mark w olson : the european union ’ s financial services action plan testimony of mr mark w olson, member of the board of governors of the us federal reserve system, before the committee on financial services, u. s. house of representatives, 22 may 2002. * * * thank you, mr. chairman, for the opportunity to speak today on matters relating to the operations of u. s. banking organizations in the european union. this is a time of significant change within the european union with the ongoing efforts to complete the single market in financial services. i join with my colleagues here today in welcoming the european union ’ s plans to make its market more efficient and transparent. the united states has always been a strong supporter of european unity as well as market reforms that eliminate unnecessary regulatory burden and promote better functioning of markets and financial systems. the financial services action plan of the european union includes proposals that are aimed at achieving these same goals. the fsap involves a series of regulatory and legislative measures designed to achieve, among other things, a single wholesale european market ; open and secure retail markets ; and state - of - the - art prudential rules and supervision. to further these goals, a number of directives have been or will be adopted that deal with issues such as money laundering, investment services, implementation of new basel capital rules and international accounting standards, and supervision of financial conglomerates. i will deal with the latter three areas later in my testimony. these directives, and all of the other measures being adopted in the fsap, will affect u. s. financial services firms with operations in europe. the fsap is intended to modernize and enhance the efficiency and structure of the regulatory regime for financial services within the european union. to the extent that the fsap achieves these goals, u. s. firms are well - positioned to offer innovative and efficient services to customers throughout europe. at the federal reserve, we follow with interest changes to foreign bank regulatory and supervisory systems and seek to understand how these systems affect the banking institutions for which we are responsible. this is especially important in the european union, in which u. s. banking organizations have substantial operations. as of december 2001, 27 u. s. banking organizations operate in the european union with aggregate eu assets of over $ 650 billion. moreover, 66 eu banking organizations conduct commercial banking and other financial services in the united states with aggregate u. s. assets of over $ 1. 7 trillion. these figures

states, they can issue in dollars and don ’ t have to bear exchange rate risk. and u. s. investors can get exposure to foreign firms without incurring exchange rate risk. see bertaut, von beschwitz, and curcuru ( 2023 ). see bertaut, von beschwitz, and curcuru ( 2023 ). - 6the many sources of demand for u. s. dollars show through to its very high share of foreign exchange transactions, where, according to the latest statistics from the bank for international settlements, the dollar remains by far the most commonly traded currency. 10 the size and depth of dollar foreign exchange markets mean the dollar is frequently used as a “ vehicle ” currency : even when firms and investors around the globe want to transact in two currencies that don ’ t include the dollar, they typically find that it is easier and less expensive to first conduct a trade between the initial currency and the dollar and then conduct a second trade to exchange the dollars for the second currency. 11 the final role for an international currency is as a unit of account, and an important measure on this dimension is its use as an “ anchor currency ” against which other countries may attempt to limit their exchange rate movements. here, the research finds that the dollar ’ s usage as an anchor currency has increased somewhat over the past two decades. not including the u. s., economies anchored to the dollar accounted for roughly 50 percent of world gross domestic product ( gdp ) by 2015. by contrast, the share of world gdp anchored to the euro was only 5 percent ( not counting the euro area itself ). 12 to recap, by standard measures of an international currency ’ s use, there has not been any notable erosion in the dollar ’ s dominance over the past couple of decades. going forward, however, there are potential challenges to the dollar ’ s international status, and some recent developments have the potential to boost the international use of other currencies. see bank for international settlements ( 2022 ). see devereux and shi ( 2013 ). see ilzetzki et al. ( 2019 ). - 7a shifting payments landscape — for example, the rapid growth of digital currencies — could reduce reliance on the u. s. dollar. people often conjecture that cryptocurrencies like bitcoin may replace the u. s. dollar as the world ’ s reserve currency. but most trading in decent