3 Issuing costs of state guaranteed bonds - Financial Risk and ...
3 Issuing costs of state guaranteed bonds - Financial Risk and ...
3 Issuing costs of state guaranteed bonds - Financial Risk and ...
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2.3 Issuance strategies<br />
2 Overview <strong>of</strong> <strong>state</strong> guarantee schemes<br />
Banks adopted different types <strong>of</strong> strategies in regard to the issuance <strong>of</strong> SG <strong>and</strong> non-SG <strong>bonds</strong>. The<br />
majority <strong>of</strong> banks participating in <strong>state</strong> guarantee schemes issued only SG <strong>bonds</strong> over the period <strong>of</strong><br />
the study (131 banks). However, a significant minority issued a mix <strong>of</strong> SG <strong>and</strong> non-SG <strong>bonds</strong> (42<br />
banks).<br />
In terms <strong>of</strong> timing, those issuing both types <strong>of</strong> <strong>bonds</strong> followed up SG bond issues with non-SG<br />
bond issues. Among this group, SG bond issues were followed up by non-SG bond issues, on<br />
average, five months afterwards. This provides an early indication that non-SG bond issues were<br />
facilitated by earlier SG bond issues.<br />
In terms <strong>of</strong> size, SG bond issues tended to be substantially larger than non-SG bond issues among<br />
banks issuing both types <strong>of</strong> <strong>bonds</strong>. Issuance volumes <strong>of</strong> SG <strong>bonds</strong> by this group <strong>of</strong> banks were<br />
€0.7bn on average while issuance volumes <strong>of</strong> non-SG <strong>bonds</strong> were €0.12bn on average.<br />
A larger number <strong>of</strong> non-SG bond issues were brought to market than SG bond issues among the<br />
group <strong>of</strong> banks issuing both types <strong>of</strong> <strong>bonds</strong>, at 291 for SG bond issues <strong>and</strong> 404 for non-SG bond<br />
issues. However, in terms <strong>of</strong> overall value, SG bond issuances still exceed non-SG issuances.<br />
Geographically, Member States with the banks issuing the most SG <strong>bonds</strong> only are also the<br />
Member States with the banks issuing SG <strong>and</strong> non-SG <strong>bonds</strong>. This includes Member States such as<br />
Denmark, Germany, Spain <strong>and</strong> the UK.<br />
Figure 3 shows the top 20 issuers (by issuance volume) <strong>of</strong> SG <strong>and</strong> non-SG <strong>bonds</strong> among banks<br />
whose bond issues benefitted from <strong>state</strong> guarantees. In general, the identity <strong>of</strong> the top SG issuers<br />
is different from that <strong>of</strong> the top non-SG issuers.<br />
However, in line with some <strong>of</strong> the observations made above, a number <strong>of</strong> common names are<br />
found in both the left-h<strong>and</strong> <strong>and</strong> the right-h<strong>and</strong> panes. Danske Bank <strong>and</strong> Caja Madrid feature in<br />
both panes, consistent with the finding that Danish <strong>and</strong> Spanish banks issued a mix <strong>of</strong> SG <strong>and</strong> non-<br />
SG <strong>bonds</strong>. And, other banks such as the Allied Irish Bank, feature in the SG <strong>bonds</strong> list but not the<br />
non-SG <strong>bonds</strong> list.<br />
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