philip r lane : “ multiple reserve currencies and the international monetary system ” panel remarks by mr philip r lane, governor of the central bank of ireland, at the seventh high - level snb - imf conference on the international monetary system, zurich, 10 may 2016. * * * the world is in an important transition phase : the share of emerging economies in global gdp is far higher now than a decade ago. over time, these countries are adopting a more liberal approach to international financial integration, building a larger set of domesticcurrency financial markets that facilitate participation from overseas investors and permitting greater outward flows from the domestic private sector. in turn, the asymmetric configuration of the global financial system that characterised the decade following the asian crisis ( large external surpluses, accumulation of foreign currency reserves, the acquisition of foreign debt assets but the issuance of foreign equity liabilities on the part of emerging economies ) is due for replacement but the exact properties of the new configuration is not yet clear ( lane and milesi - ferretti 2008 ). in terms of the overall level of reserves, we know that traditional factors such as the level of trade openness and the exchange rate regime have been joined by financial factors, such as the size of the domestic financial system, the extent of capital account openness and the scale of foreign currency liabilities in determining the appropriate level of reserves. for instance, obstfeld, shambaugh and taylor ( 2010 ) were prescient in emphasising the size of domestic financial liabilities that could potentially be converted into foreign currency as a driver of reserves, in view of recent developments in various emerging markets and the emphasis in the april 2016 imf world economic outlook on gross capital outflows as an increasingly important driver of the financial account for these economies. in related fashion, the empirical work on the composition of reserves identifies both trade and financial linkages as significant in explaining currency shares : all else equal, a country that trades a lot with the euro and issues a lot of euro - denominated debt will hold more euro reserves, compared to a country that is more closely linked to the us and issues a lot of dollar liabilities. related work includes eichengreen and mathieson ( 2000 ), lane and shambaugh ( 2010 ) and benetrix et al ( 2015 ). the rise of china as a share of global gdp and the internationalisation of the rmb means that the share of the rmb in reserves

##led almost €14 billion. http : / / www. centralbank. ie / press - area / press - releases / pages / capitalandliquidityresultspublishedfor bankingsector. aspx. bis central bankers ’ speeches is important to realise that, although arrears were mounting steadily, and the inevitability of sizable losses in the non - nama portfolio was recognised by all, even at this stage banks had recognised relatively few write - downs. as already noted, the forecasting exercise was being conducted in circumstances that were largely out of the range of historical experience : absent that, it is of interest to explain the assumptions that were made ( at the instance of blackrock ) to underpin a data - based loss projection. thus, for residential mortgages, blackrock – extrapolating from uk experience – assumed that, in the end, bank forbearance on delinquent loans would not be successful in avoiding foreclosures, and they modelled negative equity as the major driver of delinquencies. thus, in effect, a significant proportion of negative equity loans was assumed to default in each quarter, and little of the unsecured portion of the loan would be recovered. 14 since the house price forecasts entailed a large fraction of the mortgage book remaining in negative equity throughout the horizon of the exercise, this produced a higher estimate of life - time losses than had been envisaged in the top - down exercise of the previous year. for commercial property loans, the ability of the debtor to secure rental renewals was assumed to be low, so that for this segment too blackrock ’ s lifetime loan - loss assumptions were heavily driven by loan - to - value ratios. in choosing parameters, blackrock also made subjective judgments about the banks ’ operational ability to make effective loan recovery. mapping the blackrock loan losses into capital requirements for pcar2011 entailed some judgment as to how much of future prospective losses to provide for in the banks ’ capital right away. here there was some tension between accounting and economic approaches. it was deemed, from the accounting point of view, unnecessary to insist that the banks hold sufficient capital immediately to meet all of the lifetime projected loan losses. on the other hand, holding enough to meet projected three year losses ( and still end after 3 years with 10. 5 % core tier 1 capital in the base case and 6 % in the stress case ) was deemed insufficient