financial decisions of all affected sectors. for these reasons, the bank is fully committed to playing our part in ensuring that ireland successfully responds to climate change in the coming years. acknowledgements prepared for the 2019 monsignor padraig de brun memorial lecture at nui galway. i thank philip brennan, denise delaney, liam mcmunn, john nash and paul reddan for their help in preparing this speech. i am also grateful to john fitzgerald, sam langfield, rea lydon and billy pizer for helpful interactions. climate change and the irish financial system | central bank of ireland | page 12 references aldy, joseph, alan j. krupnick, richard g. newell, ian w. h. parry and william a. pizer ( 2010 ), “ designing climate mitigation policy, ” journal of economic literature 48 ( 4 ), 903 - 934. backstrom, hans, jennifer anderson, laurence roth, emmanuel butin, martin vleeschhouwer, erwen crehalet and jakob thoma ( 2017 ), “ lifeguard wanted : tracking article 2. 1c & transition risks in financial markets, ” briefing note, 2 degrees investing initiative. batten, sandra ( 2018 ), “ climate change and the macro - economy : a critical review, ” bank of england staff working paper no. 706. battiston, stefano, antoine mandel, irene monasterolo, franziska schutze and gabriele visentin ( 2017 ), “ a climate stress - test of the financial system, ” nature climate change 7, 283 - 288. carney, mark ( 2015 ), “ breaking the tragedy of the horizon – climate change and financial stability, ” speech, lloyd ’ s of london ( september 29 ). carney, mark ( 2018 ), “ a transition in thinking and action, ” speech, international climate risk conference for supervisors. coeure, benoit ( 2018 ), “ monetary policy and climate change, ” speech, scaling up green finance : the role of central banks. de bruin, kelly c and aykut mert yakut ( 2018 ), “ the economic and environmental impacts of increasing the carbon tax, ” esri research series no. 79. dell, melissa, benjamin f. jones and benjamin a. olken ( 2014 ), “ what do we learn from the weather? the new climate - economy literature, ” journal of economic literature 52

largest, were, however, sanctioned for administrative breaches. these are the figures as reported in 2010. the latest data give 37 and 54 per cent. bis central bankers ’ speeches period ( and would have been 11½ % in the absence of bank rescue spending ), this would not be sustainable for long. initial policy response although a deficit of 14 or even 11 per cent of gdp can hardly be considered austere, government had already begun a programme of fiscal adjustment in 2008, without which the deficit would have been even wider. the taxation of income in particular was increased, and a four - year plan of tax and expenditure changes designed to restore stability to the public finances was under way. additional fiscal pressure was emerging from the banking system. initially interpreted as merely part of the global liquidity tightening that emanated from the us subprime problems, the irish banks were encountering increasing difficulties in rolling over their international borrowings : maturities were shortening and the geographical spread of the providers of funds narrowing ( lane 2015 ). eventually, at the end of september 2008, just after the bankruptcy of lehman, the third largest bank ( anglo ) was on the eve of being unable to meet its obligations when the government stepped - in with a blanket guarantee for the liabilities of the locally controlled banks. at first it was not expected by the national financial authorities that the guarantee ( which was copper - fastened in legislation ) would entail a significant budgetary outlay, but they had not built in any safety - first mechanism to limit the state ’ s exposure to the pig - in - poke they had acquired. it soon transpired that supervisory awareness of the vulnerability of the banks to the property turn - down had been very limited. the sudden stop the combination of the loss of tax revenue and increased spending on social transfers with the emergence of a large contingent liability on foot of the bank guarantee was what created the vulnerability of the irish sovereign to a sudden stop in its access to international funding. with market attention focused on greece in the autumn and winter of 2009 – 10, and in the absence of clarity on the likely loan losses of the irish banks, the sudden stop was somehow deferred. however, these conditions changed. the scale of the embedded bank losses began to crystallise as the larger property - related loans were purchased at a market - related “ longterm economic value ” by the government - created asset management agency nama. that the government would have to meet either a large