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Document Type

Case Studies

Abstract

The collapse of Lehman Brothers on September 15, 2008, and its severe impact on global credit markets impelled governments around the world to enact stabilization measures to calm and protect their domestic economies. The Italian Republic, while not directly affected by the US subprime mortgage crisis, preemptively implemented emergency procedures and programs to ensure the stability of their banking system. Announced with the passage of Decree-Law No. 157 on October 13, 2008, and legally enforced under Law 190/2008 of December 4, 2008, the Italian Guarantee Scheme (the Guarantee Scheme) was aimed at protecting institutions whose interbank lending abilities had the potential to be impacted by the global credit crunch. Specifically, the Guarantee Scheme allowed Italian banks, including Italian subsidiaries of foreign banks, deemed to be solvent by the Banca d’Italia to apply for guarantee coverage for debt instruments issued after October 13, 2008, with maturities of between three months and five years. Although no overall cap was initially specified, Italian authorities determined individual participation according to official capital requirements. The Guarantee Scheme was never utilized and concluded with the expiration of its issuance window on December 31, 2009.

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