Austria: IBSG Guarantee Program

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 Interbank Market Support Act (Interbankmarktstärkungsgesetz, "IBSG"). In addition to calling for the establishment of a new clearing bank to facilitate interbank lending, IBSG permitted the Austrian government to guarantee debt securities issued by other eligible institutions. Securities issued by eligible institutions with a maturity of three years or less (five years in exceptional circumstances) were eligible for guarantee. According to IBSG, the amount outstanding for all measures taken under the act could not exceed €75 billion. Of this, €4 billion was specifically allocated for guarantees of the clearing bank, Oesterreichische Clearingbank AG (OeCAG). This was subsequently reduced to €50 billion. The guarantee scheme established by IBSG was used by six institutions in addition to OeCAG, for a total of approximately €25 billion (€24.05 billion, CHF 325 million, and ¥20 billion). After being extended by one year the issuance window for guarantees closed on December 31, 2010. None of the participating institutions defaulted on the guaranteed debt. The amount of guaranteed debt outstanding declined steadily, and all had matured by June 2014.

In line with a joint action plan for Euro area countries, Austria passed the Interbank Market Support Act (Interbankmarktstärkungsgesetz, "IBSG") to target disruption in the interbank market caused by the intensifying financial crisis. Under IBSG, the government called for the establishment of a clearing bank to facilitate interbank lending which was authorized to receive federal guarantees. In addition, IBSG permitted the Federal Minister of Finance to guarantee newly issued, senior debt securities issued by eligible Austrian institutions.

Through the IBSG guarantee scheme, the government could guarantee securities with a maturity of three years or less (five years in exceptional circumstances) issued by Austrian credit institutions and insurance companies. IBSG capped the amount of guarantees outstanding at €75 billion, with €4 billion reserved for guarantees for the clearing bank. This was subsequently reduced to €50 billion. Participating institutions had to have sustainable business policies and adequate capital ratios and were required to lend to corporate entities and individuals. Additionally, the government would review participants’ internal compensation schemes. According to the Ministry of Finance, six credit institutions participated in the program for a total of approximately €25 billion (€24.05 billion, CHF 325 million, and ¥20 billion). The Austrian government charged a fee for participation based on debt maturity and issuer creditworthiness.

After being extended by one year, the program’s issuance window closed on December 31, 2010. No institutions participating in the program defaulted. The final security guaranteed under IBSG matured in June 2014, at which point there were no guarantees outstanding.

The limited scholarship on IBSG, which largely focuses on the clearing bank rather than the guarantee scheme, asserts that the measures were successful in reinvigorating, but not completely restoring, the Austrian interbank market.

The limited analyses of IBSG have focused largely on the clearing bank, ignoring the effects of the broader guarantee scheme on other Austrian credit institutions. In their analysis, Schmitz, Weber, and Posch (2009) note that Austrian banks’ liquidity risk declined because they were able to borrow larger amounts over longer periods but the interbank market was not fully restored—because liquidity and maturities had not reached pre-crisis levels—following the introduction of the bank package, though they do not disentangle the effects of the two components of IBSG (Schmitz, Weber, and Posch 2009, 67).

In assessing Austria’s bank support measures generally, the European Commission has concluded that “despite the significant costs, the use of bank support measures in line with EU state aid rules helped to restructure the Austrian banking sector and preserve financial stability” (European Commission 2016).

Appendix A

In Europe, the interbank market was hit particularly hard by the 2007–2009 global financial crisis. Unsecured interbank loans carried high premiums, market liquidity dried up, and maturity terms shrank throughout late 2007 and early 2008 before the interbank market largely ceased functioning altogether following the collapse of Lehman Brothers in September (Schmitz, Weber, and Posch 2009, 66). In Austria, financial institutions were affected by exposure to Lehman Brothers and Icelandic banks, as well as their activity in central and southeast European markets (Kalss 2010, 528).

In response to these conditions, euro-area countries convened at a summit in October 2008. The meeting resulted in a joint action plan calling for national governments to “improve market functioning over longer term maturities” through the introduction of guarantee programs for bank senior debt issuance (Summit of the Euro Area Countries 2008). In Austria, this call was met by the passage of a financial market stability package that contained the €75 billion Interbank Market Support Act (IBSG) and the €15 billion Financial Market Stability Act (FinStaG).

IBSG had two main components. First, it called for the establishment of a new, privately owned clearing bank to facilitate interbank lending. The bank, Oesterreichische Clearingbank AG (OeCAG) conducted regular auctions to match available deposits with demands for credit. OeCAG could issue securities guaranteed by the federal government, and the government pledged to cover a certain amount of the clearing bank’s losses. (See Simon 2020 for additional detail on the clearing bank.) Second, it allowed the government to guarantee securities with maturities of three years or less (five in exceptional circumstances) issued by other credit institutions. FinStaG allowed the Federal Minister of Finance to recapitalize and strengthen the capital base of specific credit institutions and insurance companies. (See Simon 2018 for more information on the FinStaG.)