Book Reviews

The BIS Gets the Once-over

Adam LeBor

Tower of Basel

The Shadowy History of the Secret Bank That Runs the World

PublicAffairs, New York, 2013, 336 pp., $28.99 (cloth).Â

BIS is an obscure abbreviation for anyone other than a banker. But readers of the financial pages are all too familiar with the Swiss city of Basel in the context of international standards on banks’ capital adequacy and other prudential recommendations by the Basel Committee on Banking Supervision, whose secretariat is at the Bank for International Settlements—or BIS. Adam LeBor, a journalist and author on European current affairs, has written a well-researched 300-plus-page book about this little-known international bank headquartered in a modernistic office tower in Basel.Â

The book is described on the back cover as the “first investigative history of the world’s most secretive global financial institution.” I found it an informative—albeit emotional—piece of serious journalism by an author who has read a large body of literature, talked to numerous people, and studied archives. But this is not a disinterested history book. The title itself deems the book the “shadowy history of the secret bank that runs the world.”

LeBor has a good eye for issues worth investigating: the story of the BIS is such a topic. Since its inception in 1930 its history has been rich in dramatic turns, and a thorough yet accessible book on this curious institution is long overdue. The BIS has always been special in the complex world of high finance. Even the raison d’être and the present functions of the bank are hard to describe in plain language. It was established after World War I with a delicate mandate: to settle war reparation payments imposed on defeated Germany by the Treaty of Versailles. Technicalities such as collection, administration, and distribution of the funds payable certainly called for a financial institution. Thus the BIS (BIZ in German) was established—an admittedly distinctive institution whose founding owners included not only the central banks of the victors (Belgium, France, Italy, United Kingdom) but also those of Germany, Japan, and—strangely—a consortium of three U.S. banks on behalf of the Federal Reserve. Soon the central banks of Austria, Czechoslovakia, Hungary, and other small European countries joined the bank that was to fill a niche for financial transactions between central banks and for professional contacts. History soon took a sharp turn: German reparations were suspended. Yet the BIS resumed its activities: the unusual mix of shareholders did not prevent the bank from functioning even during the terrible war years.Â

LeBor believes that the BIS was far from neutral before and during World War II, that it became a de facto German-controlled bank, even though its chairmen, presidents, and key staff were not German. He dwells on the life and activity of a number of key players—Hjalmar Schacht, the president of the Reichsbank; Montagu Norman, the governor of the Bank of England; and the American Thomas McKittrick, BIS president during the war—and accuses the latter two of crimes...