Document Type

Case Study

Case Series

Credit Guarantee Programs

JEL Codes

G01, G28


By October 2008, Portuguese banks’ access to liquidity was severely restricted due to strains in international wholesale markets. On October 12-13, 2008, the Portuguese government notified the European Commission of a guarantee scheme intended to promote solvent credit institutions’ access to liquidity as part of the European policy response to the acute financial crisis aiming to achieve and maintain financial stability. Under the scheme, the Portuguese government guaranteed financing agreements and banks’ issuance of non-subordinated short- and medium-term debt. To obtain a guarantee under the Scheme, banks paid a fee based on the maturity of the debt and a risk proxy for the issuer. Banks that called on a guarantee were required to either pay back the Portuguese state or exchange the loan for preference shares. Eight credit institutions participated in the Scheme, including three of the largest Portuguese banks. Collectively they issued approximately €21.5 billion in guaranteed debt. Initially set to close on December 31, 2009, the Scheme’s issuance window was repeatedly extended until February 9, 2019. The most recent issuance under the Scheme was made in early 2013. The last remaining bond guaranteed under the Scheme matured on February 17, 2017. The Scheme is considered to have been successful in promoting debt issuance and increasing liquidity in the Portuguese financial system.

Date Revised