If banks are able to sell part of their loans on an active and liquid secondary market, they can use the liquidity obtained to reactivate the supply of credit. A scheme of this kind would have to be carefully designed in order to ensure its effectiveness in terms of new lending, give banks a correct structure of incentives and minimize the costs to taxpayers.
The originator bank should retain some of the risk, thereby still having the incentive to select creditworthy borrowers; it should pay a suitable fee for the issue of the guarantee, commensurate with the quality of the underlying loans.