Germany's central bank president Jens Weidmann will become the new board chairman of the Bank for International Settlements (BIS), the bank announced on Monday.

On Sunday the BIS board of directors elected Weidmann to succeed outgoing chairman Christian Noyer, governor of the Bank of France, who is currently serving his second term. Noyer first assumed his responsibilities as chairman in March 2010.

Weidmann's three-year term begins on Nov. 1 of this year.

BIS: An insiders' club for powerful banking nations

Headquartered in Basel, Switzerland, BIS's membership is made up of 60 central banks whose countries contribute about 95 percent of global economic output. Its mission, according to its website, is "to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas, and to act as a bank for central banks."

The BIS board meets at least six times a year and is made up of twenty top central bank officials from around the world, including from Brazil, Canada, China, the European Union (Mario Draghi), France, Germany, India, Italy, Japan, Mexico, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States, among others.

A narrow view of the central bank's mandate

During his tenure as head of the Bundesbank, Germany's central bank, Weidmann has taken a hawkishly narrow view of the mandate of central banks: In his view, they should narrowly focus on maintaining price stability, and eschew any larger role in macroeconomic management.

Weidmann had strongly opposed the European Central Bank's decision in early 2015 to buy eurozone sovereign bonds and in 2012 had criticized ECB head Mario Draghi's promise to do "whatever it takes" to save the euro.

Weidmann versus Draghi

Implicitly, Draghi's 2012 promise meant having the ECB monetize debt by serving as a lender of last resort for eurozone member nations. During a period of crisis in 2011-12, several eurozone countries, including Spain and Italy, saw the interest rates charged by private capital markets on money lent to those countries rise and rise. The countries' sovereign debt servicing obligations threatened to spiral out of control and lead to insolvency.

The reason: Those same capital markets were demanding higher and higher interest rates as risk premia, driven by fear that those rates would rise further, in a self-reinforcing spiral. The fear that the countries' debt burdens might be made unsupportable due to rising interest rates was precisely what caused the rates to rise further.

Draghi's "whatever it takes" promise put a sudden end to the spiral. Eurozone member countries' interest rates soon dropped back to very low levels, as markets recognized Draghi's words meant the ECB would use its infinitely flexible balance sheet to buy sovereign bonds if necessary in order to keep sovereign interest rates manageable and governments solvent despite heavy accumulated debt loads.

Draghi won that round

In the end, the ECB didn't need to act on Draghi's promise - simply making the commitment to be ECB member governments' lender of last resort if necessary was enough to end the panic.

Draghi's "whatever it takes" promise stabilised eurozone sovereign debt markets and is widely credited with preventing the collapse of the euro as a common currency.

Weidmann, however, had feared Draghi's move would contravene the European Union's treaty rule against central bank financing of fiscal spending, and would reduce the pressure for economic reforms on member nations - and the pressure for fiscal restraint, favoured by Weidmann and other influential German policymakers like finance minister Wolfgang Schäuble.

Weidmann's selection as the new chairman of the board of governors of the very influential Bank of International Settlements - he will continue on as head of the Bundesbank concurrently - raises important questions about whether the world's most powerful central banks are leaning, as a group, toward a shift in policy emphasis - away from the interventionist macroeconomic stance of low interest rates and "quantitative easing" implemented by several key central banks in recent years, including the Federal Reserve, Bank of England, Bank of Japan, and European Central Bank.