Rethinking the global financial safety net

Speech by Mr Agustín Carstens, General Manager of the BIS, Sixth High-Level Regional Financing Arrangements (RFA) Dialogue, 12 October 2021.

The US dollar dominates international financial markets and trade. This facilitates trade and financial flows across countries, but also gives rise to vulnerabilities as highlighted by the Covid-19 crisis. In March 2020, central bank liquidity support, including through the Federal Reserve swap lines, averted a full-blown dollar funding crisis. The episode highlighted the importance of an international lender of last resort. Going forward, we need a resilient global financial safety net that does not rely solely on the Federal Reserve. This safety net will need to be strengthened via robust regional and global arrangements, including a strong role for the IMF. It also needs to consider the rising role of non-bank financial intermediaries and market-based finance, adjusting facilities that provide liquidity if necessary.