risk - management, but, in addition, a system would be established that can evolve naturally as risk management practices themselves evolve. for the most part, these new quantitative techniques are designed to address risk at lcbos. they involve highly detailed and comprehensive management information systems. such systems are cost effective for lcbos, but they simply do not apply to the vast majority of banks in this country or, for that matter, to smaller and regional banks any place in the world. for this reason we do not intend that the hallmark of basel ii - - the harnessing of internal - ratings - based systems for use in the supervisory process - - be applied in this country to any but the largest and most complex banking organizations. indeed, the internal - ratings - based, or irb, approaches explicitly assume within their risk - weight formulas a high degree of portfolio diversification that very few banks can achieve. as you know, there are two versions of the irb approach : foundation and advanced. the foundation version has a high degree of built - in conservatism, under which rigid supervisory rules would establish many of the credit - risk parameters that would determine bank capital requirements. that is because the foundation approach is designed to address either banks in the early stages of developing their risk - management systems or those operating in a supervisory environment that is not yet prepared to validate and enforce the sound - practice standards applicable to banks under the advanced irb approach. in this country, the foundation version may be useful as a transition for banks that have not yet developed the ability to estimate all of the necessary credit parameters or have not convinced their supervisors that they can both do so and use those parameters in making credit decisions. the foundation version may also be useful for large organizations that have relatively limited business lines. but we would expect - - and we believe the market would as well - - that the lcbos will switch quite rapidly to the advanced version of irb. these entities, by their very nature, will be expected to have implemented the risk - management systems required by the advanced version. if they do not, supervisory pressures and market realities will bring very strong inducements indeed upon such organizations to change their procedures. the standardized approach to basel ii is extremely close to the current basel i and should ultimately involve quite modest changes on the part of most non - lcbo u. s. banks. indeed, it may not even be cost effective to apply the standardized approach in this country, with only modest revisions to the current

of money, credit and banking, vol. 37 ( march ), pp. 273 - 96. figure 1. federal reserve liabilities as a share of gdp quarterly averages percent reserve balances other liabilities treasury general account currency in circulation projections note : key identifies regions in order from top to bottom. in this figure, currency in circulation is federal reserve notes outstanding. projections of liabilities are based on responses to surveys of primary dealers and market participants conducted by the federal reserve bank of new york. nominal gdp projections are from the congressional budget office, the budget and economic outlook : 2019 to 2029. source : federal reserve board, statistical release h. 4. 1, " factors affecting reserve balances, " https : / / www. federalreserve. gov / releases / h41 ; federal reserve board staff calculations ; federal reserve bank of new york primary dealer survey and survey of market participants ; congressional budget office ( 2019 ), the budget and economic outlook : 2019 to 2029. ( washington : cbo ), https : / / www. cbo. gov / system / files? file = 2019−03 / 54918−outlook−2. pdf. table 1. federal reserve liabilities as a share of gdp ( percent ) 2006 2014 2019 2019 to 2006 change reserve balances 0. 1 14. 6 5. 7 5. 6 currency in circulation 5. 5 7. 1 7. 9 2. 4 treasury general account 0. 0 0. 6 1. 4 1. 4 other liabilities 0. 3 2. 5 1. 4 1. 1 total liabilities 5. 9 24. 8 16. 5 10. 6 note : values shown are averages for each liability item in q4 of each year divided by q4 nominal gdp in that year. values for 2019 are based on projections ( for details on projections, see the figure 1 note ). in this table, currency in circulation is federal reserve notes outstanding. total liabilities may not equal the sum of the line items due to rounding. source : federal reserve board, statistical release h. 4. 1, " factors affecting reserve balances, " https : / / www. federalreserve. gov / releases / h41 ; federal reserve board staff calculations ; federal reserve bank of new york primary dealer survey and survey of market participants ; congressional budget office ( 2019 ), the budget and economic outlook : 2019 to 2029 ( washington : cbo ), https : /