History - the BIS during the Second World War (1939-48)

The former Grand Hotel in Ch=C3=A2teau d'Oex, Switzerland. From May to O= ctober 1940, the BIS temporarily relocated to this hotel, in line with the = Swiss authorities' plan to evacuate the exposed border regions in case of a= n armed conflict.

Declining business activity and controversial neutrality

In the late 1930s, effective international cooperation became more diffi= cult because of the growing political and military tensions. During this pe= riod, the BIS was instrumental in shipping gold from Europe to the safety o= f New York, mostly on behalf of European central banks (more than 140 tonne= s of gold were transported between June 1938 and June 1940).

With the declaration of war between Germany on the one hand and France a= nd the United Kingdom on the other in September 1939, it was no longer poss= ible for representatives of these belligerent countries to attend BIS meeti= ngs. Board members were nevertheless convinced that the BIS ought to be kep= t alive to assist in financial and monetary reconstruction after the war. T= he last prewar meeting of the Board of Directors took place in Basel in Jun= e 1939. After that further Board meetings were suspended for the duration o= f the war.

In December 1939, the BIS circulated to its member central banks a decla= ration of neutral conduct for the duration of the war

The BIS adopted a neutrality declaration excluding banking operations th= at might benefit one belligerent party to the detriment of another, but dec= ided to maintain its banking services to assist central banks and to fulfil= the Bank's own obligations so far as was consistent with neutrality. The B= ank's precarious position - having on its Board central bank representative= s of countries that were at war with one another as well as of neutral coun= tries, and being cut off from direct communications with many of its member= s - gave rise to a number of difficult decisions. The most controversial of= these dated from before the war, when, in March 1939, the BIS decided to h= onour an order received from the Czechoslovak National Bank to transfer par= t of its gold reserves held in a BIS account at the Bank of England in Lond= on to a German Reichsbank account. The transfer order had been issued days = after German troops had occupied Prague - as it later transpired, under dur= ess.

From 1940 onward, the volume of BIS banking operations declined rapidly.= However, throughout the war, the BIS continued to receive interest payment= s from the German Reichsbank in respect of the investments the BIS had made= in German bonds back in 1930-31. The largest part of these interest paymen= ts were made in gold.

The legacy of the war

Investigations after the war revealed that the Reichsbank had used large= quantities of gold stolen from central banks in the occupied territories t= o make wartime payments to a number of institutions including the Swiss Nat= ional Bank and the BIS. This gold had been remelted at the Prussian mint to= conceal its origin. In this manner, during the war, the BIS received 3.7 t= onnes of gold from the Reichsbank which, it emerged from German records cap= tured after the war, had originally been looted from the central banks of B= elgium and the Netherlands. The BIS cooperated fully with the postwar inves= tigations led by the Allied Tripartite Commission for the Restitution of Mo= netary Gold and returned 3.7 tonnes of gold to the Commission in 1948.

BIS President Thomas McKittrick (1940-46), a US citizen who was resident= in Basel during the war

In July 1944, a United Nations conference met at Bretton Woods in the Un= ited States to discuss the postwar international monetary system. The Brett= on Woods Conference adopted a resolution calling for the abolition of the B= IS "at the earliest possible moment", because it considered that the BIS wo= uld have no useful role to play once the newly created World Bank and Inter= national Monetary Fund were operational. European central bankers held a di= fferent opinion, and successfully lobbied for maintaining the BIS. By early= 1948, the BIS liquidation resolution had been put aside. It was understood= that henceforth the BIS would focus foremost on European monetary and fina= ncial matters.

Up next in our timeline: the BIS as a forum for European mo= netary cooperation (1947-93)

History - the BIS during the Second World War (1939-48)

Declining business activity and controversial neutrality

The legacy of the war

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