remarks by mr. javier guzman calafell, deputy governor at the banco de mexico, at the omfif - ramp discussion on “ navigating the multicurrency reserve environment ”, washington, dc, 6 october 2016. 1 let me start by expressing my appreciation to the organizers for the invitation to participate in this panel. in recent years, central banks around the world have shown an increasing interest in investing their international reserves in assets denominated in a wider array of currencies. this is explained by a number of reasons, including a more active search for yield in a low interest rate environment and diversification from a risk management perspective. to what extent is this leading to a multicurrency environment? there are a number of attributes that a currency needs to fulfill to reach international status and take on a significant global role. first and foremost, it must be seen as a reliable store of value by both private and official non - the views expressed in this document are strictly personal. residents, thus implying that they are willing to hold assets denominated in that currency. secondly, it has to be considered an efficient medium of exchange for international transactions, in turn reflected, for instance, in its active use in the invoicing and settlement of global trade of goods and services. lastly, it should also be widely regarded as a unit of account, be it for commercial or financial flows. undoubtedly, these requirements are difficult to meet, if not unsurmountable, for the vast majority of national currencies. therefore, at present only a handful can be considered as truly international assets. naturally, the us dollar is the most important among them. according to the most recent imf data, 2 the us dollar accounts for 63 percent of all allocated foreign exchange reserves globally, more than three times as much its nearest competitor, the euro. additionally, as the bis points out in its latest triennial central bank survey, 3 the us dollar is involved in close to 90 percent of all foreign exchange see “ currency composition of official foreign exchange reserves ” ( cofer ), as of the second quarter of 2016. bank for international settlements ( 2016 ) : “ triennial central bank survey : foreign exchange turnover in april 2016 ”, september. note that since two currencies are involved in each transaction, the sum of shares in individual currencies adds to 200 % in these figures. transactions, nearly three times as much as the euro, its closest competitor in this regard

of the renminbi ’ s role to rival some of the main ae currencies looks at this stage uncertain. on the one hand, previous experience with the us dollar during the early 20th century shows that major shifts in the international monetary system can occur rapidly. on the other hand, china is still far away from meeting all the above noted conditions to provide its currency with international status, and the road ahead does not seem to be an easy one. in this respect, barry eichengreen has noted that the race to the consolidation of the renminbi as a global currency should be seen as a marathon, and not as a sprint. 5 but irrespective of the above comments, would an international monetary system with more international currencies be stronger than the present one? in my view, with a long - term perspective in mind, the answer is affirmative. for one, the more individual economies that enjoy macroeconomic and eichengreen, barry ( 2015 ) : “ china ’ s money goes global : the how, the when and the why ”, the milken institute review, fourth quarter. financial stability, are open to trade and financial flows, and have deep and liquid capital markets, among others, the more the system as a whole is likely to be sound and efficient. in addition, a higher number of international currencies entails greater possibilities to diversify overall portfolio risk, a certainly valuable opportunity for asset managers, and especially reserve managers. a multicurrency reserve system, once established, will probably reduce the risk of a persistent overvaluation of assets, including exchange rates. to this, one may add more evenly distributed benefits among countries from their role as reserve issuers, such as seigniorage gains and lower interest rates on their debt, as well as a decreased risk of major and persistent global external imbalances. on the other hand, it is important to stress that a multicurrency reserve system, as well as the road leading to it, is not free of difficulties. take the case of renminbi internationalization. this process requires, among other things, a comprehensive opening of china ’ s financial markets to foreign transactions, as well as a floating exchange rate. as shown by recent episodes, any moves in this direction could have unintended consequences, both for the domestic economy and for the global financial system. more generally, experience demonstrates that the process of financial and exchange rate liberalization in other countries may