Financial Crisis Containment and Government Guarantees
Show Less

Financial Crisis Containment and Government Guarantees

Edited by John Raymond LaBrosse, Rodrigo Olivares-Caminal and Dalvinder Singh

Financial Crisis Containment and Government Guarantees analyses the international community’s commitment to forging enhanced, well thought-out, mechanisms for containing systemic risks in the context of a highly interconnected global financial framework which incorporates ongoing financial innovation.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 11: Public guarantees on bank bonds: Effectiveness and distortions

Giusèppe Grande, Aviram Levy, Fabio Panetta and Andrea Zaghini


The exacerbation of the financial crisis which followed the collapse of Lehman Brothers in October 2008 led the governments of several advanced economies to use unprecedented amounts of state aid to support the financial sector. The immediate aim of this massive intervention was to avoid widespread failures and to restore normal financial intermediation. The financial sector support measures can be divided into three main groups: (i) guarantees on new debt securities; (ii) capital injections; and, (iii) asset purchases and asset guarantees. In most countries guarantees on bank debt turned out to be one of the favourite tools, largely because guarantees do not have an immediate impact on budget deficits since they represent a contingent liability. As can be seen in Figure 11.1, in several countries the volume of ‘indirect support’ through guaranteed issuance (in terms of GDP) was larger than or equal to the amount of ‘direct support’ via capital injections and asset purchases.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.