BANK OF ENGLAND LAUNCHES EMERGENCY LIQUIDITY

To provide commercial lenders with extra liquidity during the disruption caused by Covid-19, the Bank of England (BoE) has launched an emergency liquidity scheme known as its contingent term repo facility (CTRF) (The Times, £). The scheme is designed 'to help alleviate frictions observed in money markets in recent weeks, both globally and domestically?, providing the supply of cheap and available credit to those that need it.

The Bank of England has also advised banks and building societies to keep branches open wherever possible, following the government's announcement on Monday that non-essential businesses are to close (Reuters).

Meanwhile, HM Treasury, the Bank of England, and the FCA have written a joint letter today to the UK banks regarding Covid-19 and bank lending, urging banks to continue to provide loans during the pandemic (City A.M., online only). Please find UK Finance's statement in response to the launch of the coronavirus business interruption loan (CBIL) scheme here.

CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS) LAUNCHED

The British Business Bank's Coronavirus Business Loan Interruption Scheme (CBILS) will offer guarantees to banks to get them to extend loans and credit to struggling small businesses (Bloomberg). Under CBILS, companies with less than £45 million in annual sales can borrow up to £5 million over six years.

According to The Times (p41, £), banks will pay millions of pounds in fees to the government as part of the emergency loans programme. Lenders have agreed to pay the fees for the guarantee the government is providing to cover 80 per cent of the loans.

The Telegraph (print only, B3), reports that the loans will be interest free for 12 months and will only be available to businesses considered viable before the pandemic. Stephen Jones, CEO of UK Finance, said on BBC Radio 4 Today that a lot of small businesses may not apply but reiterated that the threshold test will apply based on viability of the business immediately before the Covid-19 outbreak, and it will be key for banks and the business to understand whether the debt taken on under the scheme can be repaid once this period has passed.

COVID-19 SCAMS WARNING ISSUED

UK banks are warning customers of scams that have emerged during the Covid-19 pandemic, as criminals seek to capitalise on the pandemic to trick customers into handing over passwords, money and sensitive data (Reuters). Banks have launched social media campaigns to warn customers of the different types of scams used by criminals, including phishing emails, payment diversion fraud and the fake selling of goods.

This comes as the National Crime Agency, Home Office and City of London Police issued a joint warning yesterday, urging people to be wary of Covid-19 scams (ITV News). As more people are isolated or working remotely, fraudsters are using the internet, telephones and doorstep calls, to pose as legitimate sellers of high-demand goods such as protective face masks, hand sanitiser, fake testing kits and health supplements that claim to prevent the virus, as well as false offers to run errands for the elderly and vulnerable (Sky News)

Responding to the joint warning, UK Finance Managing Director of Economic Crime Katy Worobec said:

?The banking and finance industry is taking action on all fronts to protect its customers from fraud and scams. We would urge the public to be vigilant against criminals using the publicity around Coronavirus as a chance to target their victims with fraudulent emails, phone calls, text messages or social media posts.

"Remember - your finance provider and the police will never contact you out of the blue and ask you to move your money.

"Always follow the advice of the Take Five to Stop Fraud campaign and take a moment to stop and think before parting with your money or information in case it's a scam.?

Meanwhile, RPC (Reynolds Porter Chamberlain), a corporate and insurance law firm, has stressed that criminals could target the government's £330 billion coronavirus package by purporting to be legitimate UK businesses and making false applications for grants (City A.M., online only).

NEWS IN BRIEF

Parliament is expected to close tonight after emergency laws to deal with the coronavirus have been passed (BBC News).

According to research conducted by the University of Oxford, the coronavirus may have already infected half of the UK population (FT, £).

London Stock Exchange (LSE) says it will allow companies listed on its market to defer payment of dividends for up to 30 days due to the pandemic impacting affecting markets (Reuters).

According to the Office for National Statistics (ONS), inflation slowed last month from 1.8 per cent to 1.7 per cent, as fuel and video game prices drop (Evening Standard, online only).

The FTSE 100 has risen for the second day, after US Congressional leaders agreed on a stimulus package worth roughly $2 trillion (City A.M., online only).

WHAT THE COMMENTATORS SAY

Writing in the FT (£), chief economics commentator, Martin Wolf writes about the challenges of the coronavirus pandemic, and how a good outcome will depend on solidarity within and across countries. Mr Wolf warns how the "the financial instability and looming recession (probably depression) we see coming will inflict huge harm on emerging and developing countries" and that if the eurozone does not show solidarity, its failure will be ?neither forgotten nor forgiven?. Mr Wolf concludes by stressing that cross-border aid must not be purely financial, and for the spate of export controls that are impacting medical supply chains to end.

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TREASURY, BANK OF ENGLAND AND FCA URGE BANKS TO SUPPORT ECONOMY THROUGHOUT COVID-19 CRISIS

The chancellor Rishi Sunak, governor of the Bank of England Andrew Bailey, and the interim chief executive of the Financial Conduct Authority Chris Woolard have written a joint letter to the CEOs of UK banks urging them to keep lending to viable businesses to support the economy throughout the Covid-19 crisis. The letter welcomed the efforts made by the banking industry so far to support businesses and customers impacted by Covid-19, but called on lenders to also support UK companies not covered by the two new state-backed loan schemes, the Coronavirus Business Interruption Loan Scheme (CBILS) and the Covid Corporate Financing Facility (CCFF)  (Financial Times, £, p3).

Responding to the letter, chief executive of UK Finance Stephen Jones said:

?The banking and finance sector is working closely with the government and regulators to deliver the support and flexibility businesses and consumers need during this challenging time. The industry is committed to supporting the economy through this temporary shock to the fullest extent, and has the capacity to assist viable businesses with their cashflow and investment needs.

?Lenders are working hard to provide the required funding to these firms as soon as possible, including through the recently announced CBIL and CCFF schemes. We will continue to work with the government, Bank of England and FCA over the coming months to ensure the industry's ability to protect and serve its customers (Reuters).?

Meanwhile, concerns have been raised by a number of business owners and MPs about the requirement from some lenders for personal guarantees to access emergency loans under the CBILS (BBC News). Speaking on BBC Radio 4's Today Programme this morning, Stephen Jones reiterated that no borrower of any type under the CBILS will be required to put up their primary property as a guarantee. He added that the terms of the scheme require all security to be realised in the event of a default before the loan can be guaranteed, but that there is more discretion for loans up to £250,000. Further information on the CBILS scheme is available on the UK Finance website here.

HOUSE SALES EXPECTED TO FALL BY UP TO 60 PER IN NEXT THREE MONTHS

Housing transactions are expected to drop by as much as 60 per cent in the next three months, according to the property website Zoopla (The Times, £, p36). Zoopla found that buyer demand had already fallen by 40 per cent last week compared with the previous seven days, commenting that the government's social distancing policy ?has created an immediate impediment to property viewings and valuations, which are integral to the process of buying and selling a home?.



UK Finance commented that mortgage lenders are currently focused on supporting those customers most affected by Covid-19, with measures including payment holidays and the suspension of repossessions (Financial Times, £, online only). A UK Finance spokesperson said: ?As such, firms are having to deploy their resources to meet this unprecedented demand, while also dealing with the impact of Covid-19 on the wellbeing of their own employees who are working tirelessly during these challenging times.? The Guardian (online only) reports on the various measures put in place by lenders to support customers in financial difficulty, including interest-fee buffers for overdrafts and mortgage payment holidays. More information on the support available to customers is available on the UK Finance website here.

NEWS IN BRIEF

The chancellor Rishi Sunak is expected to announce a package of measures today to support around two million self-employed workers facing a loss of earnings as a result of coronavirus (Telegraph, £, p1).

Government measures to protect workers and businesses hit by the coronavirus pandemic will save almost 900,000 jobs, according to estimates from the consultancy Capital Economics (The Times, £, p36).

The European Central Bank, the European Banking Authority and the European Securities and Markets Authority are considering temporarily suspending a part of the IFRS 9 accounting standards that requires banks to set aside money for potential loan losses earlier than before, reports Bloomberg.

The European Banking Authority has said it is encouraging payment firms to increase contactless payment limits to 50 euros where possible to help reduce the contagion risk of coronavirus (Reuters). It follows an announcement from UK Finance earlier this week that the contactless limit will be increased to £45 in the UK, with a roll-out beginning on April 1 2020.

The International Monetary Fund and the World Bank have called on governments to offer immediate debt relief to the world's poorest countries to help them tackle the coronavirus outbreak (Financial Times, p6).

WHAT THE COMMENTATORS SAY

Former prime minister Gordon Brown makes the case in the Financial Times (£, p23) for coordinated fiscal and monetary measures to help the global economy weather the impact of the Covid-19 pandemic, similar to the international response to the 2009 financial crisis. He remarks that the world would be far stronger and more stable if each systemically important central bank simultaneously intervened as radically as the US Federal Reserve has done. He concludes that this crisis could lead to greater global cooperation, amid a growing understanding that the world is more interdependent and fragile than ever before.

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