Based on a thorough analysis of the BIS Annual Reports from the early 1970s to the late 2010s, this chapter traces the evolution of the BIS’s thinking on the international monetary and financial system. It demonstrates how – as a result of the growth of the Eurocurrency markets in the 1970s and of the sovereign debt crisis of the 1980s – the BIS’s traditional focus on exchange rates and their potential impact on monetary stability gradually shifted to global capital flows and to the risks posed by an increasingly complex and interconnected banking system. The 1995 Mexico crisis and 1997–8 Asian crisis reinforced this shift and led to an overriding concern with the procyclicality of the financial system as a potential threat to financial stability. While recognising that the focus of the BIS on a macro-financial stability framework has contributed a lot to advancing the work of the Basel-based committees and standard-setting bodies, the chapter also concludes that not much progress has been made in coordinating monetary policies or in addressing the fundamental problem of excessive elasticity of the financial system.

This chapter is a reflection or insider’s view provided by a former President of the Federal Reserve Bank of New York and long-standing member of the BIS Board of Directors, William Dudley. Based on his first-hand experience, and in reference to the crucial decade following the global financial crisis of 2007–9, his contribution reflects on the usefulness of the BIS as the global cooperative organisation of central banks. The BIS continues to play a crucial role as a forum for information exchange and discussions among central bankers and for informal networking. In addition, through its research, meetings and policy work it enables international consensus-building with a view to promoting global financial stability. The contribution also identifies some areas in which the BIS can and should further improve, in particular in terms of its transparency, diversity and inclusiveness. The efficient coordination of work and the ongoing cooperation between the BIS and the other key stakeholders in the international financial system, in particular the IMF and the World Bank, also figures high on the agenda.

This chapter provides an historical account of why the institutional setting of the BIS has been conducive to the emergence of soft law as a critical tool for managing the global financial system. Soft law developed almost naturally at the BIS as a result of the many technocratic issues it was called on to deal with throughout its long history – be it German reparation payments in the 1930s, the management of the Bretton Woods system of fixed exchange rates in the 1960s or growing financial stability concerns in the 1970s and 1980s and beyond. The Basel I Capital Accord, adopted in 1988, was a political and regulatory watershed in that respect – a non-binding code of conduct agreed by an informal committee of experts (the Basel Committee on Banking Supervision), that was subsequently implemented by national legislation in all the main constituencies. The chapter argues that the relative success of soft law in financial regulation owes a lot to the particular set-up and traditions of the BIS. However, it concludes that in order to be successful in future, soft law – much like the BIS – will have to become ever more inclusive and transparent.

It is a commonplace to state that we live in a time of continuous change. But that doesn’t make it any less true. The force and impact of change become all the more obvious when considering a horizon that spans two generations. Fifty years ago, a mere handful of advanced industrial economies dominated the global economy. Since then, a wide array of countries have emerged as new economic powerhouses. Economic development and prosperity are now more equally spread across the globe than at any other time over at least the past two centuries.

This chapter provides an historical account of why the institutional setting of the BIS has been conducive to the emergence of soft law as a critical tool for managing the global financial system. Soft law developed almost naturally at the BIS as a result of the many technocratic issues it was called on to deal with throughout its long history – be it German reparation payments in the 1930s, the management of the Bretton Woods system of fixed exchange rates in the 1960s or growing financial stability concerns in the 1970s and 1980s and beyond. The Basel I Capital Accord, adopted in 1988, was a political and regulatory watershed in that respect – a non-binding code of conduct agreed by an informal committee of experts (the Basel Committee on Banking Supervision), that was subsequently implemented by national legislation in all the main constituencies. The chapter argues that the relative success of soft law in financial regulation owes a lot to the particular set-up and traditions of the BIS. However, it concludes that in order to be successful in future, soft law – much like the BIS – will have to become ever more inclusive and transparent.