another. in 1913, the us congress established the federal reserve system, not only to provide greater financial stability and to improve banking supervision, but also to provide an elastic currency and a national check - clearing system. the federal reserve began issuing currency in 1914. moreover, checks that were cleared through the federal reserve and that were drawn on federal reserve member banks were exchanged at par value. in the early days, the federal reserve's national check - clearing service was provided free of charge to nationally chartered banks that were required to join the system and state - chartered banks that joined voluntarily. despite some early difficulties with achieving widespread par clearing, the federal reserve's check collection services ultimately provided the nation with a much more unified payments system. during this period, checks or drafts were also used as a means of settling interbank payment obligations. to improve the safety and efficiency of the interbank settlement process, in 1918 the federal reserve developed and implemented fedwire, the first real - time gross settlement system. the key feature of the fedwire system was the ability to transfer account balances held at the central bank through telegraphic messages using a secure communications network. although fedwire was intended to improve the large - value payment system, and quickly accomplished that goal, it was also used for some urgent large - value commercial and retail payments, and continues to be used that way today. the payments operations of state and federally chartered private banks, private clearing houses, and the operations of the new central bank, provided the foundation for the private - and public - sector payments infrastructure that exists in the united states today. yet for many years, policies that deterred interstate banking shaped the design and operation of the retail payments system. the us banking and payments system has also been shaped by other important state and federal laws. starting in the late 1800s, states attempted to develop a more - uniform set of commercial laws codifying existing laws and common business practices. they eventually adopted the uniform commercial code, or ucc, which states generally enacted. at the federal level, a number of laws influenced the development of the banking system. laws such as the mcfadden act and the douglas amendment to the bank holding company act were passed to restrict either bank ownership or bank branching across state lines. over the years, legislation enacted by the various states, and ultimately at the federal level, eliminated the barriers to banks operating across state lines, at least with respect to interstate bank acquisitions. in 1994, the riegle - neal act,

##s from clients, adopted risk - sensitive margin practices to a greater extent, and enhanced tools to manage risk. going forward, the federal reserve plans to continue its focus on fundamental risk management related to counterparty credit risk, and i'll focus my remarks on three themes. first, banks should know their customers exceedingly well, both at onboarding and throughout the evolution of the relationship. second, banks should have tools to identify the unique risks they face as these risks materialize across products, business lines, and clients and use these risk measures to maintain appropriate margins through 1 / 5 bis - central bankers'speeches the credit cycle. third, banks should set prudent risk limits and respond to signals of risk appropriately. these risk management practices are important to help control the build - up of risk - preventing banks and the banking system from taking on outsized exposure to leveraged entities and preventing the build - up of that leverage. these credit risk management practices are important complements to prudent liquidity risk management and resilience measures, such as contingency planning, in which banks take steps to mitigate the impact of distress of a counterparty to the bank and the financial system more broadly. the federal reserve will also use its own tools to assess counterparty credit risk in the banking system. for example, alongside this year's stress test results, we will publish the aggregate results of several exploratory analyses, including analysis of the resilience of the globally systemically important banks to the simultaneous default of their five largest hedge fund counterparties. we will conduct that analysis under two different sets of financial market conditions to learn about how such exposures may vary across different types of stresses. we expect the information yielded from that analysis will deepen our supervisory understanding of counterparty credit risk at the banks. as we noted, the exploratory analysis will not affect bank capital requirements. there will be more to come on that in june, but for now let me speak about the risk management practices we plan to focus on in our ongoing supervision. 2 thorough due diligence as with many things in banking and business, strong risk management starts with knowing your customers. in traditional lending, a lender should understand the finances and exposures of the borrower to ensure it will be able to pay back the loan. a lender should also understand the borrower's managerial and financial history, profitability goals and the risk - taking to achieve them, and how