patrick honohan : major banking decisions in ireland during the financial crisis introductory statement by mr patrick honohan, governor of the central bank of ireland, to the oireachtas ( national parliament ) banking inquiry, dublin, 25 june 2015. * * * “ nexus phase ” i have judged it best to concentrate in this statement mainly on crisis management aspects. these were the chief focus of the first years of my term of office from late september 2009 to the end of 2013. besides, my previous appearances before the inquiry, and the separate documentation submitted by the central bank have already covered much of the remaining ground. 1 crisis management aspects 1. appropriateness of bank guarantee decision much of the discussion on the appropriateness of the bank guarantee decision has focused on what information was available to the political decision makers on the night of september 29th, 2008, on what should have been understood by their advisers, given the information that was available, and on the alternative short - term courses of action which were available and which might have achieved smaller losses for irish taxpayers, whether that was to involve a sharing with other eu governments or a bail - in of some creditors. 2 after all the ink that has been spilled over this issue, nothing has altered the conclusion of my may 2010 report which suggested some time should have been bought through emergency liquidity assistance ( ela ) in order to allow for consultation with the ecb and other eu governments, and to obtain a clearer picture of the potential exposure involved in blanket guarantee. probably some extensive form of guarantee would still have to have been granted, but it should not have included subordinated debt nor existing senior term debt. given the evident failure of their business models – as was clearly indicated in the documents prepare by the investment bank consultants, anglo and inbs should probably have been dealt with separately from the others through immediate nationalization and not included in a general guarantee. to what extent additional bail - in of creditors could have been fully effected over and above what was subsequently achieved is hard to say. as there was later, there would have been strong pressure from eu partners not to bail - in senior debt, and it is unclear whether any quid - pro - quo could have been secured in return. all in all, the focus on the night of the guarantee has been excessive. as explained below, much of the losses and the costs for the irish people had already been ineradicably incurred. 2. decision to recapitalize banks and alternatives in what

a very long - term perspective, and where the presence of non - linearities and irreversible tipping points are likely, conditioning the methodologies to be used. and there is limited research, and accompanying data, that explore how climate risks feed into the financial risks faced by banks. in this context, many supervisory and / or prudential authorities are opting to use stress tests and scenario analysis. the bank of spain is indeed preparing such stress tests for the spanish banking sector and the results are expected to be published in autumn. a pigouvian tax is assessed against private individuals or businesses that engage in activities with adverse side - effects for society that are not internalised by these private agents, as a result of not being an integral part of the costs and prices they face. in any case, recognition should be given to the fact that the efficacy of pigouvian taxes may have a limit. this is because, at some point, the supply of polluting energy inputs may be so elastic that it absorbs all the taxes levied on them, without affecting demand. at that point, quantitative restrictions could become the best option. as a result, we should accept that efforts to translate climate - related risks into quantifiable financial risks are in their early stages. and we will have to step up our efforts to address these problems and limitations. it ’ s also crucial that these efforts are coordinated at the global level, given the global dimension of the risks and the potential spillovers that can arise through interconnections between the real and financial sectors. in this regard, at the basel committee on banking supervision ( bcbs ), we are conducting a “ gap analysis ” to identify areas in the current basel framework where climate - related financial risks may not be adequately addressed or are not captured. this gap analysis will be comprehensive in nature, and will cover regulatory, supervisory and disclosure elements. building on the analysis, we plan to explore practical solutions to address any identified gaps. in addition to a set of principles or guidelines on effective supervisory practices for assessing climate - related financial risks, the committee will explore whether any policy measures under the regulatory framework should be taken, and how the basel committee could support international efforts related to the development of globally consistently sustainability reporting requirements. importantly, any changes proposed by the basel committee to its regulatory framework would be in pursuit of its mandate to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability. as to monetary policy,