A stronger U.S. banking system better protects against future shocks, provides a more solid foundation for domestic growth, and therefore also enhances prospects for growth and financial stability abroad. I look forward to a discussion with fellow panelists and also to engaging with conference participants over the next two days. Thank you for your attention. References Ehrmann, M. & M. Fratzscher (2005). Equal Size, Equal Role? Interest Rate Interdependence Between the Euro Area and the United States, Royal Economic Society, vol. 115 (506), pages 928–948, October. Farhi, E. and I. Werning (2014). Dilemma not Trilemma? Capital Controls and Exchange Rates with Volatile Capital Flows, IMF Economic Review, pp. 62: 569–605. Federal Open Market Committee (2016), Statement on Longer-Run Goals and Monetary Policy Strategy, Adopted effective January 24, 2012; as amended effective January 26, 2016. Federal Open Market Committee (2016), Policy Statement, January 27, 2016. Fleming, M. (1962). Domestic Financial Policies under Fixed and under Floating Exchange Rates, IMF staff papers, 9 (3), pp. 369–380. G20 (2010), Summit Leaders’ Declaration, Seoul, Korea, November 11 – 12, 2010. Goldberg, L. (2013). Banking Globalization, Transmission, and Monetary Policy Autonomy, Sveriges Riksbank Economic Review (Special Issue), pp. 161–193. 7  http://www.federalreserve.gov/aboutthefed/section2a.htm. BIS central bankers’ speeches  3  IMF (2105), The IMF’s Approach to Capital Account Liberalization Revisiting the 2005 IEO Evaluation, Independent Evaluation Office, Washington, D.C. IMF (2015), 2015 Spillover Report, Washington, D.C. IMF (2012), The Liberalization and Management of Capital Flows: an Institutional View, Washington, D.C. Klein, M. and Shambaugh, J. (2015).

But before I go into these issues, I would like to briefly describe the background to the reform package. Financial system close to total collapse in autumn 2008 The global financial system was close to a total collapse in autumn 2008. The large rescue packages implemented by central banks and other authorities around the world succeeded in preventing an even worse financial crisis than the one we experienced. One hardly dares speculate as to what might have happened if the rescue packages had not succeeded in restoring confidence in the banking system, because without confidence developments can be quick and drastic. The most classic example of this is a bank run. This means that the bank’s customers become concerned for their savings and rush to the bank to withdraw them in time. But the money isn’t in the bank, it has been lent out. Which is the whole point, of course. At the same time, the banks are unable to renew their loans in the market as they mature, which means they cannot meet their obligations to deposit customers or creditors in the market and they collapse like a house of cards. And without banks the financial system cannot function. If not even the most basic functions can be upheld, people will not receive their wages and will not be able to pay their bills. The economy will grind to a halt. But even though we managed to save the financial system through rescue packages, the costs of the crisis have been immense.