Effects of the Guarantees

The State guarantees based on valuation standards that coexist temporarily with market prices are an appropriate and adequate instrument of prudential regulation in a time of crisis. Therefore, these measures easily find a place in the progress that regulations are making in this field (e.g., Basel III for EU banks). This trend, besides, is only partially countered — for the time being in the United States — by compensatory structural regulation mechanisms (e.g., the Volker rule). Therefore, from an operational point of view, it appears relevant to investigate the EU pricing formula for State guarantees to cover bank debt, a fortiori because it requires that the fees charged for the provision of the guarantee scheme have to be ‘as close as possible to what could be considered a market price’.