The Bank of International Settlements’ past and its future under Carstens

Due to technological advances in communications and systems, the financial sector is currently the most globalized and interconnected. According to Dr. Agustín Carstens, governor of Mexico’s Central Bank, it is by studying the development of financial institutions throughout history that we can better understand its relevance, as well as that of international commerce, global economic growth, and macroeconomic development of advanced and emerging economies. He will assume the position of General Manager of the Bank for International Settlements on December 1st, 2017. He was our special guest at Mexico’s Second University Congress on International Studies held at our institution. Dr. Carstens referred to the history of financial institutions to highlight the historical events that played a determining factor; as an example, he remarked that the discovery of America was made possible by advances in both financing and insuring of those expeditions.

The Bank of International Settlements

The future governor of the BIS, commonly referred to as the Central Bank of central banks, also examined its history, created in 1930 in Basilea. He mentioned that its main goal initially was to provide financing for reconstruction of countries affected by WWI. Basilea was chosen as its headquarters because of its proximity to the crossing of the Rhin river, known as the gold river, the European Union’s most used waterway for the transportation of gold to European banks. He also stated that the first analyses and work toward the creation of the Euro, the currency of the European Union, was held at the BIS. Currently, the BIS is the central banks’ coordinating and cooperating center.
Dr. Carstens also mentioned two great financial institutions: the World Bank and the International Monetary Fund, lenders of last resort that play an important role in the development of countries by fostering international monetary cooperation, enabling expansion and balanced growth in international commerce, and providing countries the opportunity to fix their payment imbalance without resorting to actions severely affecting their prosperity. He also referred to his previous appointment to run the IMF stating that there are capable people from emerging nations that can contribute to this type of institution, which were normally led by managers from first-world nations.

Confrenecia:The Challenge facing Financial Institutions. FOTO: ITAM

Bitcoin: Product or Currency?

Regarding the bitcoin, he stated that while it is said to replicate the gold standard, it should be noted that bitcoin is not associated with any nationality since it is considered more of a product than a currency. Dr. Agustín Carstens expressed that a currency creates value for a central bank pertaining to a nation which is not the case with criptocurrency. He also pointed out that while the anonymity of the bitcoin has spawned black markets, if the blockchain technology is used correctly and efficiently, it can benefit the financial system. Dr. Carstens is a staunch believer that a path of sustained growth through global coordinated governance must be pursued. In his closing remarks, our alumni of economics reminisced about his time at ITAM. He stated that despite coming from a family of accountants, his classes with Pedro Aspe inspired him to pursue economics instead of accounting and it seems to be working extremely well for him.

 

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