like to wrap up with a brief discussion of some of the other decision points we will encounter as we continue the process of normalizing our balance sheet. in particular, what does the committee judge to be normal in regard to the type and duration of assets that we will hold? on composition, in line with our previously announced normalization principles, i favor a return to a balance sheet with all treasury securities, allowing our mortgage - backed securities ( mbs ) holdings to run to zero. in those principles, we also state that while we do not expect sales of mbs as part of the normalization process, later we would be open to limited sales to reduce or eliminate residual holdings of mbs. in regard to duration, moving to shorten the duration of our 2 / 3 bis central bankers'speeches holdings could increase the fed's ability to affect long - term interest rates if the need arose. however, it might be preferable to have the composition of our treasury holdings roughly match the maturity composition of outstanding treasury securities, minimizing any market distortions that could arise from our holdings. over the course of our upcoming meetings, i look forward to what promises to be an interesting discussion on these issues with my colleagues. finally, in assessing our balance sheet policy, it is important to point out that the fed remains entirely focused on meeting its statutory dual - mandate objectives of maximum employment and price stability. the normalization of the balance sheet is not a competing goal. if ever it appears that our plans for the balance sheet are running counter to the achievement of our dual - mandate objectives, we would quickly reassess our approach to the balance sheet. 1 these remarks represent my own views, which do not necessarily represent those of the federal reserve board or the federal open market committee. 2 for more information, see the committee ’ s statement regarding monetary policy implementation and balance sheet normalization, which is available on the www. federalreserve. gov / newsevents / pressreleases / monetary20190130c. htm. board ’ s website at 3 the committee ’ s policy normalization principles and plans were adopted on september 16, 2014, and can be found on the board ’ s website at www. federalreserve. gov / monetarypolicy / files / fomc _ policynormalization. pdf. the fomc adopted addenda to the policy normalization principles and plans on march 18, 2015 ( pdf ), and

made, a natural next step is to contemplate the appropriate size of the fed's balance sheet and reserves and the process for getting there. in line with the requirements of operating with ample reserves - - and boosted by the growth in nonreserve liabilities - - the fed will maintain a larger balance sheet and reserve supply relative to the pre - crisis period, with the goal of remaining on the flat portion of the reserve demand curve. i would note that reserves have already declined appreciably from their peak, falling by $ 1. 2 trillion to a current level of around $ 1. 6 trillion. at the same time, we have seen a substantial increase in our nonreserve liabilities, such as currency in circulation and the treasury general account balance. in our statement on policy normalization principles and plans, we outlined an intention to hold no more securities than necessary to implement monetary policy efficiently and effectively. 3 as the balance sheet continues to shrink, we are now in the process of determining that necessary size. ultimately, the size of the balance sheet will be determined by a number of factors, including demand for nonreserve liabilities, such as currency ( which has been rising ), and, importantly, the 1 / 3 bis central bankers'speeches quantity of reserves necessary to remain reliably on the flat portion of the reserve demand curve. survey results suggest that banks have greatly increased their demand for reserves in the postcrisis period. responses to the september 2018 senior financial officer survey report that banks would be comfortable with a level of reserves in the system in the neighborhood of $ 800 billion, taking into consideration the level of interest rates at the time. 4 in part, this increased demand reflects a response to regulatory changes introduced after the crisis. these changes include, importantly, the liquidity coverage ratio ( lcr ), which has improved banks'liquidity resilience by requiring firms to hold sufficient high - quality liquid assets to cover potential outflows during times of stress. reserves, along with treasury securities, are favored under the lcr, and, consequently, firms currently meet a sizable fraction of their lcr requirements by holding reserves. notwithstanding survey results, the level of reserve demand remains quite uncertain. it is possible that, over time, the preferences of banks will shift, or that demand will prove more price elastic than banks are currently expecting. as i have discussed previously, bank holdings of reserves to meet lcr requirements could shift toward treasury