By Claudio Borio, Gianni Toniolo, Piet Clement
This booklet explores the earlier and way forward for significant financial institution cooperation. In contemporary worldwide financial system, the cooperation among principal banks is a key aspect in protecting or restoring financial and monetary balance, thereby making sure a gentle functioning of the foreign economic system. Or is it? during this ebook, economists, historians, and political scientists glance again on the event of imperative financial institution cooperation in past times century - at its pursuits, nature, and methods and at its successes and screw ups - and draw classes for the longer term. specific realization is dedicated to the position performed through principal financial institution cooperation within the formula of minimal capital criteria for the world over energetic banks (the Basel Capital Accord, Basel II), and within the strategy of eu financial unification and the advent of the euro.
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Extra info for The Past and Future of Central Bank Cooperation
When in late 1960 the free market price of gold shot up by over 15 percent above the official price, it was first suggested at the BIS governors’ meetings that a scheme should be created by central banks to buy and sell gold in the market in order to keep the free and official prices close to each other. The suggestion was at first dismissed, but the BIS began to monitor the London gold market closely. In the autumn of 1961, as concerns about the free market gold price increased, the US secretary of the Treasury revived with the UK chancellor the idea of joint central bank operations on the London gold market.
Thus, the Basel Club came to be an active locus of financial diplomacy. According to Bank of Italy Governor Guido Carli, in the 1960s the BIS played the dual role of decision-maker and executive organ. ” The operative side consisted in executing those decisions, subject to government approval, for instance, in the case of the support to the pound and the Gold Pool (BIS 1980). There are many reasons why the 1960s turned out to be years of intense central bank cooperation at the BIS. First, the very nature of the international monetary set-up (including the implicit political pact upon which it was based) required constant, almost day-by-day coordinated intervention on the currency and gold markets.
Within the EPU, bilateral balances were automatically offset, so that each country had one single balance, debtor or creditor, toward the EPU rather than toward its individual trading partners. At the same time, the EPU extended credits to debtor countries, drawing from a fund created by surplus balances and by an initial allocation of dollars from the US Treasury. The BIS was appointed agent for the EPU, in charge of managing multilateral settlements. The Bank had by then accumulated unrivaled experience in performing trustee and agent functions, a non-negligible part of its original mission.