BANK FOR INTERNATIONAL SETTLEMENTS THIRTY-FOURTH ANNUAL REPORT 1st APRIL 1963 — 31st MARCH 1964 BASLE 8th June 1964 TABLE OF CONTENTS Page Introduction Part I - Current Economic Trends and Policies 1963-64 Developments in western Europe (p. 4) : output and demand (p. 4), inflationary pressures (p. 5), Denmark (p. 8), Italy (p. 10), France (p. 12), Netherlands (p. 13), Switzerland (p. 14), Belgium (p. 15), Sweden (p. 16), Austria (p. 17), Germany (p. 18), United Kingdom (p. 19); improved situation in the United States (p. 20); developments in eastern Europe (p. 22); the international pay- ments situation (p. 24): the shifting disequilibrium in payments (p. 24), management of exchange markets and reserves (p. 28) Part II - Monetary and Economic Survey 31 I. Credit Developments and Policies 31 Comparative credit and capital-market developments (p. 32) : new patterns of saving and investment (p. 32), bank credit and liquid-asset formation (p. 34), capital-market problems and policies (p. 41); credit policies: United States (p. 44), United Kingdom (p. 47), France (p. 49J, Italy (p. 52), Netherlands (p- 53), Belgium (p. 54), Germany (p. 55), Switzerland (p. 56), Austria (p. 57), Sweden (p. 38), Denmark (p. 59), Norway (p. 60), Finland (p. 61), Spain (p. 61), Canada (p. 62), Japan (p. 63) II. Domestic and International Prices 65 Domestic prices and wages (p. 65): consumer prices (p. 65), wholesale prices and building costs (p. 67), wages (p. 69); prices and production of raw materials (p. 71): tin (p. 75), zinc (p. 75), copper (p. 76), rubber (p. 76), wool (p. 76), sugar (p. 76), wheat (p. 77), cocoa (p. 77), world output of basic commodities (P- 77) III. World Trade and Payments 79 The expansion of world trade (p. 79)', balances of payments (p. 81) : European OECD countries (p. 81), France (p. 83), Italy (p. 85), Germany (p. 86), Netherlands (p. 88), Belgium (p. 90), United Kingdom (p. 90), Scandinavian countries (p. 92), Switzerland (p. 93), United States (p. 94), Canada (p. 98), Japan (p. 99); commercial policy (p. 100) Page IV. Gold, Reserves and Foreign Exchange 101 Gold production and markets (p. 102); gold and exchange holdings (p. 105) : gold (p. 105), exchange (p. 107); the US international liquidity position (p. 108); European monetary reserves (p. 113): France (p. 113), Germany (p. 115), Switzerland (p. 115), Netherlands (p. 116), Belgium (p. 116), Denmark (p. ny), Austria (p. 117), Spain (p. 117), Italy (p. 117), United Kingdom (p. 118), Sweden (p. 119); International Monetary Fund (p. 119); foreign exchange (p. 121): spot markets (p. 121), forward markets (p. 123), other exchange developments (p. 124) V. The Euro-Currency Market 127 Problem of denning Euro-currencies (p. 127); present size of the market (p. 129); development of the market since the late 1950s (p. 130); sources and uses of Euro-currencies (p. 131) : sources of Euro-dollars (p. 132), sources of other Euro-currencies (p. 134), uses of Euro-currencies (p. 134); Euro-dollar interest rates (p. 135); other Euro-currency interest rates (p. 137); exchange regulations, banking controls and the Euro-currency market (p. 138); Euro- dollars and the US balance of payments (p. 140) VI. The European Monetary Agreement 142 Continuation of the Agreement (p. 142); operations under the Agreement (p. 143): European Fund (p. 143), Multilateral System of Settlements (p. 145); management of the European Fund and the Multilateral System of Settle- ments (p. 147) Part III - 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); financial results (p. 161); changes in the Board of Directors (p. 162) Conclusion 163 Balance sheet as at 31st March 1964 and Profit and Loss Account for the financial year ended 31st March 1964. LIST OF TABLES AND GRAPHS (Graphs are indicated by an asterisk) Page Part I - Current Economic Trends and Policies 1963-64 Western Europe: Industrial production 4 Gross national product and its components 6 Imports and industrial wages *... 11 Centrally-planned economies: National income, industrial production and productivity 22 Continental Europe : Balance on current account and reserve movements * 26 World balance of payments 27 Part II - Monetary and Economic Survey I. Credit Developments and Policies Gross national saving and investment 33 Expansion of bank assets 35 Official holdings of foreign assets and the money supply 36 Rate of growth of monetary and quasi-monetary liabilities * 38 Money supply, quasi-money and gross national product 40 Capital market: Net issues 42 Official discount rates 46 Interest rates * 50 II. Domestic and International Prices Consumer prices 66 Consumer prices * 67 Wholesale prices 68 Wholesale prices * 68 Building costs 69 Wages in industry 70 Hourly earnings in industry * 71 World-market commodity prices * 73 Prices of major commodities 74 World production of basic commodities 78 Page III. World Trade and Payments International trade, by areas 79 Developing countries : Volume and unit value of foreign trade * .... 80 European OECD countries: Balances of payments 82 France : Foreign trade 83 Balance of payments 84 Italy: Balance of payments 86 Germany: Balance of payments 87 Netherlands: Balance of payments 89 United Kingdom: Balance of payments 91 United States: Balance of payments 95 Private capital movements 96 Canada: Balance of payments 98 Japan: Balance of payments 99 IV. Gold, Reserves and Foreign Exchange World gold production 102 Estimated sources and uses of gold 104 London market gold price* 105 International liquidity 106 Financing of the US balance-of-payments deficit 109 US Federal Reserve System swap arrangements no European countries: Reserve positions 114 Italy: Monetary movements 118 IMF: Currencies drawn, 1947-63* 120 Holdings of leading currencies* 120 European spot quotations for the US dollar * 122 V. The Euro-Currency Market Commercial banks' gross short-term liabilities and assets in certain foreign currencies 128 Commercial banks' net short-term foreign currency liabilities and assets . 130 Overseas and foreign banks and accepting houses in the United Kingdom: Deposit liabilities and advances to non-residents * 131 US interest rates and Euro-dollar rate in London* 136 UK interest rates and Euro-sterling rate in Paris *.. 138 VI. The European Monetary Agreement European Fund: Credits granted 143 Utilisation of credits granted 144 Payments made under the Multilateral System of Settlements 146 Statement of Account of the European Fund 147 Page Part III - Activities of the Bank Annual balance-sheet totals 149 Memorandum accounts 150 Liabilities * 150 Composition of resources 151 Deposits, by origin 151 Deposits, 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) 158 German Government International Loan 1930 (Young Loan) 158 Austrian Government International Loan 1930 159 Secured loans of the High Authority of the European Coal and Steel Community 160 THIRTY-FOURTH ANNUAL REPORT submitted to the ANNUAL GENERAL MEETING of the BANK FOR INTERNATIONAL SETTLEMENTS held in Basle on 8th June 1964. Gentlemen, I have the honour to submit herewith the Annual Report of the Bank for International Settlements for the thirty-fourth financial year, which began on ist April 1963 and ended on 31st March 1964. Details of the results of —the-year-'s—business -operations—are- given ffl-Paft-IHr^egether-withan--analysis of the balance sheet as at 31st March 1964. The accounts for the thirty-fourth financial year closed with a surplus of 27,417,055 gold francs, against 21,210,271 gold francs for the previous year. After the writing-off of the cost of a building purchased during the year and the deduction of 2,000,000 gold francs transferred to the provision for exceptional costs of administration and of 7,500,000 gold francs transferred to the provision for contingencies, the net profit amounted to 17,517,055 gold francs, compared with 13,710,271 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 be applied to the reduction of the amount of the undeclared cumulative dividend. This sum, which has been fixed at 8,500,000 gold francs, will represent an extraordinary distribution of 42.50 gold francs per share. The total distribution will thus amount this year to 80 gold francs, payable in Swiss francs in the amount of 114.30 Swiss francs per share. Part I of this Report deals with economic developments and policies in Europe and the United States in 1963 and the early months of 1964. In Part II a survey is given of developments in the fields of credit, prices, 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. The Bank has continued to co-operate with other international institutions. PART I CURRENT ECONOMIC TRENDS AND POLICIES 1963-64 Developments over the past twelve months have helped to resolve favourably some of the uncertainties about the economic situation which were still prominent a year ago.