the use and budgetary treatment of guarantees and direct ... · direct loans • many countries...

The use and budgetary

treatment of guarantees

and direct loans by

OECD countries

Ian Hawkesworth

Budgeting Division

Public Governance and Territorial Development Directorate, OECD

The survey

• The survey was conducted during April and May 2010 with the aim of presenting the results to the Working Party of Senior Budget Officials

• The purpose is to study the use and budgetary treatments of guarantees and loans in general as well as their use in response to the financial crises.

• It was sent out to senior budget officials in 32 OECD member countries which generated responses from 22 countries.

The presentation

1. Volume of guarantees and loans

2. The issuance of guarantees

3. The issuance of direct loans

4. Summary and future work

1. Volume of guarantees and loans

Loan guarantees

Direct loans

2 307 272 192 180

Value of total stock of loan guarantees and direct loans

issued by governments as of April-May 2010 for a subset

of OECD countries*

(millions of U.S. dollars)

*Australia, Austria, Canada, Denmark, Finland, Germany, Greece,

Hungary, Iceland, Mexico, Netherlands, New Zealand, Norway, Poland,

Portugal, Slovak Republic, Sweden, Switzerland, Turkey, and the UK.

Amount of guarantees and direct loans per sector

(millions of U.S. dollars)

Sector Loan guarantees Direct loans

Export 234,360 9,000

Student loans 2,458 66,613

Schools, Hospitals construction 1,522 7,364

Agriculture 2,021 8,107

Financial sector 1,883,027 22,943

Non-financial, non-agriculture 35,275 39,791

Other sector 148,610 38,361

Total 2,307,272 192,180

2. The issuance of guarantees

The Issuance of individual guarantee

Sectors with guarantees

* Some services (export and student loans) are outsourced from the central government to legally independent

organisations governed by public law.

The aim of premiums in countries with

financial-sector guarantees

How are the premiums calculated in

export guarantees?

1) Australia, Iceland, United Kingdom

2) Austria, Germany, Hungary, Netherlands, New Zealand, Norway, Sweden

3) Finland, Canada

4) Portugal

5) Poland

Apart from administration fees, what

expenditures concerning the guarantees

appear in the budget?

Indemnities: Iceland, Poland, Netherlands, Spain, Germany, Austria, Portugal, New Zealand

Other: Germany, Norway, Switzerland, Mexico, Sweden, Finland, Hungary, Greece, Denmark

No expenditure appear: Canada, UK, Norway, Switzerland, Slovak Republic, Australia, Turkey

Were the same procedures used for the

issuance of guarantees at the time of the GFC

as is normally the case, or were other

procedures used?

General procedures? N Country

No, general procedures and rules were ignored ex ante due to extreme circumstances

2

Denmark, Netherlands

Yes, general procedures and rules were used

10

Canada, Australia, Poland, Norway, Austria, Portugal, Sweden, New Zealand, Greece, Spain

Yes, but some rules were adjusted 6 Hungary, Finland, Mexico, Germany, Turkey, United Kingdom

No guarantees were issued in response to the Global Financial Crisis.

3 Iceland, Switzerland, Slovak Republic

A majority reports an increase in the stock of

government guarantees to financial and other

corporations due to the Global Financial Crises

3. The issuance of direct loans

Sectors with direct loans

In general, what government revenues do

direct loans generate?

Other: Norway, Denmark, Switzerland, Austria, Sweden, Finland

Administration fees: Germany, Denmark, Norway, Sweden, New Zealand, Turkey

Interest income: Canada, Australia, Iceland, UK, Norway, Austria, Denmark, Slovak Republic,

Mexico, Portugal, Sweden, Hungary, New Zealand

None: Spain

Apart from administration fees, what

expenditures concerning the direct

loans appear in the budget?

Where are the issuances and performance

of direct loans reported?

4. Summary

• Of the 22 countries surveyed, all indicated that they do have a regular

issuance of state guarantees and that all but five countries issue

direct loans

• Many countries adjusted or adapted the ordinary procedures when

dealing with guarantees and direct loans in response to the financial

crises.

• A majority of countries reported an increase in the issuance and total

stock of guarantees and direct loans in response to the Global

Financial Crises. The increase in direct loans is less substantial than

the increase in state guarantees.

• The budgetary treatment of expenditures varies between the

responding countries, connected to guarantees and direct loans. For

both guarantees and direct loans, it is common that no expenditure

appear at all (apart from administration fees)

4. Future work

• Despite 20 countries responding there are still substantial gaps in our knowledge of how guarantees and loans are treated.

• Some methodical issues:

– Definitions will have to be clearer

– Many answers were “depends on the case”

– Many questions were only partially answered

• In response it is proposed to hold an experts meeting that will report to the next Senior Budgetary Officials (SBO) meeting.

Thank you

Ian Hawkesworth: ian.hawkesworth@oecd.org

+(33-1) 45 24 16 32