Banking: The Basel Club

Among the world's temples of high finance, none has risen to such eminence in such an unpretentious way as the Switzerland-based Bank for International Settlements. Its five-story, stone-faced headquarters, sandwiched between a tourist agency and a watch shop across from the railway station in Basel, still looks like the second-class hotel it once was. Travelers who often enter its musty lobby hoping to change their money find neither tellers nor vaults nor any cash at all. The B.I.S. keeps elsewhere its $1 billion gold hoard and $1.7 billion in other assets, for it is primarily a nerve center for its eight member central banks.

Last week more than 200 of the world's top moneymen from three continents gathered in the former hotel for the bank's 37th annual meeting. They came not so much for the brief formal session (at which President Jelle Zijl-stra of The Netherlands Bank was elected B.I.S. president to succeed his retiring fellow countryman, Marius Holtrop) as for the two preceding days of frank talk behind closed doors about monetary problems. "You save two weeks of travel in Europe by coming here," explained Federal Reserve Chairman William McChesney Martin, who led the U.S. contingent.

The world's intricate system of monetary cooperation, which has made possible the West's surge of prosperity since World War II, depends on trust and teamwork among central bankers. Perhaps more than any other institution, the B.I.S. helps knit such personal ties. In addition to the work sessions last week, there were teas, cocktail parties, receptions and dinners for delegates and their wives—and the traditional gourmet stag lunch at Basel's venerable Schützenhaus restaurant. "The B.I.S.," says Economist Robert Triffin, Yale's famed international monetary expert, "is partly a country club and partly a church—to maintain the dogma of central-bank independence from governments."

Dutch Uncle. B.I.S. directors —among them central-bank governors from Britain, West Germany, France, Italy, The Netherlands, Belgium, Sweden Switzerland—confer monthly at Basel with emissaries from nonmembers U.S., Canada and Japan. That inner ring forms what financiers have dubbed "the Basel Club": eleven men whose banks control three-quarters of the world's gold and currency reserves. Originally set up in 1930 to handle reparations payments from World War I, the B.I.S. gained stature chiefly after the mid-'50s as European currency controls ended. From the regular meetings in Basel sprang such innovations as currency swaps, by means of which central bankers again and again have defeated speculators against the British pound, and the European gold pool, which has kept the price of the yellow metal stable for seven years (and did so once again during the Middle East crisis). Though the International Monetary Fund boasts vastly greater resources, the Basel Club's ability to provide a wobbly national currency with almost instant credit is often more decisive in forestalling economic panic.