The United Kingdom's Credit Guarantee Scheme (U.K. GFC)

Journal of Financial Crises: Vol. 2 : Iss. 3, 927-947. Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol2/iss3/48

Yale Program on Financial Stability Working Paper

21 Pages Posted: 26 Oct 2020

See all articles by Christian McNamara

Christian McNamara

Yale University - Yale Program on Financial Stability

Date Written: October 10, 2020

Abstract

The September 15, 2008, bankruptcy of Lehman Brothers resulted in a collapse of wholesale funding markets that threatened the ability of UK financial institutions to continue funding themselves. By the end of the month, two leading UK banks—HBOS and Bradford & Bingley—had to be rescued, and there was a real risk that the entire financial system could collapse. Faced with the need to stabilize the system, UK regulators on October 8 introduced a package of measures that included a £250 billion Credit Guarantee Scheme (the Guarantee Scheme) aimed at providing banks with access to needed funding. Under the Guarantee Scheme, eligible institutions could pay a risk-based fee and issue debt with terms of up to three years that would be guaranteed by HM Treasury. Debt issuance under the Guarantee Scheme was initially quite significant at approximately £100 billion by the end of 2008. After its issuance window closed on February 28, 2010, the Guarantee Scheme terminated on October 26, 2012, when the final guaranteed debt matured. During the course of its existence, the Guarantee Scheme had guaranteed approximately £134 billion in debt. HM Treasury suffered no losses under the program and earned approximately £4.3 billion in fees.

Keywords: United Kingdom, short-term debt, medium-term debt, government guarantee

JEL Classification: G01,G28

Suggested Citation

McNamara, Christian, The United Kingdom's Credit Guarantee Scheme (U.K. GFC) (October 10, 2020). Journal of Financial Crises: Vol. 2 : Iss. 3, 927-947. Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol2/iss3/48, Yale Program on Financial Stability Working Paper, Available at SSRN: https://ssrn.com/abstract=3718007

Christian McNamara (Contact Author)

Yale University - Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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