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447 - The impact of state guarantees on banks' debt issuing costs, lending and funding policy - Study on behalf of EC DG Economic and Financial Affairs - London Economics Authors: Patrice Mull

London Economics, Patrice Muller, Shaan Devnani and Rasmus Flytkjaer

The impact of state guarantees on banks' debt issuing costs, lending and funding policypdf(3 MB) Choose translations of the previous link 

The effectiveness of state guarantees given to banks in 2008-10 on banks' debt issuing costs, lending and funding policy.

Summary for non-specialistspdf(534 kB)


The empirical study carried out by London Economics on behalf of the European Commission analysed the market value of state guarantees given to banks in 2008-10 on banks' issuing costs and whether there were significant differences visible in the balance sheets of banks that used state guarantees and those that refrained from using them. The report presents a comprehensive ex-post evaluation of one of the main tools to restore the functioning of wholesale financial markets after the Lehman bankruptcy. The results of the empirical research suggested that the guarantee schemes were successful in lowering the costs of bond issuance of participating banks while having relatively little distortionary impacts on non-participating banks. Moreover, cross-border spill-over appear to be non-existent.

(European Economy. Economic Papers. 447. January 2012. Brussels. PDF. 179pp. Tab. Graph. Bibliogr. Free.)

KC-AI-11-447-EN-N (online)
ISBN 978-92-79-22966-4 (online)
doi:10.2765/25635 (online)

Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.

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