Alex Brummer in London
The decision by the Bank for International Settlements (BIS) the Basle-based central bankers’ club, to widen its membership to include nine emerging market countries, represents a critical milestone for the global economic order.
It has been evident since the International Monetary Fund’s (IMF) 50th anniversary meetings in Madrid in 1994 that the richer industrial countries can no longer cajole or bully their developing country counterparts to order, any more than they can prevent the export of jobs to Asia.
Until now, however, emerging market nations have had real difficulty in making it to the top table. The efforts to redistribute quotas, the equivalent of shares, to newcomers has stalled. Germany continues to block the sale of IMF gold to support debt forgiveness for the poorest countries.
And while the richer countries are willing to allow the newly emerging surplus nations, like Singapore, to join their emergency funding facility, they still continue to balk at allowing the newcomers to join in discussions of broader issues, such as credit risk in the banking system.
Given the inherent conservatism of the BIS, which is best known for developing rules designed to underpin the safety of bank balance sheets, it is perhaps the last place most people would have looked for reform.
Quietly, however, its general manager, Andrew Crockett, has been working behind the scenes to widen the franchise. He has changed the nature of BIS monthly meetings, to give a wider group of central bankers the chance to air their views. Now he has been successful in winning places for them on the BIS board.
The new intake will include the Hong Kong Monetary Authority, the People’s Bank of China, Banco Central do Brasil, Reserve Bank of India, Banco de Mexico, the Russian central bank and the Saudi Arabian and Singapore monetary authorities.
As a result, the newcomers will now be able to directly influence the views of the G10 leading industrial countries. Moreover, by drawing countries like Singapore into the net, it should be easier to ensure their co-operation in future banking crises.
Membership of the BIS will bring with it status but also greater global responsibilities. The BIS — set up in the wake of the World War II as a payments organisation for German reparations — has, in effect, become the first global financial institution of the 21st century.