the objective of the guarantee was to give sufficient time for our banks to stabilise their funding situation, by providing the necessary confidence for international investors that would enable them to continue lending to irish banks in the fraught environment at that time, thereby relieving short - term funding constraints and preventing a drain of liquidity. to maintain the confidence of international wholesale markets on which irish banks are heavily dependent, it was essential that the guarantee be pitched at a level that ensured success. the guarantee resulted in an immediate improvement in the liquidity situation. subsequently, a large number of countries, including at least 14 other european countries, introduced guarantee schemes in order to obviate the same risks, although the type, and maturity, of liabilities covered has differed according to different circumstances and judgements made in individual countries. recapitalisation it was recognised at the time that the guarantee was not a long - term solution and that it would still be necessary to determine if additional capital would be necessary for irish banks. on the basis of supervisory information, irish banks met their regulatory requirements. across europe, however, international markets were expecting higher core tier 1 capital ratios than before the crisis. a number of countries, including ireland, took the decision to recapitalise banks on this basis. a further consideration in the irish case was market participants ’ expectations of significant write - downs on property - related assets that would eat into existing capital. the severity of the downturn in the economy was also a factor in recapitalisation here. while irish banks, unlike many of their international peers, were not exposed to securities based on us subprime mortgages, the exposure that attracted concern in the irish case was our system ’ s over - exposure to property - related loans. there was great uncertainty about the ultimate impact of the unwinding of an overheated property market on the quality of banks ’ assets. there was also concern that banks might attempt to improve their capital positions only by curtailing the supply of credit. historical experience from other countries shows that this type of dynamic would potentially have had severe and lasting negative repercussions for the economy and the financial sector and needed to be avoided after consultation between all the relevant authorities, a decision was taken to recapitalise our largest domestic banks following due diligence on these banks ’ exposures. the banks were also required to make a commitment to increase lending capacity to small and mediumsized firms and first - time buyers. following the

promote discussion. its quality was attested to by mervyn king, who went over to palle at the end of one meeting to say, “ i am really impressed by how much insight you can compress into only six pages ”. that was quite a compliment from a man who is known to be both very smart and very demanding. and perhaps even more astonishing, palle produced more than 80 such papers, over more than a decade, and i cannot recall one case where a governor found a factual error. finally, and this ties back into my earlier comments about palle ’ s research findings, he was never dogmatic in his policy analysis. he could always see the two sides of every argument and the way changing circumstances might alter the balance between them. this was a great quality to have in working for a cooperative institution like the bis. our mission, after all, is not to tell people what to do but rather to help our clients understand better both their own options and the options open to other central banks. palle did this splendidly. contributions to how med functioned i want to finish with a few words about palle ’ s personal qualities, qualities which contributed materially to the functioning of med and to the pleasure that i took personally in the work that i did at the bis. for all of the praise that i have heaped upon him, palle was not an easy man. he could be overtly intolerant of those he considered as too big for their boots, time wasters, or interested in their own advantage at the expense of the best interests of the department. and his disdain for modern management methods, consciousness - raising, performance appraisals and the like presented a problem for those, like me, who were responsible for such processes. but palle got away with it, because everyone knew that he was both extraordinarily conscientious about his work and extraordinarily kind to almost everyone. on many occasions palle came to me to tell me that someone on the staff was ill, or overworked, or needed a talk for motivation. and i know for a fact that he often offered such help himself, and sometimes to the most unlikely persons. it was characteristic of him that the last note he ever prepared for the bis was one for the global economy meeting in january – a meeting that palle ( having just retired ) would not attend. his rationale was simple : the note had to be prepared over the christmas