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FIFTHANNUAL REPORT 1St APRIL 1964 — 31St MARCH 1965 BASLE

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FIFTHANNUAL REPORT 1St APRIL 1964 — 31St MARCH 1965 BASLE BANK FOR INTERNATIONAL SETTLEMENTS THIRTY-FIFTH ANNUAL REPORT 1st APRIL 1964 — 31st MARCH 1965 BASLE 14th June 1965 TABLE OF CONTENTS Page Introduction i Part I - Current Economic Trends and Policies 1964-65 3 The dollar (p. 3); sterling (p. 9); developments in continental western Europe (p. 15); eastern Europe (p. 22): USSR (p. 23), Czechoslovakia (p.23), Poland (p. 23), eastern Germany (p. 24), Rumania (p. 24), Bulgaria (p. 24), Hungary (p. 25), Yugoslavia (p. 25J; debate on the international monetary system (p. 26): the adjustment process (p. 27), international liquidity (p- 3°); problems of developing countries (p. 32) Part II - Monetary and Economic Survey 37 I. Credit Developments and Policies 37 Comparative credit and capital-market developments (p. 38) : changing pat- terns of saving and investment (p. 38), capital markets and long-term interest rates (p. 41), bank credit and liquid-asset formation (p. 45); credit policies in individual countries (p. 50): United Kingdom (p. 50), United States (p. 53), France (p. 56), Italy (p. 59), Netherlands (p. 61), Belgium (p. 63), Germany (p. 65), Switzerland (p. 67), Austria (p. 68), Sweden (p. 69), Denmark (p. 70), Norway (p. 71), Finland (p. 72), Spain (p. 72), Canada (p. 73), Japan (p. 74) II. World Trade and Payments 76 Balances of payments (p. 80) : United States (p. 80), Canada (p. 83), European OECD countries (p. 84), United Kingdom (p. 87), Italy (p. 91), Germany (p- 93) > France (p. 96), Netherlands (p. 98), Belgium (p. 99), Austria (p. 100), Switzerland (p. 100), Scandinavian countries (p. 101), Japan (p. 102); commercial policy (p. 103) III. Gold, Reserves and Foreign Exchange 106 Gold production and markets (p. 107); gold and exchange holdings (p. 109) : gold (p. 109), exchange (p. 112); International Monetary Fund (p. 113); the US international liquidity position (p. 115); European monetary reserves (p. 118); United Kingdom (p. 121), France (p. 122), Italy (p. 123), Benelux (p. 124), Germany (p. 124), Switzerland (p. 125), other European countries (p. 125); foreign exchange (p. 126): sterling (p. 126), Swiss franc (p. 128), Deutsche Mark (p. 129), other European currencies (p. 129), Canadian dollar (p. 129), other exchange developments (p. 130) Page IV. The Euro-Currency Market 132 Changes in the overall positions (p. 136); changes in individual reporting countries (p. 137); suppliers and users of Euro-dollars (p. 140); interest rates (p. 142) V. The European Monetary Agreement . 144 Operations under the Agreement (p. 144): European Fund (p. 144), Multi- lateral System of Settlements (p. 146); management of the European Fund and the Multilateral System of Settlements (p. 147) Partili - Activities of the Bank 149 Operations of the Banking Department (p. 149) : composition of resources (p. 150), employment of resources (p. 153); the Bank as Trustee and Fiscal Agent for international government loans (p. 157); the Bank as Depositary under the terms of the Act of Pledge concluded with the High Authority of the European Coal and Steel Community (p. 159); the Bank as Agent for the OECD (European Monetary Agreement) (p. 160); development of co- operation between central banks and international organisations (p. 160); financial results (p. 161); changes in the Board of Directors and in the Management (p. 162) Conclusion 164 Balance sheet as at 31st March 1965 and Profit and Loss Account for the financial year ended 31st March 1965. LIST OF TABLES AND GRAPHS (Graphs are indicated by an asterisk) Page Part I - Current Economic Trends and Policies 1964-65 United States: Prices and wages in industry * 5 International transactions 7 United Kingdom: The budget 14 Industrial production * 16 Gross national product and its components 18 Prices and wages 20 Centrally-planned economies : National income, industrial production and productivity 24 Part II - Monetary and Economic Survey I. Credit Developments and Policies Gross national saving and investment 39 Capital market : Net issues 42 Interest rates * 44 The banking system : Monetary survey 46 Money, quasi-money and gross national product * 49 United Kingdom: Saving and investment 52 United States: Corporate sources and uses of funds 54 Excess reserves and borrowings of member banks * 55 Official discount rates 61 II. World Trade and Payments International trade 76 Exports, by areas * 77 Developing countries : Volume of trade, export prices and terms of trade * . 78 World balance of payments 79 United States: Balance on regular transactions 80 Private capital movements 82 Canada : Balance of payments 84 European OECD countries : Balances of payments 86 Page United Kingdom: Balance of payments * 88 Balance of payments 89 Italy : Balance of payments 92 Germany : Balance of payments 94 France: Balance of payments 96 Netherlands: Balance of payments 98 Japan: Balance of payments 102 III. Gold, Reserves and Foreign Exchange World gold production 107 Estimated sources and uses of gold 108 London market gold price * 109 International liquidity no Dollar balances 112 Fund exchange transactions 113 Fund holdings of selected member currencies 114 Financing of the US balance-of-payments deficit 116 European countries : Reserve positions 120 United Kingdom: Monetary movements . • 121 Italy: Monetary movements 123 Sterling and Swiss franc quotations for the US dollar * 127 IV. The Euro-Currency Market Commercial banks' short-term liabilities and assets in certain foreign currencies vis-à-vis non-residents 134 Commercial banks' short-term liabilities and assets in certain foreign cur- rencies vis-à-vis non-residents, excluding positions vis-à-vis the country of issue of the currency in question 135 Short-term dollar positions of reporting banks vis-à-vis non-residents ... 136 Changes in reporting countries' dollar positions vis-à-vis non-residents . 138 Dollar positions of reporting European banks outside their own area . 141 Rates of interest in London and New York * 142 V. The European Monetary Agreement European Fund: Credits granted 145 Utilisation of credits granted 146 Statement of account 148 Page Part III - Activities of the Bank Annual balance-sheet totals 149 Memorandum accounts 150 Liabilities * 150 Composition of resources 151 Resources, by origin 151 Resources, by nature and term 152 Total cash and investments 153 Gold position 153 Assets * 154 Time deposits and advances and other bills and securities 156 German External Loan 1924 (Dawes Loan) 157 German Government International Loan 1930 (Young Loan) 158 Austrian Government International Loan 1930 158 Secured loans of the High Authority of the European Coal and Steel Community 159 THIRTY-FIFTH ANNUAL REPORT submitted to the ANNUAL GENERAL MEETING of the BANK FOR INTERNATIONAL SETTLEMENTS held in Basle on 14th June 1965. Gentlemen, I have the honour to submit herewith the Annual Report of the Bank for International Settlements for the thirty-fifth financial year, which began on ist April 1964 and ended on 31st March 1965. Details of the results of the year's business operations are given in Part III, together with an analysis of the balance sheet as at 31st March 1965. The accounts for the thirty-fifth financial year closed with a surplus of 34,519,144 gold francs, against 27,417,055 gold francs for the previous year. After deduction of 1,500,000 gold francs transferred to the provision for exceptional costs of administration and of 10,500,000 gold francs transferred to the provision for contingencies, the net profit amounted to 22,519,144 gold francs, compared with 17,517,055 gold francs for the preceding year. The Board of Directors recommends that the present General Meeting should decide to distribute, as last year, a dividend of 37.50 gold francs per share. The Board also proposes that, as an exceptional measure, a lump sum should again be applied to the reduction of the amount of the undeclared cumulative dividend. This sum, which has been fixed at 14,000,000 gold francs, will represent an extraordinary distribution of 70 gold francs per share. The total distribution will thus amount this year to 107.50 gold francs, payable in Swiss francs in the amount of 153.60 Swiss francs per share. Part I of this Report deals with economic developments and policies in Europe and the United States in 1964 and the early months of 1965. In Part II a survey is given of developments in the fields of credit, external payments and reserves and in the foreign exchange and Euro-currency markets; an outline is also given of the working of the European Monetary Agreement. Part III deals with the operations of the Bank and the functions it performs on behalf of the High Authority of the European Coal and Steel Community and as Trustee and Fiscal Agent for international loans. It also touches on the Bank's rôle in promoting co-operation between central banks as well as on its relations with other international institutions. — 3 PART I CURRENT ECONOMIC TRENDS AND POLICIES 1964-65 For the western industrial countries the main economic problems with which policy had to contend during the past year were the curbing of inflationary pressures in the continental countries, the currency crisis in the United Kingdom and the large increase of capital exports in the United States. In all these respects the situation at present is better than it was six months ago, though it is not yet clear that the difficulties have been fully overcome. On the positive side, output and employment have generally re- mained high and the outlook in this regard is favourable. In the less-developed countries the improved external position of a year ago has not been fully maintained and a further effort to achieve adequate growth without inflation is indicated. The countries of eastern Europe seem to have had some success in making their planning less rigid and in establishing better market incentives for the allocation of resources.
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