How Does the Withdrawal of State Guarantees Affect Risk-Taking by Banks?

States often grant banks guarantees to prevent the collapse of the financial system. However, these guarantees must be withdrawn again as quickly as possible. The potential implications of withdrawing guarantees should nevertheless be examined beforehand. The insights gained enable states to take supporting measures if necessary. This article examines how the abolition of guarantor liability in 2001 affected risk taking in Landesbanks' lending operations.