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International Monetary Fund. European Dept.

Issues The Danish authorities overall find the staff report and the related material balanced in relation to issues on the Danish financial sector. There are, however, some issues which my authorities would like to clarify further. Staff concludes that the government guarantee schemes and the state funded capital injections have enhanced the perception of the existence of an implicit government guarantee on the financial sector. Staff concludes that after bank rescue packages 1 and 2, Denmark has enacted and implemented bank rescue package 3 allowing for haircuts

International Monetary Fund. Fiscal Affairs Dept.
This paper discusses key findings of the Fiscal Transparency Evaluation of Kenya. Since 2010, the Treasury has made important changes in Kenya’s public financial management framework, the impact of which can clearly be seen in its performance against the Fiscal Transparency Code. The prospects for quick improvements in the fiscal reporting area are clearly within the grasp of the National Treasury. Fiscal forecasting and budgeting practices are generally in line with good practice under the Fiscal Transparency Code, reflecting more than a decade of experience with medium-term budgeting and preparing and presenting macro frameworks.
Mr. Wolfgang Bergthaler, Mr. Kenneth H Kang, Ms. Yan Liu, and Mr. Dermot Monaghan
The global financial crisis has left a large private sector debt overhang and high levels of non- performing loans (NPLs) in several European countries. Small and medium-size enterprises (SMEs) represent a significant and weak segment of the nonfinancial corporate sector. SMEs face a number of legal, financial, and regulatory challenges to restructuring that differ from those of larger corporates, such as a rigid and costly insolvency regime, a higher fixed cost to loan restructuring, and the lack of alternative sources of financing. Given SMEs’ large presence and close links to the banking system, addressing the SME loan problem in Europe will be critical for strengthening bank and corporate balance sheets and supporting a more robust and sustained recovery.
International Monetary Fund. European Dept.

injections implemented by the government were designed to ensure sufficient capital buffers, facilitate bank access to funding, and promote lending ( EC 2008 ). The liquidity support included government guarantees on new bank debt and a bond loan scheme. The initial government guarantee envelope of €15 billion was increased several times and remained in place until 2016. The bond loan program of €8 billion was extended multiple times until mid-2015, and after that the unused envelope was added to the government guarantee scheme. None of these guarantees have been called

International Monetary Fund

is assumed to be 8 percent. 9 Also Panetta and Signoretti (2010) find that supply restrictions have contributed to the decline in credit growth for a limited amount, and only during the most acute phase of the crisis. 10 Government guarantee schemes for SME credit are expected to be an incentive for bank lending also because according to Basel II the level of capital requirement for a publicly guaranteed credit line is very low or even nil. 11 In a similar vein in Italy enterprises that find difficult access to credit have been given the

International Monetary Fund. European Dept.

for systemic banks. 11. The government guarantee schemes and the state funded capital injections are likely to have enhanced the perception of the existence of an implicit government guarantee on the financial sector . Indeed, the CDS spreads of Danske—the largest Danish bank—fell by almost 90 basis points (bps) within two weeks after the full government guarantee was introduced in early October 2008. Concurrently, sovereign CDSs spreads jumped up by 40 bps, and remained elevated compared to historical values until early 2009, suggesting that banks’ risk had

International Monetary Fund

value. 3 The Rp 703 trillion stock of domestic bonds issued as a result of the financial crisis is composed of Rp 43.5 trillion in bank recapitalization bonds and Rp 267 trillion in inflation indexed bonds (indexed principal amount as of January 25,2002) issued to Bank Indonesia to fund the government guarantee scheme for bank liabilities. 4 From 2002 onwards, income from deposit guarantee payments will no longer be counted toward IBRA’s cash collection targets. 5 Transfer of assets to IBRA was still ongoing through end-2001. 6 This represents