This paper shows that private incentives influence the allocation of public guaranteed lending (PGL), resulting in weaker banks shifting riskier corporate loans’ risk to taxpayers. We exploit data from the Banco de España’s Central Credit Register during the COVID-19 shock in Spain, and a...

This paper analyzes the impact of public credit guarantee schemes on the allocation and performance of bank credit during the COVID-19 crisis. We exploit exhaustive loan-level data from the credit register with unique information on the provision of COVID-19 public loan guarantees in Spain. We...

We show that public guaranteed loans (PGL) increase credit availability improving real effects, but private banks' incentives imply that weaker banks shift riskier corporate loans to taxpayers. We exploit credit register data during the COVID-19 shock in Spain, and a stylized model guides the...

We show that public guaranteed loans (PGL) increase credit availability improving real effects, but private banks' incentives imply that weaker banks shift riskier corporate loans to taxpayers. We exploit credit register data during the COVID-19 shock in Spain, and a stylized model guides the...