by Fergal O'Brien,
Paul Gordon and Frank Connelly
Welcome to the Elite Private Club of the World's Central Bankers
There's been a changing
of the guard at the Bank for International Settlements (BIS),
the little-known organization that sits at the heart of the world's
He's taking charge of an
institution that stands out as a bastion of global technocracy in an
age of increasing transparency and growing disillusionment
The likes of Mario Draghi, Janet Yellen, and Mark Carney routinely hold confidential gatherings there with colleagues from around the globe.
That hasn't stopped the BIS, which was founded in 1930 and is owned by central banks, from challenging the economic orthodoxy of its own members.
By 2003, William White, then economic adviser, and colleague Claudio Borio were pushing for preemptive monetary tightening to avoid dangerous asset bubbles, a contrarian view that looked prescient later, during the financial crisis.
It's kept beating that drum even as central bankers in the U.S., Europe, and Japan slashed interest rates to record lows and launched unprecedented bond-buying programs to fend off deflation.
Borio, now head of the monetary and economic department at the BIS, argued in a September speech that central bankers may be underestimating the "generally benign" effects of globalization and technology on inflation and should rethink their response to deflationary trends.
He called out Larry Summers, former secretary of the U.S. Department of the Treasury and a proponent of the "secular stagnation" theory, who argues weak U.S. growth and inflation result from a persistent shortfall in demand.
Summers describes the BIS as,
...while adding that he frequently disagrees with its conclusions.
He's not alone in questioning the BIS's stance.
A 2016 review of the bank's publications co-authored by Bean found the organization "doing a lot right" on the research front but expressed reservations about the BIS,
Joining the Debate
Research aside, the BIS has grown in prominence in the years of monetary policy experimentation and banking regulation that have followed the crisis.
While some central banks made efforts to open up as their increasing powers drew scrutiny from voters and governments, in Basel they've rowed back.
Jens Weidmann, president of Germany's Bundesbank and chairman of the BIS board of directors, says sometimes secrecy is necessary.
The organization hosts the Financial Stability Board and the Basel Committee on Banking Supervision, which hash out the rules that govern the international financial system.
There's also the Global Economy Meeting and its sister forum, the Economic Consultative Committee, dubbed "the world's most exclusive club" by Adam LeBor, author of a book on the BIS.
These latter two groups convene once every two months, on a Sunday, for formal sessions followed by a dinner on a top floor of the BIS tower, which has 360-degree views of Basel and the mountains.
They seldom open
themselves to scrutiny from the press and the public.
The European Central Bank bowed to public pressure in 2015 and began publishing the minutes of its meetings, while the Federal Reserve started holding quarterly press conferences in 2011.
As for the BIS, it has scrapped the press conference that used to accompany the publication of its annual report, while the Global Economy Meeting discontinued press briefings following its bimonthly gatherings.
Transcripts or minutes of the meetings held in Basel aren't made available; actions are relayed through press statements, if at all.
That approach doesn't sit well with everyone.
In his interview, Caruana insisted there's a lot of communication from the bank through papers and reports, and that improvements have been made in transparency and accountability.
Eye on Bitcoin
Carstens, 59, is a long-standing member of the global financial elite.
He earned a doctorate in economics from the University of Chicago and served as finance minister before taking up his role at the Bank of Mexico in 2010.
In his new job, he says he'll focus on the BIS's traditional role of facilitating communication between central banks, while keeping a skeptical eye on cryptocurrencies such as bitcoin.
There's little sign the institution will raise the curtain on the secretive proceedings it hosts anytime soon.