christopher j waller : welcoming remarks on the international roles of the us dollar welcoming remarks by mr christopher j waller, member of the board of governors of the federal reserve system, at the third conference on the international roles of the us dollar, hosted by the federal reserve board, washington dc, 20 may 2024. * * * thank you, beth anne, and thank you for the opportunity to speak to you today. 1 i would like to welcome everyone to this third conference on the international roles of the u. s. dollar, which is jointly organized by the federal reserve bank of new york and the federal reserve board. when people talk about the " dollar, " they are referring to a number of roles it plays on the world stage - including a physical currency used worldwide, financial assets denominated or redeemable in u. s. dollars, or a settlement unit used in transactions. in all of these, the role of the u. s. dollar in global finance and its economic and financial stability implications are of elementary importance to federal reserve. participants in the first and second installments of this conference discussed the different roles the dollar plays in the global economy and how the primacy of the dollar benefits not only the united states but also the rest of the world. u. s. households, for instance, benefit from lower transaction and borrowing costs, while u. s. businesses and the u. s. government benefit from deep financial markets, including a large pool of creditors and investors. households and businesses in foreign economies also benefit from access to this broad pool of lenders and investors, which reduces their financing costs and fosters global economic growth. despite all the benefits the dollar provides the united states and global economies and the efforts to mitigate some of the financial stability challenges posed by its dominant role, there has, for some time, been commentary predicting that the dollar is destined for demise - potentially an imminent demise. such predictions have not materialized. 2 the dollar remains, by far, the most widely used currency across a variety of metrics, including as a store of value and a medium of exchange. however, the role of the united states in the world economy is changing, and finance is always changing, so i think it is important for policymakers to regularly consider if and why the dollar's role might change as well. this conference is a good venue to discuss some of the challenges and opportunities for the international use of the dollar in this ever - changing financial landscape. for

were left unchecked, the result might be a stagnant economy at whose core was a stagnant banking system. in contrast, the federal reserve ’ s economic responsibilities are an important reason why we have striven to maintain a consistent bank regulatory policy, one that entails neither excessive tightness nor ease in supervisory posture. the former would lead to credit crunches, the latter, with a lag, would lead to excessive bank failures. just as the probability of bank failure should not be the only concern of the effective regulator, bank regulation is not the only, or even the most important, factor that affects the banking business. the condition of the macroeconomy also has something to say about your success as a banker. in that regard, the generally favorable macroeconomic conditions we have been facing for the past few years suggest that bankers should now take pause and reassess the appropriateness of their lending decisions. mistakes in lending, after all, are not generally made during recessions but when the economic outlook appears benevolent. recent evidence of thin margins and increased nonbank competition in portions of the syndicated loan market, as well as other indicators, suggest some modest underwriting laxity has a tendency to emerge during good times. this suggests the need for a mild caution that bankers maintain sound underwriting standards and pricing practices in their lending activities. toward financial reform without losing the strengths of our current system let me now turn from general concerns over our regulatory structure to more specific concerns regarding the supervisory and regulatory treatment of our largest, most complex banking organizations - - a subject in which i suspect community banks have some considerable interest. as the 105th congress contemplates financial reform legislation, it is critical to focus on the issue of how best to supervise risk - taking in these large entities and, in particular, whether there should be significant umbrella supervision for the entire banking organization. historically, bank holding companies have been largely confined to financial activities that are similar to, often the same as, those permissible to commercial banks. also historically, supervision of banking organizations, both large and small, has tended to focus mainly on the need to protect the bank. to some extent, this emphasis on the bank rather than the nonbank activities of the banking organization was prompted by, or permitted by, management techniques that tended not to treat risk - taking in integrated fashion across the entire holding company. the regulators ’ main concern was the bank, and bank safety could be analyzed more or less remotely and distinctly