State aid to banks (IVOR nr. 109) 2018/8.3.1:8.3.1 Appropriateness of a guarantee

State aid to banks (IVOR nr. 109) 2018/8.3.1

8.3.1 Appropriateness of a guarantee

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

The appropriateness of guarantee schemes is nicely explained by the following recital:

“As regards appropriateness, the Commission acknowledges that the objective of the guarantee scheme is to provide safety to investors in newly issued debt of participating institutions, in order to provide sufficient liquidity to participating banks. This is a reaction to the international market-failure where even solvent banks are having difficulties getting access to liquidity. The Commission considers that such guarantee schemes should help to overcome this market failure, by establishing the conditions for the revivalof the interbank lending market and financial markets more generally and regards it therefore as an appropriate means”.1

This recital shows the main elements in the Commission’s reasoning to substantiate the appropriateness of the guarantee: ‘market-failure’, ‘safety net’, ‘revival of (interbank) lending market’. These elements appear in almost every decision in which the appropriateness of a guarantee (scheme) is assessed.

An interesting observation can be found in the decision on the Polish guarantee scheme. In this decision, the Commission held that the mere existence of the scheme already contributed to the stability of the financial markets, because it provided a safety net. So it did not matter if there were banks that actually made use of the scheme.2

Deze functie is alleen te gebruiken als je bent ingelogd.