2 - Almost a Century of Central Bank Cooperation

Summary

The Bank for International Settlements (BIS) was created in 1930 primarily to administer the Young Plan, including reparations loan repayments from Germany. But the first objective of the BIS, as defined in its Statutes, is to “promote the cooperation of central banks” – to provide a meeting place for central bankers to exchange information, discuss common problems, agree on shared aims, set common standards, and possibly even provide mutual support. This objective must be viewed against the background of the 1920s, when there had been episodic, typically bilateral cooperation among central banks. Indeed, episodes of such cooperation can be found in the pre-1914 period, for example, a gold loan by the Bank of France to the Bank of England during the Baring crisis of 1890, or the discounting of English bills by the Bank of France in 1906, 1907, 1909, and 1910, thereby relieving pressure on the gold reserves of the Bank of England (Bloomfield 1959: 56). Examples can be found from even earlier, including the Latin and Scandinavian currency unions (Schloss 1958: 7–24).

With the post-1918 breakup of the Austrian, Ottoman, and Russian empires, many new countries were created that needed central banks and economic stabilization. The League of Nations had a program to assist the new states in setting up their financial systems and stabilizing their economies.