Document Type

Case Study

Case Series

Credit Guarantee Programs

JEL Codes

G01, G28


Given Spanish banks’ heavy investment in the housing and construction markets in the lead-up to the global financial crisis (GFC), the collapse of the subprime mortgage market and Lehman Brothers’ bankruptcy on September 15, 2008, impelled the government to implement stabilization measures to calm, recapitalize, and restructure its domestic banking sector. The Spanish Guarantee Scheme for Credit Institutions (the Guarantee Scheme) was one of the first interventions to be enacted, announced by Spain’s Ministry of Economy and Finance on October 13, 2008, by Royal Decree-Law 7/2008 on “Urgent Economic and Financial Measures in relation to the Concerted Action Plan of the Countries in the Euro Zone.” The scheme entered into force upon the signing of Ministerial Order EHA/3364/2008 on November 21, 2008. The program, funded from Spain’s annual budget, initially committed up to €100 billion for the state guarantee of new and senior unsecured debt instruments issued by credit institutions, consolidated groups of credit institutions, and pools of credit institutions registered in Spain. Later it was expanded to €164 billion. Per the terms of the original Ministerial Order, debt with maturities ranging from three months to three years—or between three years and five years under special circumstances—was covered under the Guarantee Scheme. Between November 21, 2008, and December 31, 2011, the Spanish government guaranteed €69.7 billion in debt issuances. No defaults occurred.

Date Revised