whether their current cushion of actual capital above regulatory minimums is still appropriate. on balance, the federal reserve believes that an appropriately conservative approach to capital adequacy serves the united states'interest in maintaining the safety, soundness, and resiliency of our banking system. however, we also recognize the impact that differences among countries can have and that it is worthwhile to minimize them whenever possible. as chairman bernanke noted this past fall, we intend to review and consider international differences before issuing a final basel ii rule. conclusion this will be my last speech on basel ii as a member of the board of governors of the federal reserve system. i want to thank many of you in the audience for taking the time to meet with me and answer my many questions related to capital and risk management over the years. i encourage all of you to continue to push forward with continuous innovation in risk management and financial instruments.

##ing international specialization, and hence cross - border trade and increasing dispersion of current account balances, are as yet diminishing. to be sure, as i pointed out earlier this year, we may be approaching a point, if we are not already there, at which exporters to the united states, should the dollar decline further, would no longer choose to absorb a further reduction in profit margins. an acceleration of u. s. import prices, of course, would impede imports and give traction to the process of adjustment in our trade balance. moreover, international investors, private and official, faced with an increasing concentration of dollar assets in their portfolios, will at some point choose greater balance in their asset accumulation. that shift, over time, would likely induce contractions in both the u. s. current account deficit and the corresponding current account surpluses of other nations. to date the proportional shift out of dollars from the total of official and private sector foreign currency accounts has been modest, when adjusted for exchange rate changes. 6 of course, the shift has been larger on an unadjusted dollar equivalent basis. however, the market has absorbed this change in an orderly manner. the more - rapid aging of european and japanese populations relative to the aging of the u. s. population should slow the flow of foreign saving available to the united states. although those population dynamics are already in train, little evidence as yet of slowed savings transfers has surfaced. the correlation coefficient between paired domestic saving and domestic investment, a conventional measure of the propensity to invest at home for oecd countries constituting four - fifths of world gdp, fell from 0. 97 in 1990 to less than 0. 8 in 2003. this correlation coefficient has been even lower recently when the united states is excluded from the sample. with rare exceptions, a decline in the correlation of countries'paired domestic saving and domestic investment implies an increased dispersion of current account balances. it is true that estimates of the ratios of the current account to gdp for many countries in the nineteenth century are estimated to have been as large as, or larger, than we have experienced in recent years. however, the substantial net flows of capital financing for those earlier deficits were likely motivated in large part by specific major development projects ( for example, railroads ) bearing high expected rates of return. by contrast, diversification appears to be a more salient motivation for today's large net capital flows. moreover, gross