Bank of International Settlements fires its director and Hernandez de Cos is among the favorites | Economy

The Bank for International Settlements (BIS) will decide this Monday in principle who will replace the Mexican Agustin Carstens at the head of the organization. Possible candidates for the position of managing director of the BIS include former Bank of Spain governor Pablo Hernandez de Cos. According to various sources, Hernandez de Cos’s chances are high, unless there are geopolitical issues or an Asian woman. This position is very relevant because it serves to coordinate the activities of central banks and the development of international financial regulation at a time when multilateralism may be on hold with Trump in the White House. There are fears that there will be a relaxation of requirements for banks in the United States, which will drag down other countries.

Although the position of managing director does not have direct regulatory powers, it is highly respected and represents an exceptional vantage point from which to influence international economic debates and decisions, especially of the type that occurs in informal meetings between economic authorities that are usually organized by BIS. This institution participates in international forums such as the G20 or meetings of the International Monetary Fund. If Hernández de Cos is elected, his main task will be to maintain reasonable and global standards for the banking and non-banking financial sectors.

Hernández de Cos could receive broad support from central bankers, particularly ECB President Christine Lagarde, Federal Reserve President Jerome Powell and Latin American central bankers. He will be the second Spaniard to hold the post after Jaime Caruana, who was also governor of the Bank of Spain. And the third Spanish-speaking person in a row to replace the Mexican Carstens. The Bank of Spain is not on the BIS board of directors, the decision-making body made up of the 18 presidents of the largest central banks.

Perhaps one of the most notable activities of the BIS is the holding of an informal meeting of the governors of the major central banks. Every two months, about 50 central bankers meet at the BIS to discuss global economic issues, monetary policy or exchange rates. Organizational staff spend a lot of time and resources preparing discussion notes. Hence the body’s ability to influence unnoticed.

The BIS is a bank of central banks and, given the relationships it maintains with other central banks and economic authorities, the position of managing director will enhance Hernandez de Cos’s international profile. At his age, 53, this could be a gateway to other positions, such as a seat on the ECB Council, or even make him a possible candidate for the presidency of the European Bank when Christine Lagarde ends her tenure. term. This was recently stated in an article Financial Times.

Prestige at the Bank of Spain

Hernandez de Cos is widely credited with restoring much of the prestige lost by the Bank of Spain after the financial crisis. His arrival was a breath of fresh air for the institution. Flexing the bank’s muscles, he crafted a complex and detailed speech aimed at building consensus on the economic reforms Spain needed at a time of polarization. The government did not always like his words. But he is widely known for his vocation for public service, his ability to work and his technical knowledge. At the European level, according to an economist at a major investment bank, Hernandez de Cos was the only governor who was considered a dove, listened to by ECB hawks because of the soundness and soundness of his arguments. The BIS position would contribute to the success of former Vice President Teresa Ribera’s placement as Ursula von der Leyen’s number two on the European Commission.

The BIS was created after World War I to facilitate the payment of war reparations to the Germans. From the very beginning, the world’s major central banks met there to exchange information and collaborate at a time when the gold standard was in effect and communications were not what they are today. Thus, it is the oldest international financial institution, predating the IMF or the World Bank. And in fact it is the bank of central banks: it manages their external reserves, which put dollars into the BIS, and invests them, offering them a return. This activity provides funding for the institution and gives it independence.

In addition, this organization serves as a research service on monetary policy, economics and finance. It has extensive statistics that are widely used by central banks, with very comprehensive information on international financial flows and bank interest rates. It publishes an annual report and numerous research papers that have a major impact on the financial world. For years he has warned about the escalation of global debt. Its chief economist, Claudio Borio, is a highly respected voice on global economic issues.

Perhaps the most important function of the organization is the presence of several committees that serve to coordinate and set international regulatory standards: the Committee on Payment and Settlement Systems; the Basel Committee on Financial Regulation, already chaired by Hernandez de Cos and which set global capital requirements after the financial crisis and guidelines on money laundering, and the Committee on the Global Financial System, which studies the interaction between monetary policy and the financial sector. All these committees are located within the bank. Then there are others that are not part of its structure, but to which the BIS provides shelter: the Financial Stability Board, where representatives of national treasuries, central banks and bank regulators meet to analyze the risks of the system. There is also an insurance committee and a deposit insurance committee. Overall, in all these areas, the BIS serves as a catalyst for international regulatory standards. And the Institute of Financial Services, run by another Spaniard, former deputy governor of the Bank of Spain Fernando Resta, conducts crisis simulation exercises, carries out numerous studies and conducts a large number of trainings for senior staff, with a particular emphasis on this. on the use of technology.

The only organization of this type that is not under the auspices of the BIS is IOSCO, which coordinates the regulation of financial markets, and whose secretary general has been appointed another Spaniard: Rodrigo Buenaventura, who until now was president of the National Commission for Financial Markets. Markets and securities (CNMV) in Spain. Despite these names, Spaniards have traditionally been underrepresented in the BIS.

The BIS also provides services to central banks. In recent years, he has helped them develop technology prototypes in what is known as the program. Innovation Centerfor example, for wholesale digital currency, to perform economic forecasts, financial supervision, market analysis or platforms that allow cross-border payments to be more efficient, since these remittances tend to be slow and have high fees.