Final answer:
The Bank for International Settlements (BIS) is an international financial institution that fosters global monetary and financial stability. They operate by engaging central banks in collective action and providing banking services to only central banks and international organizations. The BIS is a critical component of the international financial system.
Step-by-step explanation:
The Bank for International Settlements (BIS) is an international financial institution that serves as a bank for central banks. Established as a result of the Bretton Woods Conference, the BIS's main goals are to promote monetary and financial stability, to serve as a prime counterparty for central banks in their financial transactions, and to act as an agent or trustee in connection with international financial operations. It is distinct from the International Monetary Fund (IMF) and the World Bank; however, these institutions collectively work towards managing the international political economy (IPE) and enhancing global economic stability.
The BIS facilitates cooperation among central banks and provides a forum for discussion and research on policy regarding monetary and financial stability. It also serves as a hub for central banks' management of international liquidity and provides banking services, but only to central banks or international organizations.
Additionally, the BIS monitors and analyses global banking and financial stability while providing a repository for central banks to store their currency reserves. Through its various functions, the BIS plays an integral role in the overall health of the world's financial system.