Big unease at the Tower of Basel: once a European fortress, the BIS is about to experience a Canadian takeover. Is this an emerging Anglo-Saxon Trojan horse? TIE's Klaus Engelen goes behind the scenes.

• Author: Engelen, Klaus C.
• Position: Institutions

A major top reshuffling is underway these days at the Bank for International Settlements (BIS) in Basel. Two outstanding leaders of the international financial world--Andrew Crockett and William McDonough--have announced their intentions to step down.

On April 1 of this year, Malcolm D. Knight (58), senior deputy governor of the Bank of Canada since 1999, will succeed Andrew Crockett as managing director of the BIS, an institution that acts as "Bank of Central Banks." And on July 1, Jaime Caruana, governor of the Bank of Spain, will take over the chair of the Basel Committee on Banking Supervision from McDonough, who negotiated the new global risk-based accord for bank capital (Basel II) and who will retire as president of the New York Federal Reserve in the middle of this year.

Another Canadian, Nick LePan, superintendent of financial institutions, will serve in the newly established position of vice chairman of the Committee on Banking Supervision. And Roger W. Ferguson, Jr., the Fed's vice chairman, has taken over as chairman of the Committee on the Global Financial System (CGFS). Since the bank's high-caliber team of economists is headed by William White, another Canadian, three key positions at the bank will be in Canadian hands.

At first glance these leadership changes at the center of the world of central banking in Basel have been accomplished without much visible collateral damage. Central bankers--in contrast to finance ministers and finance officials--are known to work under a veil of secrecy. In particular, when choosing one of their peers for a major international position, they try hard to keep any discord among themselves from the public eye.

FINANCE OFFICIALS WITH A BIG STAKE

This time around things didn't go that smoothly if one looks a bit behind the veil. As the central bank governors of the major industrial countries were working to replace the two outstanding financial leaders, their internal squabbling and their jostling for the new positions leaked out. The reasons were obvious. Who gets the top-management post at the BIS is an issue that goes beyond the world of central banking, because Crockett also has been chairing the Financial Stability Forum (FSF), today's important platform for central bankers, financial market supervisors and finance officials.

The major task of the FSF is to improve international financial stability through timely information exchange and better co-operation in financial supervision and surveillance. Formed in April 1999 with the blessing of G7 finance ministers and following the recommendations of Hans Tietmeyer, the former president of the Deutsche Bundesbank, the FSF has done a lot to bring together, on a regular basis, national authorities responsible for financial stability in significant international financial centers, sector-specific international groupings of regulators and supervisors and committees of central bank experts. With a small secretariat at the BIS in Basel, the FSF is setting the agenda to cope with financial market shocks or fragilities of the international financial system. Assessing the damage of the September 11 attacks on the insurance sector and looking into the implications of corporate scandals such as Enron and World-Com were high on the Forum's agenda.

Last year, when Crockett signaled that he would like to step down from his position by the end of March, 2003, the G7 deputy finance minister sounded a...