You will immediately discern upon descending to the bedrock of Manhattan, marveling at the massive vault door, appreciating the multi-faceted control environment, that payments security is a timeless preoccupation. Hardly any of the gold in the vaults of the Federal Reserve Bank of New York is the property of the United States, whose reserves you know from 007 lore reside in Ft. Knox. Instead, it is gold held on behalf of foreign and international monetary authorities. Indulge me, if you will, in a fascinating historical anecdote in the annals of official reserve custody, which I will endeavor, perhaps feebly, to tie to today’s theme. The Spanish Civil War was a brutal conflict that pitted Nationalist rebel forces, allied with Fascist Italy and Nazi Germany, against the Republican government supported by the Soviet Union. In 1938, with their government on the cusp of implosion and before fleeing into exile, the Republicans hastily sent their gold stock to their trusted ally, the Soviet Union, for safekeeping. This episode is recounted in a history of the Spanish Civil War by Hugh Thomas, who writes the following: According to Orlov (now I confess to not reading the whole book, so I do not actually know who Orlov is; nevertheless, according to no less an authority than Orlov!
In other words, perhaps uniquely in the constellation of the Federal Reserve System, my colleagues and I work for you. My standing before you represents a visceral reminder of our accountability to depository institutions, independent of size, which rely upon our services to send and receive time critical payments; to maintain and permit the transfer of Fedwire eligible securities; and to provide cash services to support the needs of consumers and commercial establishments. It is with this orientation that I offer these remarks today, which reflect my own views and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System. The theme of today’s conference, appropriately, has been “Navigating Future Risks for Community Banks”. Allow me to elaborate upon the single risk that dominates from my vantage, regrettably not a “future risk” but an all too present one, and to highlight some of the measures that we are taking in response. The risk to which I refer is not a function of regulatory pressure, or capital demands, or an evolving economy, or compliance challenges, or the proliferation of new technologies, or an unprecedented season of payments innovation, or the challenging competitive landscape. All of these may represent very real risks, and no doubt occupy your consciousness, to borrow the lyrics of a prior generation, “eight days a week”.