legal personality, no treaty basis and no power to bind its members. Read more Basel · International BaselSwitzerland at the table in Basel
Switzerland was present when the Basel Committee was created. At the end of 1974, after the failure of the Herstatt bank in Cologne and the Franklin National Bank in New York, the central bank… Read more Basel · International BaselThe chain of delegation: from the Banking Act to FINMA's ordinances
How does a Basel standard enter Swiss law? The answer lies in a chain of delegation that runs from the Federal Assembly through the Federal Council to FINMA. Read more Basel · International BaselThe Expert Commission of 2010 and the progressive component
The most consequential Swiss departure from Basel was designed by a commission of experts appointed by the Federal Council in November 2009. Read more Basel · International BaselThe Swiss contingent convertible
The proposals of the Expert Commission gave a central role to an instrument that hardly existed in 2010: debt that converts into equity or is written down when the issuing bank's capital falls below… Read more Basel · International BaselConsistency under review: the RCAP and the IMF
Because the Basel Committee cannot enforce its standards, it relies on peer review. Read more Basel · International BaselProportionality from below: the small banks regime
The Basel standards were written for internationally active banks. Many jurisdictions apply them to all their banks, however, including small savings banks and cooperative banks with purely domestic… Read more Basel · International BaselFinal Basel III, the output floor and the Swiss mortgage
The final Basel III package of December 2017 was the international response to a problem that the Swiss authorities had addressed with the leverage ratio: the variability of risk weights calculated… Read more Basel · International Basel19 March 2023: the AT1 write-down
The weekend of 18 and 19 March 2023 put the Swiss translation of Basel III to its hardest test. Read more Basel · International BaselHierarchy of claims: the reaction abroad
The reaction in other jurisdictions came within a day. On 20 March 2023, the Single Resolution Board, the European Banking Authority and ECB Banking Supervision published a joint statement on the… Read more Basel · International BaselThe litigation
The write-down provoked one of the largest bodies of litigation in Swiss legal history. Read more Basel · International BaselGoing concern, gone concern and the parent bank
The Credit Suisse case has drawn attention to a distinction that is central to the post-2008 architecture: the distinction between going-concern capital, which absorbs losses while the bank continues… Read more Basel · International BaselDid Basel III fail? The international post-mortems
The Basel Committee and the Financial Stability Board both published reports on the banking turmoil of 2023 in October of that year. Read more Basel · International BaselThe political economy of the UBS debate
The proposals of the Federal Council to require full capital backing of foreign participations at the parent level turned a technical question into a matter of national politics. Read more Basel · International BaselLessons for other jurisdictions
The Swiss experience offers several lessons for jurisdictions that implement the Basel standards. The first concerns the form of transposition. Read more Basel · International BaselFSB, IAIS, CPMI and the BIS Innovation Hub — conclusion
The Basel Process has turned the city into the centre of a network of committees and associations that shape the regulation of banks, insurers, deposit insurers, payment systems and financial market… Read more Basel · International BaselThe Basel Process
The Bank for International Settlements is often described as the bank of central banks. Read more Basel · International BaselFrom the Financial Stability Forum to the Financial Stability Board
The Financial Stability Board grew out of the Asian financial crisis of 1997 and 1998. Read more Basel · International BaselThe FSB as a Swiss association
For its first years, the FSB had no legal personality. It was a forum of authorities whose secretariat was employed by the BIS and housed in its building. Read more Basel · International BaselChairs, Plenary and working methods
The chairs of the FSB have been drawn from the senior ranks of central banking. Mario Draghi, who had chaired the FSF since 2006, became the first chair of the FSB in 2009 and remained in office… Read more Basel · International BaselResolution and the Key Attributes
The most important contribution of the FSB to international financial regulation is its framework for the resolution of failing financial institutions. Read more Basel · International BaselG-SIBs, peer reviews and non-bank financial intermediation
Since November 2011, the FSB has published an annual list of global systemically important banks (G-SIBs). Read more Basel · International BaselThe FSB and crypto-assets and digital assets
The FSB turned its attention to crypto-assets and digital assets in 2018, when the rapid growth of the markets for bitcoin and other tokens raised the question of whether they posed risks to… Read more Basel · International BaselThe International Association of Insurance Supervisors
Insurance supervisors organised themselves internationally later than banking supervisors. Read more Basel · International BaselIADI and the protection of depositors
The International Association of Deposit Insurers (IADI) was established in May 2002 as an association under Swiss law, with its secretariat at the BIS in Basel. Read more Basel · International BaselThe CPMI and financial market infrastructure
The Committee on Payments and Market Infrastructures has a longer history than its present name suggests. Read more Basel · International BaselMarkets Committee, CGFS and Irving Fisher Committee
Three further central bank committees complete the picture of the Basel Process. The Markets Committee is the oldest of them. Read more Basel · International BaselThe Financial Stability Institute and central bank governance
The Financial Stability Institute (FSI) was set up by the BIS and the Basel Committee at the end of the 1990s, with the task of assisting financial sector supervisors around the world in improving… Read more Basel · International BaselThe BIS Innovation Hub
The BIS Innovation Hub is the most recent addition to the Basel Process. It was established in 2019 with the mandate to identify and develop in-depth insights into critical trends in technology… Read more Basel · International BaselBasel, Washington and Madrid
The Basel bodies do not work in isolation. Their relationship with the International Monetary Fund and the World Bank in Washington is one of division of labour. Read more Basel · International BaselLegitimacy and accountability of transgovernmental networks
The bodies described in this chapter have been analysed in legal and political science as transgovernmental networks. Read more Basel · International BaselBasel as a Brand of Global Governance: Institute on Governance, Basel Convention — conclusion
"Basel" has become a name for international regimes through a long accumulation of history and institutions. Read more Basel · International BaselA city name as an institutional label
Most cities are known abroad for their monuments, their football clubs or their products. Basel is known in a stranger way. Read more Basel · International BaselWhy Basel became a name for international regimes
Several factors explain why the name of a medium-sized Swiss city attached itself to international regimes. The first is geography. Read more Basel · International BaselEarlier Basel names in world history
The use of the city's name for events of international significance did not begin with the BIS. Read more Basel · International BaselThe Basel Convention: origins
The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal is today the most widely ratified environmental treaty bearing the city's name. Read more Basel · International BaselStructure and obligations of the Convention
The Convention rests on a few core principles. Transboundary movements of hazardous wastes and other wastes shall be reduced to the minimum consistent with their environmentally sound management. Read more Basel · International BaselThe Ban Amendment and the plastic waste amendments
From its beginning the Convention was criticised by African states and environmental organisations for regulating the waste trade instead of prohibiting it. Read more Basel · International BaselThe BRS conventions
The Basel Convention does not stand alone. Two further treaties deal with hazardous chemicals. Read more Basel · International BaselHazardous waste, environmental crime and finance
At first sight the Basel Convention has little to do with a financial centre. A closer look shows several connections. Read more Basel · International BaselThe Basel Institute on Governance as a governance brand
Part E, Chapter III introduced the Basel Institute on Governance from the perspective of anti-money laundering law. Read more Basel · International BaselPublic governance
The public governance work of the Institute addresses the conditions under which corruption arises in the state. Read more Basel · International BaselCollective action and the private sector
A distinctive contribution of the Institute concerns collective action against corruption. The idea is simple to state. Read more Basel · International BaselGreen corruption
In recent years the Institute has added a programme on what it calls green corruption. Read more Basel · International BaselAcademic programmes and training
The Institute has also made a mark in education. It offers training for prosecutors, investigators and analysts, often in partner countries, and has developed courses on asset recovery, financial… Read more Basel · International BaselSwisspeace and the University of Basel
A second Basel institution in the field of global governance is swisspeace, the Swiss Peace Foundation. Read more Basel · International BaselSwitzerland as host state and the policy of the canton
The international organisations in Basel exist on the basis of agreements with the Swiss Confederation. Read more Basel · International BaselThe Basel Committee as a brand
Among all Basel brands, the Basel Committee on Banking Supervision is the most powerful. Its accords have given the city's name a permanent place in the vocabulary of finance. Read more Basel · International BaselConferences, fairs and soft power
A brand of global governance depends on more than standards. It also needs places where people meet. Basel's role as a meeting place goes back to the Council and the fairs of the fifteenth century. Read more Basel · International BaselThe risks of the brand
A brand built on standards carries particular risks. Its value depends on the credibility of the standards, and that credibility can be damaged by failures that have nothing to do with the city… Read more Basel · International BaselThe practitioner's view
For a lawyer who advises banks, asset managers, fiduciaries and private clients across borders, the Basel brand is a matter of daily work. Read more