Bank for International Settlements
BIS was formed with funding by the central banks of six nations, Belgium, France, Germany, Italy, Japan, and the United Kingdom. In addition, three private international banks from the United States also assisted in financing the establishment of the BIS." Each nation's central bank subscribed to 16,000 shares. The U.S. central bank, the Federal Reserve, did not join the BIS, but the three U.S. banks that participated got 16,000 shares each making U.S. representation three times that of any other nation. The U.S. banks who joined were J.P. Morgan & Company, First National Bank of New York and First National Bank of Chicago.
Statutes of the Bank for International Settlements
Objects Of Bank:
"The objects of the Bank are: to promote the co-operation of central banks and to provide additional facilities for international operations; and to act as trustees or agent in regard to international financial settlements entrusted to it under agreements with the parties concerned."
- Statutes of the Bank for International Settlements Article 3 [as if January 1930, text as amended on March 10,2003], Basic Texts (Basle, August 2003), p. 7-8 :
"The authorised capital of the Bank shall be three thousand million Special Drawing Rights (SDR), as defined from time to time by the International Monetary Fund.1 (2) It shall be divided into 600,000 shares of equal nominal value, consisting of three tranches of 200,000 shares each. (3) The nominal value of each share and the amount remaining to be paid up shall be stated on the face of the share certificates which may be issued by the Bank pursuant to Article 16."
- Chapter II: Capital Article 4 (1)
Buyout of Private Shareholder in 2001
On January 8, 2001, an Extraordinary General Meeting of the BIS approved a proposal that restricted ownership of BIS shares to central banks. Some 13.7% of all shares were in private hands at that time, and the repurchase was accomplished with a cash outlay of $724,956,050. The price of $10,000 per share was over twice the book value of $4,850. Note Private ownership still possible through countries member banks):
"In accordance with the resolutions of the Extraordinary General Meeting held on 8 January 2001 and in order to implement Article 15 of the Statutes as amended, the Bank will, on a compulsory basis, repurchase each share which, as of that date, is registered in the name of a shareholder other than a central bank (a "private shareholder"), against payment of compensation of CHF 16,000 for each share, as follows: .... (4) The Board will redistribute, in the manner in which it considers appropriate, the shares repurchased from private shareholders either (a) by offering them for sale to central bank shareholders against payment of an amount equal to that of the compensation paid to the private shareholders, or (b) by offering them for subscription as bonus shares by central bank shareholders in proportion to the number of shares held (including, if applicable, any share purchased pursuant to (a) above), it being understood that this redistribution may be achieved by a combination of (a) and (b)."
- Article 18(A) (Transitional provisions)
1 One SDR is the equivalent to the sum of US$ 0.577, Euro 0.426, Japanese yen 21.0 and Pound sterling 0.0984 according to Rule O-1 as adopted by the Executive Board of the IMF on 29 December 2000 and effective 1 January 2001; this decision is subject to revision every five years.
Restriction on Loaning Governments Money or Owning Real Estate:
The Bank may not: ...
(c) make advances to Governments; ...
(f) except so far as is necessary for the conduct of its own business, remain the owner of real property for any longer period than is required in order to realise to proper advantage such real property as may come into the possession of the Bank in satisfaction of claims due to it.
- Article 24
Apparently the bank also does not accept deposits from, or provide financial services to, private individuals or corporate entities.
The Banks Operations
Article 21 of the original BIS statutes define day-to-day operations:
- buying and selling of gold coin or bullion for its own account or for the account of central banks;
- holding gold for its own account under reserve in central banks;
- accepting the supervision of gold for the account of central banks;
- making advances to or borrowing from central banks against gold, bills of exchange, and other short-term obligations of prime liquidity or other approved securities;
- discounting, rediscounting, purchasing, or selling with or without its endorsement bills of exchange, checks, and other short-term obligations of prime liquidity;
- buying and selling foreign exchange for its own account or for the account of central banks;
- buying and selling negotiable securities other than shares for its own account or for the account of central banks;
- discounting for central banks bills taken from their portfolio and rediscounting with central banks bills taken from its own portfolio;
- opening and maintaining current or deposit accounts with central banks;
- accepting deposits from central banks on current or deposit account;
- accepting deposits in connection with trustee agreements that may be made between the BIS and governments in connection with international settlements.;
- accepting such other deposits that, as in the opinion of the Board of the BIS, come within the scope of the BIS’ functions.13
The BIS also may
- act as agent or correspondent for any central bank
- arrange with any central bank for the latter to act as its agent or correspondent;
- enter into agreements to act as trustee or agent in connection with international settlements, provided that such agreements will not encroach on the obligations of the BIS toward any third parties.
The Bank is Managed by Governors of Central Banks of Belgium, France, Germany, Great Britain, Italy and U.S.A.
Chapter IV: Management: Article 26: The administration of the Bank shall be vested in the Board. Article 27: The Board shall be composed as follows: (1) The Governors for the time being of the central banks of Belgium, France, Germany, Great Britain, Italy and the United States of America (hereinafter referred to as ex-officio Directors).
The Bank Gives Itself Immunity
Chapter VII: General Provisions [...] Article 55 (1) The Bank shall enjoy immunity from jurisdiction, save: (a) to the extent that such immunity is formally waived in individual cases by the President, the General Manager of the Bank, or their duly authorised representatives; or (b) in civil or commercial suits, arising from banking or financial transactions, initiated by contractual counterparties of the Bank, except in those cases in which provision for arbitration has been or shall have been made. (2) Property and assets of the Bank shall, wherever located and by whomsoever held, be immune from any measure of execution (including seizure, attachment, freeze or any other measure of execution, enforcement or sequestration), except if that measure of execution is sought pursuant to a final judgment rendered against the Bank by any court of competent jurisdiction pursuant to sub-paragraph 1(a) or (b) above. (3) All deposits entrusted to the Bank, all claims against the Bank and the shares issued by the Bank shall, without the express prior agreement of the Bank, wherever located and by whomsoever held, be immune from any measure of execution (including seizure, attachment, freeze or any other measure of execution, enforcement or sequestration).
Article 2 Inviolability:
+The buildings or parts of buildings and surrounding land which, whoever may be the owner thereof, are used for the purposes of the Bank shall be inviolable. No agent of the Swiss public authorities may enter therein without the express consent of the Bank. Only the President, the General Manager of the Bank, or their duly authorised representative shall be competent to waive such inviolability.
+The archives of the Bank and, in general, all documents and any data media belonging to the Bank or in its possession, shall be inviolable at all times and in all places.
+The Bank shall exercise supervision of and police power over its premises.
Article 4 Immunity from jurisdiction and execution
+The Bank shall enjoy immunity from criminal and administrative jurisdiction, save to the extent that such immunity is formally waived in individual cases by the President, the General Manager of the Bank, or their duly authorised representative.
+The assets of the Bank may be subject to measures of compulsory execution for enforcing monetary claims. On the other hand, all deposits entrusted to the Bank, all claims against the Bank and the shares issued by the Bank shall, without the prior agreement of the Bank, be immune from seizure or other measures of compulsory execution and sequestration, particularly of attachment within the meaning of Swiss law.
A quick summary of their immunity, explained further below, includes
- diplomatic immunity for persons and what they carry with them (i.e., diplomatic pouches)
- no taxation on any transactions, including salaries paid to employees
- embassy-type immunity for all buildings and/or offices operated by the BIS
- no oversight or knowledge of operations by any government authority
- freedom from immigration restrictions
- freedom to encrypt any and all communications of any sort
- freedom from any legal jurisdiction9
Further, members of the BIS board of directors (for instance, Alan Greenspan) are individually granted special benefits:
- “immunity from arrest or imprisonment and immunity from seizure of their personal baggage, save in flagrant cases of criminal offence;”
- “inviolability of all papers and documents;”
- “immunity from jurisdiction, even after their mission has been accomplished, for acts carried out in the discharge of their duties, including words spoken and writings;”
- “exemption for themselves, their spouses and children from any immigration restrictions, from any formalities concerning the registration of aliens and from any obligations relating to national service in Switzerland ;”
- “the right to use codes in official communications or to receive or send documents or correspondence by means of couriers or diplomatic bags.”10
Lastly, all remaining officials and employees of the BIS have the following immunities:
- “immunity from jurisdiction for acts accomplished in the discharge of their duties, including words spoken and writings, even after such persons have ceased to be Officials of the Bank;”[bold emphasis added]
- “exemption from all Federal, cantonal and communal taxes on salaries, fees and allowances paid to them by the Bank…”
- exempt from Swiss national obligations, freedom for spouses and family members from immigration restrictions, transfer assets and properties – including internationally – with the same degree of benefit as Officials of other international organizations.