3 Issuing costs of state guaranteed bonds - Financial Risk and ...

2 Overview of state guarantee schemes
issue. They consider the relationship between SG bond issues and non-SG bonds issues and find
that, even around the peak of SG bond issuance activity there is no evidence of substitution
between the two classes of securities in the Euro area, with issuance in each remaining broadly in
synchronicity. There is some of evidence of substitution between SG bonds and non-SG bonds in
the UK though. Over January and April 2009, a strong negative association was found between SG
and non-SG bonds. However, this negative link disappears the following month. Section 3.6
considers in greater detail the issue of spill-over as reflected in issuing costs faced by banks.
2.2.2 Issuance activity by Member State
Figure 2 shows the distribution of approved measures and guarantees granted under state
guarantee schemes. This shows that the number and value of approved state guarantees varies
greatly across the EU.
Among Old Member States, approved measures ranged from as little as €20.5bn in Portugal up to
€518.7bn in Denmark. This represents 11.9% of GDP in the case of Portugal and 221.3% of GDP in
the case of Denmark.
Figure 2: Approved measures and guarantees granted under state guarantee schemes
Note: Approved measures in excess of €5bn shown
Source: European Commission
These figures, especially in the case of Denmark, may seem large. However, firstly, the figures for
approved measures are significantly larger than guarantees granted. The utilisation (guarantees
granted as a percentage of approved measures) of state guarantees across the EU27 is 27.8%, on
average.
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