This page intentionally left blank P1: SBT 9780521877794pre CUUS250/Borio 978 521 87779 May 15, 2008 22:45 past and future of central bank cooperation This book explores the past and future of central bank cooperation In today’s global economy, the cooperation among central banks is a key element in maintaining or restoring monetary and financial stability, thereby ensuring a smooth functioning of the international financial system Or is it? In this book, economists, historians, and political scientists look back at the experience of central bank cooperation during the past century, at its goals, nature, and processes, and at its successes and failures, and draw lessons for the future Particular attention is devoted to the role played by central bank cooperation in the formulation of minimum capital standards for internationally active banks (the Basel Capital Accord, Basel II) and in the process of European monetary unification and the introduction of the euro Claudio Borio is Head of Research and Policy Analysis at the Bank for International Settlements (BIS), where he has worked since 1987, covering various responsibilities in the Monetary and Economic Department Dr Borio was formerly a Lecturer and Research Fellow at Brasenose College, Oxford, and an economist at the Organisation for Economic Co-operation and Development (OECD) He holds a D.Phil and an M.Phil in economics from Oxford and has published extensively in the fields of monetary policy, banking, finance, and issues related to financial stability Gianni Toniolo is Research Professor of Economics and History at Duke University, Durham, NC; a Research Fellow of the Centre for Economic Policy Research (CEPR), London; and a member of the Academia Europæa He was previously Professor of Economics at the University of Rome, Tor Vergata, and at Ca’ Foscari, the University of Venice He is a former President of the European Historical Economics Society Toniolo’s books include An Economic History of Liberal Italy, 1850–1918 (1990); Central Bank Cooperation at the Bank for International Settlements (Cambridge University Press, 2005, with the assistance of Piet Clement); and The International Economy Between the Wars (2008, with Charles H Feinstein and Peter Temin) Piet Clement is Head of Library, Archives, and Research Support at the Bank for International Settlements He holds a Ph.D in history from the Catholic University of Leuven, Belgium, and has published on the history of international cooperation and of the BIS i P1: SBT 9780521877794pre CUUS250/Borio 978 521 87779 ii May 15, 2008 22:45 P1: SBT 9780521877794pre CUUS250/Borio 978 521 87779 May 15, 2008 22:45 Studies in Macroeconomic History series editor: Michael D Bordo, Rutgers University editors: Marc Flandreau, Institut d’Etudes Politiques, Sciences Po, Paris Chris Meissner, University of California, Davis Franc¸ois Velde, Federal Reserve Bank of Chicago David C Wheelock, Federal Reserve Bank of St Louis The titles in this series investigate themes of interest to economists and economic historians in the rapidly developing field of macroeconomic history The four areas covered include the application of monetary and finance theory, international economics, and quantitative methods to historical problems; the historical application of growth and development theory and theories of business fluctuations; the history of domestic and international monetary, financial, and other macroeconomic institutions; and the history of international monetary and financial systems The series amalgamates the former Cambridge University Press series Studies in Monetary and Financial History and Studies in Quantitative Economic History Other books in the series: Howard Bodenhorn, A History of Banking in Antebellum America Michael D Bordo, The Gold Standard and Related Regimes Michael D Bordo and Forrest Capie (eds.), Monetary Regimes in Transition Michael D Bordo and Roberto Cort´es Conde (eds.), Transferring Wealth and Power from the Old to the New World Richard Burdekin and Pierre Siklos (eds.), Deflation: Current and Historical Perspectives Trevor J O Dick and John E Floyd, Canada and the Gold Standard Barry Eichengreen, Elusive Stability Barry Eichengreen (ed.), Europe’s Postwar Recovery Caroline Fohlin, Finance Capitalism and Germany’s Rise to Industrial Power Michele Fratianni and Franco Spinelli, A Monetary History of Italy Continued after the index iii P1: SBT 9780521877794pre CUUS250/Borio 978 521 87779 iv May 15, 2008 22:45 P1: SBT 9780521877794pre CUUS250/Borio 978 521 87779 May 15, 2008 Past and Future of Central Bank Cooperation Edited by claudio borio Bank for International Settlements gianni toniolo Duke University piet clement Bank for International Settlements v 22:45 CAMBRIDGE UNIVERSITY PRESS Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521877794 © Bank for International Settlements 2008 This publication is in copyright Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press First published in print format 2008 ISBN-13 978-0-511-42918-7 eBook (EBL) ISBN-13 hardback 978-0-521-87779-4 Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate P1: SBT 9780521877794pre CUUS250/Borio 978 521 87779 May 15, 2008 22:45 Contents Acknowledgments Contributors page ix xi Introduction: Past and Future of Central Bank Cooperation Piet Clement One Hundred and Thirty Years of Central Bank Cooperation: A BIS Perspective Claudio Borio and Gianni Toniolo 16 Almost a Century of Central Bank Cooperation Richard N Cooper Architects of Stability? International Cooperation among Financial Supervisors Ethan B Kapstein 113 Central Banks, Governments, and the European Monetary Unification Process Alexandre Lamfalussy 153 The Future of Central Bank Cooperation 174 Beth A Simmons vii 76 P1: SBT 9780521877794pre CUUS250/Borio 978 521 87779 May 15, 2008 22:45 Contents Interdependence and Cooperation: An Endangered Pair? Tommaso Padoa-Schioppa 211 Bibliography 221 Index 237 viii P1: JyD 9780521877794bib CUUS250/Borio 978 521 87779 May 23, 2008 18:35 Bibliography Neely, C J (2000) “The practice of central bank intervention: Looking under the hood.” Federal Reserve Bank of St Louis Review, 83(3), 1–10 O’Rourke, K H and J G Williamson (1999) Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy Cambridge: MIT Press Oatley, T and R Nabors (1998) “Redistributive cooperation: Market failure, wealth transfers and the Basel Accord.” International Organization, 52(1), 35–54 Obstfeld, M and K S Rogoff (1995) “Exchange rate dynamics redux.” The Journal of Political Economy, 103(3), 624–60 Obstfeld, M and K S Rogoff (2002) “Global implications of self-oriented national monetary rules.” The Quarterly Journal of Economics, 117(2), 503–35 Orphanides, A and J C Williams (2003) “Imperfect knowledge, inflation expectations, and monetary policy.” NBER Working Paper No 9884 Padoa-Schioppa, T and F Saccomanni (1994) “Managing a market-led global financial system,” in Managing the World Economy: Fifty Years After Bretton Woods Washington DC: IIE, pp 235–68 Padoa-Schioppa, T (2004, March 22) “The evolving European financial landscape: Integration and regulation.” Remarks to the Groupe Caisse des D´epoˆ ts/KfW, Berlin (Available online at http://www.ecb.int.) Peltzman, S (1976) “Toward a more general theory of regulation.” Journal of Law and Economics, 19, 211–40 Picciotto, S (1997) “Networks in international economic integration: Fragmented states and the dilemmas of neo-liberalism.” Northwestern Journal of International Law and Business, 17(2/3), 1014–56 Posen, A (2002) “A strategy to prevent future crises.” Unpublished manuscript, IIE, October Putnam, R (1988) “Diplomacy and domestic politics: The logic of two-level games.” International Organization, 42(3), 427–60 Quintyn, M and M W Taylor (2003) “Regulatory and supervisory independence and financial stability.” CESifo Economic Studies, 49(2), 259–94 Rogoff, K S (1985) “Can international monetary cooperation be counterproductive?” Journal of International Economics, 18, 199–217 Rogoff, K S (2003) “A vote against grandiose schemes.” Finance and Development, 40(1), pp 56–7 Rogoff, K S (2005) “Let it ride.” Foreign Policy, 147 (March/April), pp 74–5 Rosenberg, M R (1993) “Is G-7 coordinated intervention responsible for greater stability of exchange rates?” Journal of Asian Economics, 4(2), 397–405 232 P1: JyD 9780521877794bib CUUS250/Borio 978 521 87779 May 23, 2008 18:35 Bibliography Roubini, N and B Setser (2005) “Will the Bretton Woods regime unravel soon? The risk of a hard landing in 2005–2006.” (Available online at http://pages.stern nyu.edu/∼nroubini/papers/BW2-Unraveling-Roubini-Setser.pdf.) Rubin, R E (2003) In an Uncertain World New York: Random House Saccomanni, F (2002) “Tigri globali, domatori nazionali Il difficile rapporto tra finanza globale e autorit`a monetarie nazionali.” Studi e Ricerche, Bologna: Il Mulino, p 312 Santos, J A C (2001) “Bank capital regulation in contemporary banking theory: A review of the literature.” Financial Markets, Institutions & Instruments, 10(2), 41–84 Sarno, L and M P Taylor (2001) “Official intervention in the foreign exchange market: Is it effective and, if so, how does it work?” Journal of Economic Literature, 39(3), 839–68 Sayers, R (1976) The Bank of England 1891–1944 Cambridge: Cambridge University Press Schacht, H H G (1956) Confessions of “The Old Wizard.” Boston: Houghton Mifflin Schloss, H H (1958) The Bank for International Settlements Amsterdam: NorthHolland Schneider, B (2001, April 11) “International financial architecture: Have we done enough to set it right?” Speech delivered at the Overseas Development Institute Schwartz, A J (2000) “The rise and fall of foreign exchange market intervention.” NBER Working Paper No 7751 Siebert, H (2003) “Should G-7 policy coordination be revived?” The International Economy, Fall Simmons, B A (1993) “Why innovate? Founding the Bank for International Settlements, 1929–30.” World Politics, 45(3), 361–405 Simmons, B A (1994) Who Adjusts: Domestic Sources of Foreign Economic Policy during the Interwar Years Princeton: Princeton University Press Simmons, B A (1996) “Rulers of the game: Central bank independence during the interwar years.”International Organization, 50(3), 407–43 Simmons, B A (2001) “The international politics of harmonization: The case of capital market regulation.” International Organization, 55(3), 589–620 Singer, D A (2004) “Capital rules: The domestic politics of international regulatory harmonization.” International Organization, 58(3), 531–65 Slaughter, A.-M (1997) “The real world order.” Foreign Affairs, 76(5), 183–97 Slaughter, A.-M (2000) “Governing the global economy through government networks,” in M Byers (ed.), The Role of Law in International Politics: Essays 233 P1: JyD 9780521877794bib CUUS250/Borio 978 521 87779 May 23, 2008 18:35 Bibliography in International Relations and International Law Oxford: Oxford University Press, pp 177–205 Slaughter, A.-M (2004) “Disaggregated sovereignty: Towards the public accountability of global government networks.” Government and Opposition, 39(2), 159–90 Smith, R and I Walter (n.d.) “Megabanks: Too big to fail, too big to monitor, too big to regulate?” New York University, unpublished manuscript Solomon, R (1977) The International Monetary System, 1945–1976 New York: Harper & Row Solomon, R (1999) Money on the Move Princeton: Princeton University Press Summers, L H (2004, October 3) “The US current account deficit and the global economy.” Speech delivered at The Per Jacobsson Lecture, Washington DC Sundararajan, V., D Marston and R Basu (2001, May) “Financial system standards and financial stability: The case of the Basel Core Principles.” IMF Working Paper WP/01/62 Tanaka, M (2003) “The macroeconomic implications of the new Basel Accord.” Cesifo Economic Studies, 49(2), 217–32 Tew, B (1970) International Monetary Cooperation 1945–1970 London: Hutchinson & Co Toniolo, G., with the assistance of P Clement (2005) Central Bank Cooperation at the Bank for International Settlements, 1930–1973 Cambridge-New York: Cambridge University Press Truman, E M (2003) “A critical review of coordination efforts in the past,” in H Siebert (ed.), Macroeconomic Policies in the World Economy Heidelberg: Springer Truman, E M (2005) “The euro and prospects for policy coordination,” in A S Posen (ed.), The Euro at Five: Ready for a Global Role? Washington DC: IIE Van Walre de Bordes, J (1924) The Austrian Crown: Its Depreciation and Stabilization London: P S King & Son Volcker, P and T Gyohten (1992) Changing Fortunes: The World’s Money and the Threat to American Leadership New York: Times Books Volcker, P (2005) “An economy on thin ice.” Washington Post, April 10, p White, W R (1996) “International agreements in the area of banking and finance: Accomplishments and outstanding issues.” BIS Working Papers No 38 White, W R (2000) “What have we learned from recent financial crises and policy responses?” BIS Working Papers No 84 234 P1: JyD 9780521877794bib CUUS250/Borio 978 521 87779 May 23, 2008 18:35 Bibliography Wooldridge, P (2002) “Globalising international banking.” BIS Quarterly Review, March, pp 41–51 Working Group on Strengthening Financial Systems (1998) Report of the Working Group on Strengthening Financial Systems (Available online at http://www.bis.org) Wyplosz, C (1998) “Globalised financial markets and financial crises,” in J J Teunissen (ed.), Regulatory and Supervisory Challenges in a New Era of Global Finance The Hague: Forum on Debt and Development Zaring, D (1998) “International law by other means: The twilight existence of international financial regulatory organizations.” Texas International Law Journal, 33, 281–330 235 P1: JyD 9780521877794bib CUUS250/Borio 978 521 87779 236 May 23, 2008 18:35 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 17:1 Index ABN Amro, 143 Adenauer, Konrad, 87 APEC See Asia-Pacific Economic Co-operation Arabian countries monetary co-operation among, 12 Argentina See also Baring crisis, 60 ASEAN See Association of South-East Asian Nations Asia, 68, 132, 133, 209 Asian crisis, 6, 10, 56, 60, 113, 115, 117, 125, 132–136, 196 monetary co-operation in, 54, 208, 210 Asian Bond Funds, 68, 106 Asia-Pacific Economic Co-operation (APEC), 207 Association of South-East Asian Nations (ASEAN), 207 Australia, 85, 193 Austria, 36, 83, 196 autarky, 18, 36–38 Baden Baden conference (1929) and the foundation of the BIS, 34 Baer, Gunter D., 59 Baker Plan (1986), 99 Baker, James, 100, 110 Banco Ambrosiano See banking failures Bank for International Settlements (BIS) and membership to the FSF, 194, 195 and secretarial support to G7 working groups, 57 and secretarial support to the Committee of Governors of the EEC central banks, 58 and the Gold Pool, 44–46 and the reform of the international monetary system, 43 Annual Reports, 17, 55, 60, 63, 74, 80, 83, 84, 95, 168 as Agent for the Asian Bond Funds, 106 as Agent for the EPU, 42, 86 as an expression of central banks’ independence, as an instrument of technical co-operation, 35 as facilitator of the Delors Committee, 58 Basel club, 43, 44 emergency credits, 196 foundation of, 3, 16, 31, 32, 34, 35, 69, 76 informal committees, meetings at the, 23, 43, 47, 50, 83, 92, 96, 126, 127, 149, 158 237 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 17:1 Index Bank for International Settlements (cont.) member central banks, 68, 96, 115, 177, 181, 184, 204, 209 opposition to, 39 Representative Offices, 68, 74 role in data collection, 95 role of, 7, short-term credits, 196 stabilization loan, 83 Statutes of, 16, 76 support credits, 196 Bank of Canada, 68, 81, 197 Bank of Credit and Commerce International See banking failures Bank of England, 3, 16, 29, 32–34, 46–48, 61, 74, 76, 77, 81, 91, 92, 109, 122, 126, 127, 142, 150, 197 and the Gold Pool, 46 Bank of France, 29, 32, 76, 78, 81, 90 discounting of English bills by the, 76 Bank of Italy, 33, 44 Bank of Japan, 68, 100–102, 106, 110, 111, 199 as member of the BIS, 209 Bank of Korea as member of the BIS, 209 Bank of Mexico, 98 swap facility to the, 99 Bank of Russia See State Bank of the Russian Empire Bankhaus Herstatt See banking failures banking crises, 3, 29, 36, 71, 123, 193, 194 banking failures Banco Ambrosiano, 61, 129 Bank of Credit and Commerce International, 61 Bankhaus Herstatt, 8, 9, 55, 60, 62, 63, 126 Continental Illinois Bank, 125 Creditanstalt, 36, 37 First Chicago Bank, 125 Franklin National Bank of New York, 9, 60, 125, 126 Republic Bank, 125 banking supervision, 6, 8, 9, 13, 114, 213 banks of issue, emergency lending among, 29 Baring crisis, 76, 195 Basel Capital schemes, 7, 122, 144, 190, 191, 193 See also Basel I, Basel II Basel Committee on Banking Supervision (BCBS), 9, 50, 64–67, 125–129, 131, 136, 144, 191, 192, 213 and membership to the FSF, 194, 195 member countries, 193 Basel Concordat, 61, 125, 128 Basel Core Principles for Effective Banking Supervision, 61, 64, 115, 136, 145 Basel Group Arrangements (sterling), 92, 196 See also Sterling Group Arrangements Basel I, i, 9, 10, 61, 115, 125, 131, 143, 145, 148, 191, 193 launch of, 131 Basel II, i, 9, 10, 62, 115, 131, 136–138, 140, 143–146, 148, 150, 192–194 IRB (internal ratings-based) approach, 193 Basel III, 150 BCBS See Basel Committee on Banking Supervision Belgium, 86 Bellagio Group, 207 benign neglect, 5, 48 Bernanke, Ben, 203 bilateral agreements establishment of, 32 Blum, L´eon, 81 Blunden, George, 128 Bonn summit (1978), 53 Borio, Claudio, i, 16, 169 Brady Plan (1989), 99 Brazil, 60, 96 Bretton Woods system, 4–6, 18–20, 25, 39, 40, 43, 48, 49, 51, 52, 63, 69, 70, 74, 103, 124, 125, 196, 207, 208 collapse of, 17, 49, 213 Brussels international monetary conference (1892), 30 Bulgaria, 77 Burma, 85 Burns, Arthur, 96 Camdessus, Michel, 113 Canada, 85, 91–93, 100, 120, 193 and the adoption of Basel II, 192 238 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 17:1 Index capital adequacy, 118, 130, 131, 135, 143, 145 Carli, Guido, 44 CBRC See China Banking Regulatory Commission central banks central banking principles, 33 See also Norman, Montagu core functions of, definition of, 81, 82 functions in the pre-1914 period, 26 independence of, 7, 8, 11, 14, 22, 23, 25, 33, 57, 66, 82, 161, 166, 176, 208 lender of last resort, 1, 9, 114, 120, 122, 129, 133, 141, 176 note-issuing, political control over, 180 role in the restoration of gold convertibility, 25 swap arrangements, 5, 90, 104, 106, 196, 197 Ceylon (now Sri Lanka), 85 CGFS See Committee on the Global Financial System Chiang Mai initiative (2000), 90, 106, 196 China, 12, 14, 90, 96, 193, 202, 204, 206–208 China Banking Regulatory Commission (CBRC), 193 Citicorp, 122 clearing and settlement systems, Clement, Piet, i, Clinton, Bill, 133 CLS (Continuous Linked Settlement) Bank, 63 collateralized debt obligations, 142 Committee of Governors of the Central Banks of the Member States of the European Community, 58 mandate of, 58, 154, 158, 159 Committee on Payment and Settlement Systems (CPSS), 50, 64, 67, 213 and membership to the FSF, 195 Committee on the Global Financial System (CGFS), 64 and membership to the FSF, 195 Comptroller of the Currency as member of the Fed Board of Governors, 81 concerted support, 91 Continental Illinois Bank See banking failures Cooper, Richard N, 76 Cortelyou, George B, 31 CPSS See Committee on Payment and Settlement Systems crash of 1929, 78 crash of 1987, 102 credit creation, 108 credit default swaps, 142 credit risk, 60, 142, 143, 145, 193 Credit Suisse, 143 Creditanstalt See banking failures Crockett, Andrew D, 64, 195 Cross Report (1982), 63 currency devaluations, 212 currency manipulation, 4, 206 Danzig, 83 Dawes and Young loans, 96 de Gaulle, Charles, 93 de la Madrid, Miguel, 98 debt crisis, 6, 19, 55, 56, 98, 129, 130, 132 deflation, Delors Committee, 58, 154, 157, 158, 169 Delors Plan (1989), 103 Delors Report (1989), 155 Delors, Jacques, 158 Denmark and the European monetary unification process, 158 derivatives, 5, 10, 64, 95, 121, 142, 143 Deutsche Bank, 143 Deutsche Bundesbank, 88, 91, 98, 102, 103, 105, 111, 161 dollar depreciations, 95, 97, 101 dollar standard, 40 Dubai meeting (2003), 204 Dublin summit (1990), 158 Duisenberg, Wim, 159 239 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 17:1 Index ECB See European Central Bank Ecofin, 101, 104, 162, 164, 165 economic and monetary union, 54, 103, 153, 157 ecu See European currency unit Einaudi, Luigi, 215 EMCF See European Monetary Co-operation Fund EMEAP See Executives’ Meeting of East Asia and Pacific central banks Emergency Stabilization Fund (ESF), 133 emerging market economies, 6, 19, 55, 56, 62, 67, 115, 128, 135, 136, 138, 190, 204 EMI See European Monetary Institute Emminger, Otmar, 98 EMU See European Monetary Union EPU See European Payments Union ERM See exchange rate mechanism ESCB See European System of Central Banks ESF See Emergency Stabilization Fund Estonia, 77 euro launch of the, 11, 106 eurocurrency market, 5, 8, 40, 48, 49, 70 Euro-Currency Standing Committee, 63 See also Standing Committee on the Euro-Currency Market eurodollar market, 55, 88, 94, 95 European banking conference (2004), 210 European Central Bank (ECB), 11, 101, 103, 105, 166, 197, 201 and membership to the FSF, 195 foundation of, 103, 105, 155, 158 headquarters in Frankfurt, 67 independence of the, 159 monetary statistics, 171 European Commission, 67, 153 Green Paper “The practical arrangements for the introduction of the single currency”, 162 European currency unit (ecu), 105 creation of, 158 private ecu, 59 European Economic Community, European Monetary Co-operation Fund (EMCF), 59, 103–105 European Monetary Institute (EMI), 10, 103, 155, 165 Annual Reports, 160, 165 Convergence Report (1996), 165 Report “The changeover to the single currency” (1995), 162 European Monetary System (EMS), 54, 70, 80, 97, 103, 104 European monetary unification process, 2, 11, 153–155 European Monetary Union (EMU), 5, 11, 58, 154 European Payments Union (EPU), 4, 42, 74, 85, 86, 153, 154, 166 foundation of, 86 European System of Central Banks (ESCB), 59, 103, 158, 167, 199 Statute of, 59 exchange rate, 12, 17, 25, 41, 51, 54, 70, 103–107, 111, 197, 198–202, 205 co-operation on, 7, 17, 57, 70, 208 discussions at the BIS, 57 fixed, 4–6, 19, 29, 40, 43, 48, 52, 69, 70, 74, 95, 125, 174, 208, 209 floating, 5, 6, 19, 38, 49, 52, 104, 108, 110, 125 management, 26, 82, 176, 197–199, 208 mechanism, 59, 105 pegging, 4, 32, 84, 125, 161, 206 speculative pressure on, 49 stability of, 29, 40 stability of “tripolar”, 201 exchange risk, 63, 82 Executives’ Meeting of East Asia and Pacific central banks (EMEAP), 68, 106 member central banks, 106 Fed See Federal Reserve Bank Federal Open Market Committee (FOMC), 109, 200 Federal Reserve Bank, 8, 42, 68, 77, 78, 81, 82, 90, 93, 96, 99, 101, 109–111, 166, 176, 197, 198, 200, 201, 203, 207, 217 involvement in BIS activities, 175 swap lines, 92 240 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 17:1 Index Federal Reserve Bank of Chicago, 78, 110 Federal Reserve Bank of New York, 33, 34, 43, 45, 77, 78, 82, 91, 97 first meeting at the BIS, 45 Federal Reserve Board, 88, 96, 97, 102, 108 Federal Reserve System, 81 fiat money regime, 19, 32 financial crises, 10, 132–134, 176, 185, 212 financial instability, 19, 20, 27, 50, 54–56, 63, 69, 70, 122, 125, 126, 190 financial institutions, 6, 10, 56, 64, 65, 114, 116, 120–123, 125, 128, 129, 131, 141, 149, 151, 193, 194 financial instruments, 151 Financial Sector Policy Forum See Financial Stability Forum financial stability, i, 1–3, 5, 6, 10, 12, 18, 19, 21, 24, 27, 29, 31, 36, 40, 49, 57, 62, 66, 69–71, 74, 115–119, 122–125, 134, 137, 140, 141, 144, 145, 149, 171, 190, 194, 195 definition of, 19 Financial Stability Forum (FSF), 64, 67, 134, 213 mandate of, 194 members of, 194, 195 Financial Stability Institute (FSI), 67 financial supervision, 116, 119, 121, 123, 128, 131, 194 First Chicago Bank See banking failures fiscal policy, 33, 110, 141, 148, 171 FOMC See Federal Open Market Committee foreign direct investments, 202 foreign exchange markets co-operation in, 32 France, 86, 87, 97, 120 withdrawal from the Gold Pool, 47, 89, 93 Franklin National Bank of New York See banking failures French franc devaluation of the, 87, 93 Friedman, Milton, 215 FSF See Financial Stability Forum FSI See Financial Stability Institute G5, 53, 97 central banks’ participation in the, 82 G6, 100 G7, 53, 64, 67, 97, 111, 204 G8, 2, 113, 137 G10, 8, 43, 44, 49, 55, 56, 60, 63, 67, 88, 94, 115, 126–128, 135, 136, 144, 179, 181, 182–184, 190, 202 central banks’ participation in the, 82 role in debt crises, 133 G20, 179, 184 GAB See General Arrangements to Borrow General Arrangements to Borrow (GAB), 43, 88, 91, 92 Genoa conference (1922), 16, 33 German reparations, 4, 16, 31, 33, 76, 185 role in the foundation of the BIS, 34 Germany, 36, 37, 53, 70, 76, 86–88, 120, 162, 185, 196, 201 role in the ECB’s independence, 161 Global 2000 Coordination Group, 67 globalization, 120 first, 3, 27 second, 52 Gold and Foreign Exchange Committee, 57 gold arrangements See two-tiered gold arrangements gold convertibility, 3, 20, 21, 25, 27, 28, 33, 34, 40, 45, 69, 77, 78, 83, 87 suspension of, 89, 95, 96 gold inflow sterilization See sterilization Gold Pool, 4, 5, 21, 40, 43–47, 88–90 member central banks, 89 gold sales, 87 gold standard, 3, 18, 19, 26, 29, 31, 36, 69, 84, 174, 175, 208 abandonment of, 36 classical, 27 end of the classical, 32 new, 33 reform of the, 38 reinstatement in the 1920s, 26 Goldman Sachs, 122 Graham, Lindsey, 206 241 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 17:1 Index Great Depression, 4, 24, 25, 27, 36, 53, 71, 83 Greenspan, Alan, 81, 210 Group of Experts on Payment Systems, 62 Gulf countries monetary co-operation in, 54 “hard law”, 8, 50 Hayek, Friedrich von, 215 Hayes, Alfred, 45 home country control, 128, 129, 136 Hong Kong, 68, 96, 106 Hoover administration, 176 Hoover moratorium, 16, 83 host country control, 129 house in order doctrine, 13, 214–216 precept, 13, 54, 211 Hungary, 36, 77, 83, 196 IADI See International Association of Deposit Insurers IAIS See International Association of Insurance Supervisors Iceland, 85 IMF See International Monetary Fund India, 14, 85, 96, 193, 207, 208 Indonesia, 106, 193 inflation, 5, 25, 31, 33, 53–55, 59, 70, 88, 89, 91, 97, 98, 108, 125, 159, 160, 165 Great Inflation phase, 25, 54 hyperinflation, 53 information sharing, 12, 17, 128, 184, 188, 191 interdependence, 5, 13, 117, 211–214, 218 interest rate equilibrium interest rate, 187 Intergovernmental conference on EMU (1991), 158 International Accounting Standards Board and membership to the FSF, 195 International Association of Deposit Insurers (IADI), 67 International Association of Insurance Supervisors (IAIS), 67 and membership to the FSF, 195 International Monetary Fund (IMF), 2, 43–45, 47, 48, 56, 60, 61, 64–67, 88, 91, 92, 98, 99, 104, 106, 113, 130, 133, 136, 137, 145, 148, 176, 182, 186, 188, 196, 203, 213 and membership to the FSF, 195 Articles of Agreement, 87, 103 Reports on the Observance of Standards and Codes, 185 stabilization loan, 60, 98 International Organization of Securities Commissions (IOSCO), 67, 137, 144 and membership to the FSF, 195 IOSCO See International Organization of Securities Commissions Iraq, 85 Ireland, 85 Islamic banking systems, 193 isolationism, 4, 13 Italy, 91, 120 abandonment of the ERM, 105 Japan, 87, 90, 92, 99, 201, 207, 209 Joint Year 2000 Council:, 67 Jordan, 85 Jurgensen Report (1983), 57, 111 Kapstein, Ethan, 113 Kennedy, John F, 45 Keynes, John M., 39, 218 Korea (Republic of), 96, 202, 207 Koszul, Julien, 90 KPMG, 193 Lamfalussy approach, 66 Lamfalussy Report (1990), 63 Lamfalussy, Alexandre, 10, 59, 63, 153 Latin America monetary co-operation in, 54 Latin currency union, 76 League of Nations, 77 stabilization loan, 77 level playing field, 6, 10, 56, 118, 123, 124, 137, 145 242 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 Index Libya, 85 List, Friedrich, 215 Louvre Accord (1987), 53, 100, 101, 109, 110 Luzzatti, Luigi, 30 Maastricht, Treaty of (1992), 2, 11, 103, 105, 154, 158, 161, 166, 167 Article 107 of the, 166 Madrid summit (1995), 162, 164 Malaysia, 106, 193 Marshall Plan (1947), 41, 86 Mellon, Andrew W, 82 Mexico, 96, 98, 99, 132, 133 bridging loan, 60 debt crisis, 55, 60, 61, 63, 73, 115 default, 6, 56 peso crisis See Tequila crisis Tequila crisis, 60, 132, 133, 151 Mill, John S., 215 Miller, Adolph, 78 minimum capital standards, i, 9, 61 monetary stability, 1, 5, 70 definition of, 19 moral hazard, 9, 107, 114 National Bank of Austria, 77 Netherlands, 87 New Zealand, 85 Nixon administration, 96, 97 non-OECD countries, 193 Norman, Montagu, 3, 16, 26, 33–35, 74, 77, 78, 208 See also central banks: central banking principles O’Brien, Leslie K, 92 OECD See Organisation for Economic Co-operation and Development OEEC See Organisation for European Economic Co-operation oil shocks, 98, 125 old economy, 125 Organisation for Economic Co-operation and Development (OECD), 67, 86, 182, 193, 213 and membership to the FSF, 195 Working Party Three of the Economic Policy Committee, 97, 101 Organisation for European Economic Co-operation (OEEC), 41–43, 86 Padoa-Schioppa, Tommaso, 59, 211 Pakistan, 85 Paris conference (1929) and the foundation of the BIS, 34 payment and settlement systems, 5, 6, 8, 213 PBOC See People’s Bank of China People’s Bank of China (PBOC), 106, 202, 204, 206 as a member of the BIS, 204, 209 Philippines, 106 Plaza agreement (1985), 53, 100, 101 Plender, John, 142 Poland, 77 Poon, Peter, 193 Portillo, Lopez, 99 potential output, 187 price stability, 84, 167, 177, 199 prisoner’s dilemma, 120 protectionism, prudential standards, 17 Reagan administration, 99, 100, 102, 111, 130 regulatory arbitrage, 62, 124, 147 regulatory instruments, 135, 138, 145 Reichsbank, 25, 27, 29, 78, 83 Republic Bank See banking failures Reserve Bank of Australia, 192 Reserve Bank of India, 81 as member of the BIS, 209 Reserve Bank of New Zealand, 81 Riegle-Neal Act (1997), 138 Rist, Charles, 78 Robbins, Lionel C., 215 Romania, 77 Rome, Treaty of (1957), 102 Roosa bonds, 91 Rubin, Robert, 133, 150, 151 Russia, 96 243 17:1 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 17:1 Index San Francisco Peace Treaty (1951), 209 Saudi Arabia, 96 Scandinavian currency union, 76 Schacht, Hjalmar, 78 Schmidt, Helmut, 103 Schumer, Charles, 206 SDDS See Special Data Dissemination Standard SDR See special drawing rights securitization, 5, 10, 115, 141–145, 147 shallow cooperation, 7, 184 Simmons, Beth A, 174 Singapore, 96 Single Act (1988), 157 See also European monetary unification process Smith, Adam, 212 Smithsonian agreement, 96, 103 snake, 104 “soft law”, 8, 22, 26, 50, 64–66 definition of, 50 South Africa, 85, 88 South-East Asian countries monetary co-operation among, 12 Soviet Union, 89 Spain, 37 Special Data Dissemination Standard (SDDS), 64, 188, 195 special drawing rights (SDR), 89 Sri Lanka See Ceylon stabilization loans, 60, 83, 98 Stability and Growth Pact (1997), 166, 170, 172 stagflation, 53, 160 Standard and Poor’s, 192 Standing Committee on Banking Regulations and Supervisory Practices See Basel Committee on Banking Supervision Standing Committee on the Euro-Currency Market, 49 See also Euro-Currency Standing Committee State Bank of the Russian Empire (central bank of Russia), 29 sterilization interventions of, 101, 111 of dollar inflows, 45 of gold inflows, 26, 30 sterling bloc, 84 crisis, 195 devaluation of the, 41, 92 support, Sterling Area, 84–88 composition of, 85 Sterling Group Arrangements, 43, 47, 48, 196 See also Basel Group Arrangements first (1966), 48 second (1968), 48 stock market, 78, 102 Strong, Benjamin jr, 33, 34, 77, 78, 82, 208 Suez crisis, 88 supervisory authorities, 114, 117, 118, 124, 127, 129, 149–151, 194 swap facilities, 88 Swiss National Bank, 88, 94, 111 Switzerland, 88, 91, 201 systemic risk, 9, 114, 116, 139, 143, 147, 150, 151, 184, 190, 192 systemic stability, Szymczak, Mieczyslaw S., 42 Taiwan (Republic of China), 207 and membership to the BIS, 209 Thailand, 60, 106 The Hague conference (1929) and the foundation of the BIS, 34 The Hague summit (1969), 153, 166 Tokyo Stock Exchange, 131 Toniolo, Gianni, i, 16 too big to fail, 10, 114, 140, 142 principle, 10 total factor productivity, 168 trade, 41, 86, 88, 111, 206, 212 deficits, 41 liberalization, 40, 41, 70 Triffin, Robert, 87 two-tiered gold arrangements (1968), 89, 92 UBS, 143 unemployment, 3, 212 natural rate of, 187 244 P1: JyD 9780521877794ind CUUS250/Borio 978 521 87779 May 23, 2008 17:1 Index United Kingdom, 84, 87, 88, 131 abandonment of the ERM, 105 and the European monetary unification process, 158 central bank loans to the, 88 United States, 5, 31, 42, 45, 53, 86, 87, 89, 91, 92, 99, 120–123, 126, 129, 131, 138, 145, 170, 204, 206 role in the debt crisis of 1982, 130 Valencia meeting (1995), 162 Volcker, Paul, 96, 99, 101 Werner Plan (1970), 103 Werner Report (1970), 58, 154 “window-dressing”, 94, 98 Wolff, Julius, 30 Working Group on Strengthening Financial Systems, 134 World Bank, 2, 39, 44, 67, 98, 136, 137, 213 and membership to the FSF, 195 World Trade Organization (WTO), 65 World War I, 3, 4, 25, 27, 31, 32, 216 See also German reparations World War II, 25, 36, 81, 82, 84, 85 WTO See World Trade Organization Young Plan (1929), 76, 78, 189 Yugoslavia, 83, 196 Zhixiang, Zhang, 106 Zijlstra, Jelle, 96 245 P1: JyD 9780521877794ser CUUS250/Borio 978 521 87779 May 23, 2008 18:6 Other titles in the series (continued from page iii) Mark Harrison (ed.), The Economics of World War II Kenneth Mour´e, Managing the Franc Poincar´e Larry Neal, The Rise of Financial Capitalism Lawrence H Officer, Between the Dollar-Sterling Gold Points Angela Redish, Bimetallism Aurel Schubert, The Credit-Anstalt Crisis of 1931 Pierre Siklos, The Changing Face of Central Banking: Evolutionary Trends since World War II Norio Tamaki, Japanese Banking Mark Toma, Competition and Monopoly in the Federal Reserve System, 1914–1951 Gianni Toniolo (with the assistance of Piet Clement), Central Bank Cooperation at the Bank for International Settlements, 1930–1973 David C Wheelock, The Strategy and Consistency of Federal Reserve Monetary Policy, 1924–1933 Elmus Wicker, Banking Panics of the Great Depression John H Wood, A History of Central Banking in Great Britain and the United States 246 ... 2008 22:45 past and future of central bank cooperation This book explores the past and future of central bank cooperation In today’s global economy, the cooperation among central banks is a key... (BIS), the central banks’ bank. ” The book provides a comprehensive overview of the history of central bank cooperation through the BIS and otherwise (chapters and 2); offers an in-depth analysis of. .. Introduction Past and Future of Central Bank Cooperation piet clement1 While the oldest central banks in the world claim a lineage stretching back to the late 1600s, central banking in the modern