The Extension of Bank Guarantee Systems

Aviram Levy and Fabio Panetta make an informative contribution on this topic in this VOX article.

3 replies on “The Extension of Bank Guarantee Systems”

What better argument for the breaking up of Ireland’s largest 2 no. banking institutions.

From the article:

“First, a large share of the guaranteed bonds were issued by large banks, which have also recorded very large volumes of writedowns. This might suggest that the rescue programmes may have de facto subsidised large and complex financial institutions, which according to some commentators (Roubini and Richardson, 2009) were at the root of the ongoing crisis and may be less likely to use the funds raised to increase lending to the real economy.”


Not good for the EU economic region grand masterplan. Those guys in the ECB must have a full time job, trying to hold it all together.

From the article:

“Second, survey and market information on the investor base of guaranteed bonds in the euro area indicates that a large portion of guaranteed bonds (much larger than for non-guaranteed bank bonds) are bought by domestic investors, in particular banks (see Deutsche Bank, 2009; ECB, 2009; Wall Street Journal, 2009).

This may signal that guaranteed bonds are contributing to a partial re-segmentation of the euro area bond market and, as far as the major role of banks among investors is concerned, that these bonds may not be stimulating lending to the real economy but just lending to other banks.”

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