He decides in principle this Monday who will replace him. Among the possible candidates for managing director of the BIS is the former governor of the Bank of Spain, Pablo Hernández de Cos. According to different sources consulted, unless geopolitical issues or an Asian woman arise, Hernández de Cos’ chances are high. The position is very relevant to the extent that it serves to coordinate the activity of central bankers and to develop international financial regulation at a time when, with the arrival of Trump to the White House, multilateralism may be put on hold. . It is feared that there will be a relaxation of the requirements for banks in the United States that will drag down the rest of the countries.
Although the position of managing director does not have direct regulatory power, it is highly respected and represents an exceptional vantage point from which to influence international economic debate and decisions, especially of the type that occurs in informal meetings between economic authorities who usually organized by the BIS. This institution participates in international forums such as the G20 or the meetings of the International Monetary Fund. If elected, Hernández de Cos’ great challenge will be to maintain prudent and global standards for the banking and non-banking financial sector.
in particular from the president of the ECB, Christine Lagarde, the president of the Federal Reserve, Jerome Powell, and the Latin American central bankers. He would be 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 will make the decision made up of 18 presidents of the largest central banks.
Perhaps one of the most notable activities of the BIS is holding an informal meeting of the main central bank governors. Every two months, about 50 central bankers gather at the BIS to discuss problems in the global economy, monetary policy or exchange rates. Entity staff spend a lot of time and resources preparing notes for discussion. And hence the organism’s capacity for discreet influence.
The BIS is a bank of central banks and, given the relationships maintained there with other central bankers and 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.
Prestige at the Bank of Spain
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 would add to the success of placing former Vice President Teresa Ribera as Ursula Von der Leyen’s number two in the European Commission.
The BIS was created after the First World War to facilitate war reparations for the Germans. From the first moment, the world’s main central bankers met there to exchange information and cooperate at a time when the gold standard operated and communications were not what they are today. It is, therefore, the oldest international financial institution, prior to the IMF or the World Bank. And it is really a bank of central banks: it manages their external reserves, which deposit dollars in the BIS and it invests them, offering them a return. This activity is what finances the institution and gives it independence.
In addition, this organization serves as a study service on issues of monetary policy, economics and finance. It has vast statistics that are widely used by central banks, with very complete information on international financial flows and bank interest rates. It publishes an annual report and numerous research documents with a wide impact on the financial world. . Its chief economist, Claudio Borio, is a very authoritative voice in global economic affairs.
The probably most important function of the organization is that it has within it several committees that serve to coordinate and establish international regulatory standards: the payment and settlement systems committee; the Basel committee on financial regulation, which Hernández de Cos was already chairing and which has established global capital requirements after the financial crisis and recommendations on money laundering, and the committee on the global financial system, which studies the interaction between monetary policy and the financial sector. All of these committees are located within the bank. In addition, there are others that are not in its structure, but which the BIS provides shelter: the financial stability council, in which authorities from the national treasuries, central banks and banking regulators meet to analyze the risks of the system. . There is also the insurance committee and the deposit insurance committee. In general, in all these areas the BIS serves as a catalyst for international regulatory standards. And in the Institute of Financial Services, chaired by another Spaniard, the former deputy governor of the Bank of Spain, Fernando Restoy, crisis simulation exercises, multiple studies are carried out and a lot of training is carried out for supervisory personnel, with special emphasis on use of technology.
The only organization of this type that is not under the umbrella of the BIS is IOSCO, which coordinates the regulation of financial markets, and where another Spaniard has been appointed as general secretary: Rodrigo Buenaventura, who until now was president of the National Commission of Markets and Securities (CNMV) in Spain. Despite these names, there has traditionally been little representation of Spaniards in the BIS.
The BIS also provides services to central banks. In recent years he has been helping them develop technology prototypes, under the so-called Innovation Hubfor example for wholesale digital currency, to carry out economic projections, financial supervision, market analysis or platforms that allow improving the efficiency of cross-border payments, since these remittances tend to be slow and have expensive commissions.
