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This traditional cost / benefit analysis seems less and less able, however, to account for the true behavior of reserve holders. During the crisis, foreign exchange reserves were used as a tool for internal – as well as external – financial stability. National Central Banks, especially in Latin America, acted as dollar lenders of last resort to their domestic banks. (Obstfeld et al. 2009). This function will develop in the future. Financial openness and integration means that domestic banks will engage more and more into foreign currency operations. In turn, the expansion of their international balance sheets will increase the potential demand for liquidity support in case of shocks. This trend should be accepted as a normal consequence of open  4  BIS Review 120/2010  capital markets and international banking, together with the predominance of a very limited number of currencies in international finance. It is bound to impact the demand for reserves and increase the need for self insurance. One characteristic of liquidity shocks is that the net demand for liquidity may become almost infinite. Ex ante, no buffer is ever big enough. No amount of reserves will fully protect a financially open economy against a systemic shock. It is noticeable that countries, such as Korea, which possessed very important amounts of reserves prior to the crisis and has a flexible exchange rate regime, nevertheless felt the need to enter into currency swaps with the Federal Reserve. In a sense, countries face the same dilemma as private institutions.