Economic Policy Commons^™

Uk Bank Recapitalisation Scheme, Alec Buchholtz

Journal of Financial Crises

Following the collapse of Lehman Brothers and the ensuing global credit crunch in late 2008, Her Majesty’s Treasury (HMT) announced a large economic package to provide support to the UK banking sector. As part of the package, the eight largest banks committed themselves to raising their total Tier 1 capital by £25 billion through either private fundraising or government assistance. Thus, the economic package featured a new Bank Recapitalisation Scheme to invest up to £50 billion in capital into UK banking and credit institutions that could not raise their assets in the private sector. Government capital was invested into either …

Russian Bank Capital Support Program, Sean Fulmer

Journal of Financial Crises

At the start of 2014, the Russian Federation had experienced several years of decelerating growth rates as a result of weak investment, poor governance, and failed structural reforms. During 2014, the dual shocks of rapidly declining oil prices and increasingly stringent international sanctions led to significant financial instability, as Russian firms lost access to international markets and net capital outflows accelerated. As part of the response to this crisis, the Russian government unveiled a RUB 1 trillion (US $17.2 billion) bank capital support program, which it later revised down to RUB 838 billion. The program, operated by the Deposit Insurance …

Japan Provision Of Subordinated Loans, Shiro Kawana

Journal of Financial Crises

During the international financial turmoil associated with the Global Financial Crisis, Japan’s financial institutions remained relatively sound because their exposure to overseas structured credit products was limited. Restructuring in the aftermath of Japan’s own banking crisis in the late 1990s also contributed to making Japanese banks resilient to external shocks. Nonetheless, Japanese banks’ profitability was at risk. Due to the large amount of stockholdings, major banks had large market risks which might significantly worsen their capital ratios. The increasing volatility of stock prices could make banks conscious of capital constraints in the future and could trigger an adverse feedback loop …

Italy (2008) Capital Injections, Manuel León Hoyos

Journal of Financial Crises

In response to the 2007–09 Global Financial Crisis, in October 2008, the Italian government announced urgent measures to guarantee financial stability and the flow of credit. The Italian government targeted three areas of support: (1) bank recapitalizations, (2) liquidity access, and (3) expansion of guarantees on bank deposits. This case study exclusively examines the Italian bank recapitalization scheme introduced in December 2008 in line with European Union State Aid rules.

The four Italian banks recapitalized in 2009 under the scheme were Banco Popolare (€1.45 billion), Banca Popolare di Milano (€500 million), Credito Valtellinese (€200 million), and Banca Montepaschi di Siena …

Hungary Recapitalization Scheme, Alec Buchholtz

Journal of Financial Crises

In the midst of the global financial crisis in October 2008, the Magyar Namzeti Bank (MNB), the Hungarian national bank, noticed a selloff of government securities by foreign banks and a large depreciation in the exchange rate of the Hungarian forint (HUF) in FX markets. Hungarian banks experienced liquidity pressure due to margin calls on FX swap contracts, prompting the MNB and Minister of Finance to seek assistance from the International Monetary Fund (IMF), European Central Bank (ECB) and the World Bank. The IMF and ECB approved the Hungarian government’s (the State) requests in late 2008 to create a €19 …

Greece (2008) – Capital Injections, Manuel León Hoyos

Journal of Financial Crises

In October 2008, in the midst of the Global Financial Crisis (2007–09), the Greek government announced a €28 billion ($36 billion) government package. Greek Law 3723/2008, “Enhancement of Liquidity in the Economy in Response to the Impact of the International Financial Crisis,” was passed and approved under European Union State Aid rules. The Greek law provided for three voluntary programs: recapitalizations (€5 billion), guarantees (€15 billion), and securities (€8 billion). This case study exclusively examines the recapitalization program. In this program, the Greek government acquired convertible preferred shares in banks in order to build and maintain banks’ Tier 1 capital …

Austria: Finanzmarktstabilitätsgesetz (Finstag), Claire Simon

Journal of Financial Crises

Following the adoption of a joint framework by euro area countries in response to the intensifying financial crisis in October 2008, Austria enacted a package of measures including the Financial Market Stability Act (Finanzmarktstabilitätsgesetz, or FinStaG). In addition to permitting nationalization under certain circumstances, FinStaG allowed the Austrian government to use six specific measures to recapitalize credit institutions operating in Austria and Austrian insurance companies. According to FinStaG, €15 billion ($22 billion) could be used for this purpose, though this amount was later increased. Eight institutions received support through FinStaG, and the government granted capital and liquidity support totaling €21 …