The use of government guarantees by spanish banks: to what extent can it be explained by pre-crisis balance-sheet based indicators

Zusammenfassung

When some European governments suddenly became guarantors of a huge amount of money in bank bonds, many questions arose as to what on the determinants and impacts of the government guarantees’ using. In this paper, we address some of these issues by an in-depth examination of the Spanish government guarantee program 2008–09. First of all, we provide an overview of its context, given by the unique vulnerability of the Spanish banking system to the financial crisis, and by the bank support policies adopted by OECD nations to combat the crisis. Then the Spanish debt guarantee scheme is described: program size, guarantee features, eligible institutions and instruments, fees. Fi-nally, the relationship between the risk of financial entities and guaranteed sums is examined. From this analysis, two conclusions can be drawn: first, that higher risk ratios tend to be correlated with a higher dependency on government guarantees; second, that different kinds and/or measures of risk affect the level of government guarantees in different ways.