Governmental Support For Banks and Financial Companies. COVID-19

To help financial institutions through these turbulent times, governments are rolling out relief packages. They are joined by FinTechs that offer accelerated access to their technology to stimulate business through innovation.

The economic impact of the pandemic and the unprecedented quarantine measures that followed caused stock markets to tumble. Global growth forecasts have been downgraded, and businesses are struggling to finance their operations due to a lack of consumer demand and supply chain problems.

However, it is not all bad news. According to recent research, there has been a massive 72% rise in the use of FinTech apps in Europe. The sharp jump in usage comes as the world readjusts to life and business during the global pandemic.

To limit the economic fallout of the coronavirus, governments started to roll out relief packages to help businesses survive and recover. We have prepared this list to help FinTechs understand what options are available in their region.

The information is current as of the publication date but is likely to change in the coming weeks.

The European Central Bank (ECB)

The ECB has kept the interest rates unchanged but has undertaken measures to support commercial bank lending and let governments support growth with local policies. The ECB will also provide banks with loans at a rate as low as -0.75%, below the -0.5% deposit rate.

The supervisory arm will let banks fall short of some critical capital and cash requirements (P2G, CCB, and LCR), to keep credit flowing to the economy. These measures should provide significant capital relief to banks in support of the economy. The ECB rolled out capital relief to the amount of €120 billion, which could be used to absorb losses or potentially finance up to €1.8 trillion of lending.

More information: ECB

Germany

Germany’s finance minister Olaf Scholz promised unlimited liquidity assistance to German businesses hit by the coronavirus. The relief package envisages a massive expansion of loans provided by KfW, the state-owned development bank. Companies will also be allowed to defer billions of euros in tax payments to increase liquidity.

Germany’s government agreed to increase public investments by 12.4 billion euros by 2024 and to make it easier for companies to claim subsidies to support workers on reduced working hours.

More information: Germany’s Federal Ministry of Finance

Lithuania

The Lithuanian prime minister Saulius Skvernelis has announced a 5 billion euros public health and national economy relief package. The money will be used to secure employment, help businesses, and stimulate the economy.

500 million euros will be directed to maintain business liquidity through immediate tax loans, deferred payments, or payment in installments without interest. Taxpayers will also be exempt from fines and penalties.

More information: The Lithuanian government

France

The French government will guarantee €300bn of bank loans to businesses to support their liquidity. The government has ordered the state-owned investment bank Bpifrance to guarantee loans needed to overcome short-term cash flow problems.

The immediate €45bn support package consists of €32bn for a month of deferred corporate tax and social security charges and €8.5bn for two months of state payments to workers temporarily laid off by their employers because of the crisis.

Companies will be allowed to declare force majeure due to the coronavirus outbreak if they fail to honor a contract with the public sector. The government is putting pressure on big companies to show similar leniency to subcontractors.

More information: France’s Ministry of the Economy and Finance

United Kingdom

The Bank of England has reduced the interest rate to 0.25% and introduced a new Term Funding scheme with additional incentives for Small and Medium-sized Enterprises (TFSME), financed by the issuance of central bank reserves.

The HM Treasury announced a support package that includes mortgage “holidays” for those in financial difficulty as well as £330 billion in loans and £20 billion in other aid to protect businesses facing losses. Companies can access up to £5 million in loans with no interest for the first 6 months.

More information: HM Treasury

United States

The Federal Reserve slashed the federal funds rate to 0% to 0.25% percent and announced a $2.2 trillion emergency relief package. The package includes $1200 to every American adult, $500 billion lending program for businesses, cities, and states and a $367 billion fund for small businesses.

The relief package follows quantitative easing in the form of $750 billion of asset purchases. The Fed restarted bond-buying and encouraged banks to use equity and liquid assets as capital buffers.

The government will allow businesses and individuals that are negatively impacted by the outbreak to defer up to $1 million of federal income tax payments without penalties or interest, aiming to provide $300 billion of additional liquidity to the economy.

More information: The Federal Reserve, The White House, The Treasury Department

Japan

The Bank of Japan doubled its annual purchasing of exchange-traded funds (ETFs) to $112 billion to provide stability to the markets. The bank would also create a new loan program to extend one-year, zero-rate loans to financial institutions to increase lending to firms negatively affected by the outbreak. The government also released a second relief package worth $4 billion to help SMEs cope with the fallout.

Private Sector Anticrisis Offers

Many FinTechs have joined the initiative to help financial institutions support their customers through these trying times. Ron Shevlin’s Forbes column is a continuously updated list of fintech companies that are providing technological help during the crisis.

To help society minimize the negative economic impact of the global COVID-19 outbreak SDK.finance, a financial technology provider, recently announced a 1-Year payment deferral for all companies with financial licenses issued by any country of the European Union and the United Kingdom.

Temenos is providing their online learning platform, which features more than 400 courses, free of charge to current clients for 8 weeks.

Owler recently launched a dedicated page that displays all published news content about the COVID-19 as it relates to specific private companies worldwide.

With government-issued support, this downturn can be a catalyst for business innovation – an opportunity to improve products and move forward.

1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)

Written by Alex Malyshev on Apr, 02, 2020

#Covid-19