Pablo Hernández de Cos, the former governor of the Bank of Spain, has been elected as managing director of the Bank for International Settlements (BIS). He will begin his position on July 1, 2025 with a five-year term. The BIS is the international institution responsible for coordinating and establishing global regulatory standards for banking and finance. It is also a think tank very influential on economics, monetary policy and the financial sector. And every two months it brings together about 50 central bankers from around the world to discuss economic issues, monetary policy and exchange rates.
The possibilities of Hernández de Cos’s influence on issues of economics and international banking regulation will be considerable. And his appointment coincides with a time when it is feared that, after Trump’s arrival at the White House, a common regulation for the financial system will be called into question. A process of financial deregulation could even begin in the United States that would drag down the rest of the countries. So Hernández de Cos’ biggest challenge will be to ensure that there is no weakening of regulatory standards in both banking and non-bank financing. Maintaining the stability of the system will, therefore, be your main concern.
Hernández de Cos has already been president of the Basel committee, which belongs to the BIS and which sets international standards for banking regulation, including capital buffers or recommendations against money laundering. After the crises of Silicon Valley Bank, Signature Bank and Credit Suisse, Cos warned that strict supervision is needed, that it is important not to forget the past and that the entities’ directors must examine their risk management. “The rewards of the tough supervisory decisions necessary to avoid banking crises are rarely visible or clear,” he warned at a conference in Washington in early 2023. Instead, there are many pressures to relax supervision. “That is why it is essential that we all welcome and support the ability of a supervisor to exercise discretion and tell a bank that its leverage or its maturity transformation is too high, or that its business model is unsustainable, or that “needs to take swift and substantial action to shore up risk management and governance failures,” he said.
after the financial crisis. His arrival was a breath of fresh air for the institution. Stretching the bank’s muscle, he crafted a complex and nuanced speech that sought to forge a consensus on the economic reforms needed in Spain at a time of polarization. His words did not always sit well with the Government. But he is widely recognized for his vocation for public service, his ability to work and his technical knowledge. At the European level, according to an economist from one of the largest investment banks, Hernández de Cos was the only governor considered a dove that the ECB hawks listened to due to the solidity and reasonableness of his arguments. The position at the BIS adds to the success of placing former Vice President Teresa Ribera as Ursula Von der Leyen’s number two in the European Commission.
Despite more than 80 candidates for the position, in particular the president of the ECB, Christine Lagarde, the president of the Federal Reserve, Jerome Powell, and Latin American central bankers. He is the second Spaniard to hold the position after Jaime Caruana, who was also governor of the Bank of Spain. And the third consecutive Spanish-speaking person, replacing the Mexican Carstens. The Bank of Spain is not on the board of the BIS, the body that made the decision made up of 18 presidents of the largest central banks.
The BIS is a bank that manages central bank reserves and promotes debate among central bankers. Its managing director attends international forums such as the G20 or IMF meetings. Given the relations maintained there with economic authorities, the position of managing director would reinforce the international profile of Hernández de Cos. At his age, 53 years old, it could be a gateway to other positions, such as a seat on the Council of the ECB or, even, it would place him as a possible candidate for the presidency of the Eurobank when Christine Lagarde ends her term. This was recently stated in an article by Financial Times.
