measure ). the story thus far while there are pockets of risk and global growth is still decelerating, the combination of the policy response and the state of the current imbalances in advanced economies suggest that global growth is more likely than not to stabilise eventually around its new, modest trend. but this is a judgement, not a guarantee. the world is in a delicate equilibrium. productivity is weak everywhere. the sustainability of debt burdens depends on interest rates remaining low and global trade remaining open. and business and consumer confidence are being buffeted by extreme policy uncertainty. indeed, there are at least three important risks on the horizon. first, financial risks will intensify if complacency sets in. paradoxically a prolongation of the expansion could make its demise both more likely and more painful. the frequency of financial crises over history is partly because memories fade, financial lobbies are powerful, and the costs of backsliding on financial reform are invisible, at first. when it comes to financial stability, success is an orphan. g20 countries bear heavy responsibilities to safeguard the progress since the crisis through disciplined implementation of agreed reforms. and policymakers must remain vigilant and address new risks as they arise. the lessons of subprime bear recalling. subprime mortgages emerged in the mid - 1990s as an innovation to expand home ownership to those who had been unfairly excluded. but they eventually grew unchecked until subprime mortgages written in 2006 and 2007 were twice as likely to default as those originated just a few years earlier. it is just such a descent from responsible to reckless underwriting that we must avoid today. that ’ s why the fpc has acted to limit the share of high loan - to - income mortgages uk banks can originate, the pra has tightened standards on consumer credit and the bank is monitoring closely the growth in leveraged lending. all speeches are available online at www. bankofengland. co. uk / speeches the second reason for caution is the possibility of a more material slowdown in china. china is the one major economy in which all major financial imbalances have materially worsened. it may be the exception that proves the rule that financial imbalances cause recessions. while china ’ s economic miracle over the past three decades has been extraordinary, its post - crisis performance has relied increasingly on one of the largest and longest running credit booms ever, with an associated explosion of shadow banking.

- term floating - rate notes ( issued in place of the non - transferable promissory notes, which would have been unsuitable instruments for the central bank to hold ). in the event, the €67. 5 billion borrowed from the european and imf sources almost covered the government deficit from december 2010 to the end of 2013, of which about one - quarter represented cash bank recapitalisation. there were long - term government debt repayments also in that period, but these were roughly balanced by new issues. this pattern is seen from the “ sources and needs ” table summarised in figure 1. 3 indeed many countries experienced banking failures in 2008 of comparable absolute magnitude to that of the irish banks. like ireland, each of britain, germany, the netherlands, spain, france and belgium saw banking failures that required their governments to step in for €50 billion or even more. given its smaller overall economy, however, such a sum, when for example by adding its guarantee to mortgage - backed securities. which is based on the ntma presentation at http : / / www. ntma. ie / business - areas / funding - and - debtmanagement / funding - needs - and - sources /. the pie chart excludes changes in cash balances and short - term borrowing ; note also that “ cash deficit ” includes promissory note instalment payments. bis central bankers ’ speeches combined with the sudden erosion of the tax base, proved to be more than ireland ’ s public finances could easily absorb. ( banking losses in cyprus and iceland were even larger than those of ireland in relative terms ). gradually, europe began to realise the broad interdependence of member states, especially among euro area members in the banking sphere : poorly performing member economies contributed to heightened systemic risk and slower growth across the entire euro area. the single banking market and the single currency implied such an interdependency and had encouraged policy thinking that focused on the euro area as a whole, and not on individual countries. awareness of the interdependency led, fairly early on, to a lowering of the interest rate on the official borrowings from europe and an extension of the maturities. when combined with the lengthy maturity of the floating rate notes issued by the government in respect of the liquidation of ibrc, these new terms for a large fraction of official indebtedness ( amounting to over 50 per cent of gdp ) have made all the difference to debt sustainability