In this special report we summarize the recently released annual report of the Bank for International Settlements (BIS)1 which contains some important warnings. We also reproduce the recent and highly significant speech of Mario Draghi, President of the European Central Bank (ECB).
The BIS was set up in 1930 to manage reparations payments mandated under the Treaty of Versailles. Since then, its role has expanded to serve as a “bank for central banks”, a forum for discussion and coordinating policy, and a center of financial industry regulation, including the evolving Basel standards. In addition, since its inception, the BIS has been equipped with a powerful research arm. Well known for its international, independent and blunt views on the key financial issues facing the world and, unlike the IMF, World Bank and OECD, it is not beholden to political masters and hence does not pull punches. It was among the first to sound the alarm over the global debt supercycle of the last few decades. It tangled openly with such people as Alan Greenspan, who made light of the credit risk before the crash. Its views and advice, therefore, are well worth heeding.