Document Type

Case Study

Case Series

Credit Guarantee Programs

JEL Codes

G01, G28


The international financial system had been experiencing challenges for almost a year before the crisis truly manifested in Denmark during the Summer of 2008 with the sudden demise of Roskilde Bank, Denmark’s eighth largest bank. As more Danish banks became distressed in the fall of 2008 after the collapse of Lehman Brothers, the government determined that it was necessary to intervene in the banking sector through actions such as taking over and winding up distressed banks, giving guarantees to back up the sector, and providing capital injections and liquidity support. This paper focuses on the two different types of guarantee schemes which were both implemented at the outset of the Global Financial Crisis by the Danish government in the fall of 2008 and in early 2009. The main difference between the two guarantee schemes was their breadth. While the original guarantee scheme (known in Denmark as the “General State Guarantee”) was a blanket guarantee—covering deposits in essentially all Danish banks and all unsecured debt regardless of maturity, complexity, or any other terms or conditions of the instrument—the new guarantee scheme (known in Denmark as the “Individual State Guarantee”) required applications by individual credit institutions and covered specific debt issuances. Both programs were heavily utilized. Under the General State Guarantee, almost all of the Danish banking industry in terms of market share was covered, with only 14 small banks out of almost 140 opting not to be covered. Similarly, by the time the issuance window of the Individual State Guarantee initially expired in December of 2010, it had guaranteed debt issuances of about 50 institutions that totaled approximately DKK 194 billion (approximately €26 billion).

Date Revised