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International Settlement

The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

Articles by International Settlement

What comes next? Recovery from an uneven recession

December 2, 2020

BIS Bulletin
 | 
No 33
 | 
02 December 2020

by 
Daniel Rees

PDF full text (625kb)
 | 
9 pages

Key takeaways
The effects of the Covid crisis have been felt unevenly across sectors, and the output of customer service industries could remain well below its pre-Covid trend for some time.
Economies with large customer service industries could grow more slowly in the near term, even after accounting for the stringency of containment measures and the severity of virus outbreaks.
Model projections suggest that large advanced economies could face a "98% economy" until constraints on customer service industries

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Capital flows, exchange rates and policy frameworks in emerging Asia

November 27, 2020

A report by a Working Group established by the Asian Consultative Council of the Bank for International Settlements

BIS Other
 | 
27 November 2020

PDF full text (939kb)
 | 
38 pages

Under the direction of the Asian Consultative Council of the BIS at its February 2019 meeting, the BIS Representative Office for Asia and the Pacific set up a Working Group of regional central banks to examine their policy frameworks, focusing on capital flows, exchange rates, and the joint use of monetary, macroprudential, exchange rate and capital flow management policies. The Working Group is made up of members from the central banks and

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What share for gold? On the interaction of gold and foreign exchange reserve returns

November 26, 2020

BIS Working Papers
 | 
No 906
 | 
26 November 2020

by 
Omar Zulaica

PDF full text (1,810kb)
 | 
30 pages

Summary
Focus
Gold investments still form a significant share of central banks and governments’ FX reserve portfolios. We ask whether this high share is justified from a risk-return standpoint, while investigating the variety of factors that make this a difficult question.
Contribution
We make three contributions. First, we focus on how gold affects portfolios formed purely of fixed income assets, as these more closely resemble those managed by central banks and governments in practice. Second, we

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Capital treatment of securitisations of non-performing loans

November 26, 2020

Summary of document history  

Previous version
Previousconsultation
This version
Subsequentconsultation
Subsequentversion

Revisions to the securitisation framework

11 Jul 2016

Type:  Standards

Status:  Consolidated

Capital treatment of securitisations of non-performing loans

23 Jun 2020

Type:  Consultative

Status:  Closed

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Stablecoins: potential, risks and regulation

November 24, 2020

BIS Working Papers
 | 
No 905
 | 
24 November 2020

by 
Douglas Arner,
Raphael Auer and
Jon Frost

PDF full text (2,309kb)
 | 
31 pages

Summary
Focus
Both the emergence of distributed ledger technology (DLT) and rapid advances in traditional centralised systems are moving the technological horizon of money and payments. These trends are embodied in private "stablecoins": cryptocurrencies with values tied to fiat currencies or other assets. This paper looks at market developments, how they might be monitored, the potential role of stablecoins and what this implies for their regulation.
Contribution

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Housing booms, reallocation and productivity

November 23, 2020

BIS Working Papers
 | 
No 904
 | 
23 November 2020

by 
Sebastian Doerr

PDF full text (419kb)
 | 
24 pages

Summary
Focus
Understanding the effects of house price booms on firm behaviour and the aggregate economy is a key concern for policy makers. On the one hand, rising real estate values relax firms’ financial constraints, which could lead to economic expansion and higher efficiency. However, recent studies show that house price booms can depress productivity. So far, we lack empirical evidence on the channels through which house prices affect aggregate productivity.
Contribution
The paper investigates how

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Implications of Covid-19 for official statistics: a central banking perspective

November 20, 2020

IFC Working Papers
 | 
No 20
 | 
20 November 2020

by 
Bruno Tissot and
Barend de Beer

PDF full text (348kb)
 | 
27 pages

Abstract
The impact of the Covid-19 pandemic on official statistics has been a particularly relevant issue for central banks, as both producers and users of data. As producers, they have been confronted with statistical data gaps that arose and also involved in methodological interventions to address the related challenges. As users of statistics, they needed information to pursue their monetary and financial stability policy objectives in the face of the sharp disruptions caused by the

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Bargaining power and the Phillips curve: a micro-macro analysis

November 17, 2020

BIS Working Papers
 | 
No 903
 | 
17 November 2020

by 
Marco Jacopo Lombardi,
Marianna Riggi and
Eliana Viviano

PDF full text (621kb)
 | 
57 pages

Summary
Focus
The relationship between inflation and economic activity has apparently weakened in recent years. We ask how trends in workers’ bargaining power may have played a role.
Contribution
We use a general equilibrium model to show that, when workers’ bargaining power weakens, firms to react to lower demand by cutting the number of workers (extensive margin) rather than reducing the hours per employee (intensive margin). Since the marginal cost

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Monetary policy response in emerging market economies: why was it different this time?

November 12, 2020

BIS Bulletin
 | 
No 32
 | 
12 November 2020

by 
Ana Aguilar and
Carlos Cantú

PDF full text (3,122kb)
 | 
9 pages

Key takeaways
During the Covid-19-induced financial stress in March 2020, central banks in emerging market economies (EMEs) departed from their monetary policy playbook by cutting rates even in the face of sharp currency depreciations and massive capital outflows.
Two factors were at play. First, the cyclical position of EMEs gave more room for easing of monetary policy, while structural changes improved the anchoring of inflation expectations and kept a lid on exchange rate pass-through.

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An early stablecoin? The Bank of Amsterdam and the governance of money

November 10, 2020

BIS Working Papers
 | 
No 902
 | 
10 November 2020

by 
Jon Frost,
Hyun Song Shin and
Peter Wierts

PDF full text (4,744kb)
 | 
45 pages

Summary
Focus
Trust is the bedrock of a sound monetary system. This paper examines the rise and fall of the Bank of Amsterdam (1609-1820) to gain insights on the central bank underpinnings of money. It sheds light on the governance of digital currencies.
Contribution
This paper draws lessons from the Bank of Amsterdam for the governance of money. The early operational framework of the Bank of Amsterdam resembled a "stablecoin" – where account-based money is backed

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Inside the regulatory sandbox: effects on fintech funding

November 9, 2020

BIS Working Papers
 | 
No 901
 | 
09 November 2020

by 
Giulio Cornelli,
Sebastian Doerr,
Leonardo Gambacorta and
Ouarda Merrouche

PDF full text (484kb)
 | 
42 pages

Summary
Focus
The rise of fintechs promises to spur competition in the financial sector. This could lead to sizeable efficiency gains, more choice for consumers, and enhanced financial inclusion. However, the potentially disruptive growth of firms offering novel products and services poses new challenges for financial stability and consumer protection. In response, policymakers around the world are creating "regulatory sandboxes" to

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What can commercial property performance reveal about bank valuations?

November 9, 2020

BIS Working Papers
 | 
No 900
 | 
09 November 2020

by 
Emanuel Kohlscheen and
Előd Takáts

PDF full text (335kb)
 | 
27 pages

Summary
Focus
We ask whether commercial property markets affect bank equity prices. For this purpose, we use the prices of real estate investment trusts (REITs) as a proxy for the performance of commercial property markets. Our study is based on data from the euro area, Japan and the United States, focusing on the 2003-20 period. The study includes the effects of the Great Financial Crisis and the Covid-19 pandemic.
Contribution
We test the hypothesis that REIT prices affect bank

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The macro-financial effects of international bank lending on emerging markets

November 6, 2020

BIS Working Papers
 | 
No 899
 | 
06 November 2020

by 
Iñaki Aldasoro,
Paula Beltrán,
Federico Grinberg and
Tommaso Mancini-Griffoli

PDF full text (1,388kb)
 | 
66 pages

Summary
Focus
Policy-makers and practitioners tend to see capital inflows to emerging market economies (EMEs) as expansionary, as they ease domestic financial conditions and boost credit and domestic demand. This, coupled with their volatility, implies that capital flows to EMEs are also a source of vulnerability capable of generating boom-bust cycles. Capital controls and macroprudential policies thus emerge as relevant policy

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The dawn of fintech in Latin America: landscape, prospects and challenges

November 5, 2020

BIS Papers
 | 
No 112
 | 
05 November 2020

by 
Carlos Cantú and
Barbara Ulloa

PDF full text (7,643kb)
 | 
44 pages

Fintech in Latin America is greeting the dawn. We take stock of how it is transforming financial services in the region. First, we describe the fintech landscape in terms of investment, firms and services provided. We find that fintech has quickly gained traction in Latin America, mainly in the areas of payments and alternative finance. Second, we evaluate the prospects for fintech by exploring the institutional framework to supervise and regulate it. We show that fintech regulation in the

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Implementation of Basel standards – A report to G20 Leaders on implementation of the Basel III regulatory reforms

November 3, 2020

Summary of document history  

Previous version
Previousconsultation
This version
Subsequentconsultation
Subsequentversion

Implementation of Basel standards

23 Nov 2018

Type:  Implementation reports

Status:  Current

This version

BCBS
 | 

Implementation reports

 | 
03 November 2020
 | 

Status:  Current

PDF full text (346kb)
 | 
20 pages

Topics:

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Implementation monitoring of PFMI: Level 2 assessment report for Brazil

November 3, 2020

CPMI Papers
 | 
No 196
 | 
03 November 2020

PDF full text (689kb)
 | 
56 pages

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) closely monitor the implementation of the Principles for financial market infrastructures (PFMI). This report presents the conclusions drawn by the CPMI and IOSCO from a Level 2 assessment of whether, and to what degree, the legal, regulatory and oversight framework for financial market infrastructures (FMIs) in Brazil (including rules and regulations, any relevant policy statements, or other forms of

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What Comes Next?

November 2, 2020

BIS Working Papers
 | 
No 898
 | 
02 November 2020

by 
Daniel Rees

PDF full text (987kb)
 | 
39 pages

Summary
Focus
The Covid recession has had profoundly uneven effects at an industry level. Although some industries have recovered quickly since the middle of the year, customer service industries could face ongoing constraints until a vaccine or effective treatment for the virus becomes widely available. The quantitative implications of these constraints for other industries and for aggregate GDP are uncertain.
Contribution
I use a multi-industry macroeconomic model to estimate the aggregate and

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FX execution algorithms and market functioning

October 30, 2020

Report submitted by a Study Group chaired by Andréa M Maechler (Swiss National Bank)

Markets Committee Papers
 | 
No 13
 | 
30 October 2020

PDF full text (482kb)
 | 
61 pages

On the back of increased fragmentation and automation in the FX market, the use of execution algorithms (EAs) has been on the rise. Prepared by a Markets Committee study group, this report examines the role of EAs in the FX market. It highlights key trends with regard to their increasing usage, and outlines the implications for market functioning and associated policy challenges. To complement available data and research, it draws on

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Non-US global banks and dollar (co-)dependence: how housing markets became internationally synchronized

October 29, 2020

BIS Working Papers
 | 
No 897
 | 
29 October 2020

by 
Torsten Ehlers,
Mathias Hoffmann and
Alexander Raabe

PDF full text (1,176kb)
 | 
56 pages

Summary
Focus
House prices co-move across countries, sometimes more sometimes less. We ask what US dollar funding conditions and the international banking network have to do with this co-movement.
Contribution
We make three contributions. First, we establish that net capital flows to the US indicate how easy it is for non-US global banks to obtain dollar funding. Second, we illustrate that foreign lending of these banks varies with their exposure to dollar

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Have the driving forces of inflation changed in advanced and emerging market economies?

October 28, 2020

BIS Working Papers
 | 
No 896
 | 
28 October 2020

by 
Güneş Kamber,
Madhusudan Mohanty and
James Morley

PDF full text (2,022kb)
 | 
33 pages

Summary
Focus
Inflation has remained remarkably stable in many economies since the Great Financial Crisis (GFC). The fact that inflation did not fall as much as might have been expected given the high degree of economic slack during the crisis or rise much in the recovery afterwards has raised questions about what contributed to the recent stability of inflation and whether the slope of the Phillips curve has flattened. This paper empirically investigates

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Pass-through from short-horizon to long-horizon inflation expectations, and the anchoring of inflation expectations

October 28, 2020

BIS Working Papers
 | 
No 895
 | 
28 October 2020

by 
James Yetman

PDF full text (6,903kb)
 | 
31 pages

Summary
Focus
Inflation expectations are said to be anchored if long-horizon expectations do not change very much in response to shocks. Then any deviation in inflation from target will tend to revert over time. This gives central banks greater flexibility in deciding how to respond to shocks without losing control of inflation.
Contribution
The paper uses the forecasts of professional forecasters to assess how well inflation expectations are anchored in a sample of 44 economies. It uses changes in

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The banking crisis in Ireland

October 27, 2020

FSI Crisis Management Series
 | 
No 2
 | 
27 October 2020

by 
Patrizia Baudino,
Diarmuid Murphy and
Jean-Philippe Svoronos

PDF full text (947kb)
 | 
53 pages

Executive Summary (92 KB, PDF)

This paper covers the banking crisis in Ireland that started in 2008, which stemmed from a combination of macroeconomic developments, risky bank practices and unsustainable fiscal policies. In line with the scope of this series, the paper focuses on the policy response. This involved the restructuring of the banking sector, requiring measures to restore bank capital, address asset quality issues and ensure

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Effects of eligibility for central bank purchases on corporate bond spreads

October 22, 2020

BIS Working Papers
 | 
No 894
 | 
22 October 2020

by 
Taneli Mäkinen,
Fan Li,
Andrea Mercatanti and
Andrea Silvestrini

PDF full text (352kb)
 | 
33 pages

Summary
Focus
Central banks in several advanced economies continue to rely on asset purchase programs to pursue their objectives. The costs and benefits of such policies, however, remain imperfectly understood. We try to shed light on these issues by studying the price effects of the corporate sector purchase programme (CSPP) of the European Central Bank, which involved a sizable transfer

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Assessing the fiscal implications of banking crises

October 22, 2020

BIS Working Papers
 | 
No 893
 | 
22 October 2020

by 
Claudio Borio,
Juan Contreras and
Fabrizio Zampolli

PDF full text (1,002kb)
 | 
27 pages

Summary
Focus
We propose a method to compute the probability distribution of the potential fiscal cost of a banking crisis – a key input in assessing the adequacy of a country’s fiscal buffers. Using a sample of banking crises in advanced and emerging market economies, we approximate the cost with the post-crisis increase in government debt. We then examine which pre-crisis economic developments help

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Bridging measurement challenges and analytical needs of external statistics: evolution or revolution?

October 20, 2020

IFC Bulletin
 | 
No 52
 | 
20 October 2020

PDF full text (46,291kb)
 | 
968 pages

Proceedings of the IFC Conference on external statistics, co-organised with the Bank of Portugal (BoP) and the European Central Bank (ECB), Lisbon, Portugal, 17-18 February 2020.

Conference overview

Central banks and external statistics: evolution or revolution?

Authors: 
Paula Menezes,
Fausto Pastoris,
Carmen Picon-Aguilar,
Martin Schmitz,
Nuno Silva and
Bruno Tissot

pdf

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Banking across borders: Are Chinese banks different?

October 14, 2020

BIS Working Papers
 | 
No 892
 | 
14 October 2020

by 
Eugenio Cerutti,
Catherine Koch and
Swapan-Kumar Pradhan

PDF full text (672kb)
 | 
46 pages

Summary
Focus
This paper studies the global footprint of Chinese banks, and compares it with that of other major bank nationalities. Chinese banks account for 24% of all cross-border lending to borrowers in emerging market and developing economies (EMDEs), more than double that of Japanese banks, the closest competitor. Further, almost half of all EMDE borrowers rely on Chinese banks as their most

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Bankruptcies, unemployment and reallocation from Covid-19

October 13, 2020

BIS Bulletin
 | 
No 31
 | 
13 October 2020

by 
Ryan Niladri Banerjee,
Enisse Kharroubi and
Ulf Lewrick

PDF full text (653kb)
 | 
9 pages

Key takeaways
The expected wave of business failures in the Covid-19 recession has yet to materialise, due in part to policy support, but also reflecting the inherent lag between declines in GDP and insolvencies.
Bankruptcies weigh heavily on labour markets. Unemployment typically increases three times more if a fall in GDP is accompanied by a similar-sized increase in bankruptcies.
Concentration of

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Stress-testing banks during the Covid-19 pandemic

October 12, 2020

FSI Briefs
 | 
No 11
 | 
12 October 2020

by 
Patrizia Baudino

PDF full text (531kb)
 | 
9 pages

Highlights
In response to the Covid-19 pandemic, a number of authorities that regularly conduct stress tests on individual banks adjusted their approach. They performed ad hoc exercises to assess the vulnerability of banking sectors as a whole. These exercises are different from regular ones in terms of key features such as objectives, design and methodologies, and communication.
In the short term, such stress tests can support the assessment of the pandemic’s

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The outlook for business bankruptcies

October 12, 2020

BIS Bulletin
 | 
No 30
 | 
12 October 2020

by 
Ryan Niladri Banerjee,
Giulio Cornelli and
Egon Zakrajšek

PDF full text (689kb)
 | 
9 pages

Key takeaways
Economic growth and forward-looking indicators of default risk inferred from equity markets, two variables that together predict business bankruptcies in advanced economies, show bankruptcies rising significantly by the end of 2021.
Projections of real GDP growth embedded in the consensus forecast account for the bulk of this projected increase. Unlike in previous downturns, the stock

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At the crossroads in the transition away from LIBOR – from overnight to term rates

October 9, 2020

BIS Working Papers
 | 
No 891
 | 
09 October 2020

by 
Basil Guggenheim and
Andreas Schrimpf

PDF full text (1,308kb)
 | 
27 pages

Summary
Focus
This note looks at different ways of constructing term rates from overnight rates. When LIBOR goes out of use, as planned for the end of 2021, financial contracts will need to use LIBOR’s alternative rates. For the US market, this is the Secured Overnight Financing Rate (SOFR), a measure of the cost of borrowing cash overnight collateralised by Treasury securities. However, unlike LIBOR, which is a term rate,

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