S. van Wijnbergen
- State aid and bank intervention: the ING Illiquid Assets Back-up Facility (IABF)
- Number of pages
- Amsterdam/Rotterdam: Tinbergen Institute
- Tinbergen Institute Discussion Paper
- Volume | Edition (Serie)
- TI 11-146
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
The ING Illiquid Assets Back-up Facility announced January 2009 was a SWAP-based insurance to reduce ING’s exposure to Alt-A related risk. Did the deal involve state aid? Using marketprices to evaluate the SWAP directly is impossible because markets for Alt-A based CDOs had collapsed. We therefore assess the deal’s impact on the market’s valuation of ING to answer the question. We need to correct for two concurrent events: the announcement of the fourth quarter results and the CEO. We find state aid to be between 1.1 and 2.2 b€. Thus the European Commission’s estimate that the IABF entails b€ 5 state aid is at variance with the assessment derived from market based valuations. Moreover, the intervention only had a significant impact on equity values and apparently not on debt values, indicating that ING was sufficiently capitalized.
- Also: Duisenberg school of finance: nr. DSF 26
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