One clear example is that we are not a no firm failure regulator. Orderly failure which does not disrupt our statutory objectives is part of supporting a functioning market economy. We have learned the hard way that financial stability is essential for supporting growth and employment. We have seen the effects of damaging financial stability, and the consequences in terms of lost output and the need to use public money to counteract the inability of the tools of the day to deal with the threat of the collapse of the system. We have also seen the long-lasting effects of that loss of financial stability. I remember that in the early stages of the financial crisis, most forecasts suggested a recovery would take hold in a year or so, on the assumption that the policy tools available at the time would be effective. That did not happen. A crucial lesson from that experience was the importance of policy coordination, which is why it is so much at the heart of the new role of the Bank of England. The remits of the MPC and  BIS central bankers’ speeches  1  FPC require the committees to explain how they have regard to the policies of each other. In the last year, we have seen that coordination at work. Almost a year ago, the Bank and Treasury introduced the Funding for Lending Scheme. The Bank also introduced an extended collateralised term repo facility.
This quadrant [slide 4] shows four categories of possible shocks linked to the transition. They can have a positive versus negative impact on supply, and a positive versus negative impact on demand respectively. They are not mutually exclusive, and may combine or succeed one another. Their stand-alone probability is hard to assess at this stage, but there are reasons to believe that the upper-left one (the negative supply shock) is slightly more probable than the  Page 5 sur 8 others. However, given the large range of shocks, their sources and macroeconomic effects – which could include a positive scenario of large green private capex v – [slide 5], we must continue our modelling, in line with our first commitment in relation to the ECB’s climate agenda: we committed in July 2022 to “assess the macroeconomic impact of climate change and mitigation policies on inflation and the real economy”. vi  But being uncertain about the combined macroeconomic effects does not mean being passive or inert on action now. What we can already derive from these scenarios is a set of four firm convictions and prescriptions. 1. A shock that is global and certain >>> an orderly transition - First, climate transition entails structural changes to the global economy that are both universal and certain, with an overall and possibly negative supply shock that will generate frictions and costs in terms of the necessary reallocation of production factors.