This paper focuses on the preferential financial measures adopted by BRITACOM jurisdictions that consist of 36 Council Member Tax Administrations and 30 Observers, with a view to providing suggestions on supporting financial markets and reducing the negative impact of the COVID-19 pandemic. The material in this paper is mainly selected from websites of BRITACOM, OECD, IMF, official websites of BRITACOM jurisdictions, etc.
The unprecedented COVID-19 pandemic has been spreading around the world, posing enormous threats to the public health and formidable challenges to the global economy. The BRITACOM jurisdictions have announced or adopted financial measures to combat the COVID-19 pandemic and boost the social and economic development.
The authorities increased the frequency of Financial Stability Committee meetings, enhanced the monitoring of early signs of liquidity stress, and reviewed banks' business continuity plans. Da Afghanistan Bank (DAB) froze loan classifications at the pre-pandemic cutoff of end-February.
DAB remains focused on achieving price stability in the context of a flexible exchange rate regime. DAB has engaged money-service providers, who play a systemic role in financial intermediation, to ensure uninterrupted services.
April 6. The Bank of Algeria announced that it was easing solvency, liquidity and non-performing loans (NPLs) ratios for banks. Banks are also allowed to extend payments of some loans without a need to provision against them.
April 9. The Algerian legislation includes a National Unemployment Insurance Fund which implemented a legal unemployment compensation plan for the benefit of salaried workers who have involuntarily lost their jobs for economic reasons. The extension and/or renewal of loan maturities due on March 31, 2020 and beyond; Rescheduling of debts outstanding on March 31 and beyond; Extension of deadlines for the use of loans and deferred payments; Removal of late penalties for debts due on and after March 31, 2020; and Maintenance and/or renewal of operating loans.
April 1. The Banco Nacional de Angola (BNA) introduced an electronic platform for foreign exchange transactions, which will be progressively extended for all such transactions.
April 3. The BNA increased the minimum allocation required from banks to extend credit to producers of priority products and instructed banks to provide credit in local currency to assist importers of essential goods.
May 7. The BNA reinstated its Permanent Overnight Liquidity Provision facility to provide liquidity support to banks (100 billion Kz), and extended access to large non-financial corporations on a discount line created for the purchasing of government securities.
June 17. The Central Bank of Armenia (CBA) has not used macroprudential policies actively, except asking banks to consider voluntary prudent loan restructuring and payment holiday period from March to June. The CBA's authorities are supervising banks' liquidity positions and will act swiftly if required to safeguard financial stability.
The exchange rate has been allowed to adjust flexibly.
The focus of Bangladesh Bank (BB) is to ensure that there is adequate liquidity in the financial system to support the operations of financial institutions, and it has announced that it will buy treasury bonds and bills from banks. BB has taken measures to delay non-performing loan classification, relax loan rescheduling policy for Non-Bank Financial Institutions (NBFIs), waive credit card fees and interests, suspend loan interest payments, impose restrictions on bank dividend payments, extend tenures of trade instruments, and ensure access to financial services.
Foreign exchange rules were eased by BB. International factoring was introduced to accelerate exports. BB also resumed sales of the US dollar to offset extra pressure on the market caused by lower remittance inflows following the COVID-19 outbreak.
The National Bank of Cambodia has implemented four measures to improve liquidity in the banking system: (i) delaying additional increases in the Capital Conservation Buffer; (ii) cutting the interest rate in its Liquidity Providing Collateralized Operations, decreasing banks' funding costs in domestic currency; (iii) cutting the interest rate on Negotiable Certificates of Deposit (the collateral for Licenses/Permits/Certificates/Other Authorizations (LPCOs)), to encourage banks to disburse loans; and (iv) lowering required reserves that banking and financial institutions must maintain at the National Bank of Cambodia both for local (riel) and foreign currencies. The Central Bank has also issued guidelines to financial institutions on loan restructuring for borrowers experiencing financial difficulties (but still performing) in priority sectors (tourism, garments, construction, transportation and logistics).
Cambodia continues to maintain managed floating system.
March 25. Commission bancaire de l'Afrique centrale (COBAC) informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution.
1.8 Congo, Democratic Republic of
March 24. The Banque Centrale du Congo (BCC) has postponed the adoption of new minimum capital requirements and encouraged the restructuring of non-performing loans. In addition, the BCC announced measures to reduce contamination risks in bank notes and promote the use of e-payments.
August 5. The BCC undertook a limited 25 million $ foreign exchange intervention to help stem depreciation pressures.
March 18. The Central Bank of Cyprus (CBC) announced additional measures. They include a release of capital and liquidity buffers for banks directly supervised by the CBC (100 million €), simplification of documentation requirements for new short-term loans and other credit facilities, encouraging banks to apply favorable interest rates for new loans and newly restructured loans, and simplification of approval processes for loan restructuring.
April 10. The Central Bank announced additional capital release measure, with a twelve-month extension of the phased-in introduction of other systemically important institutions capital buffer. This corresponds to a release of additional funds of approximately 90 million € as of January 1, 2021.
The Central Bank of Djibouti has stepped up its financial sector surveillance.
March 24. The Monetary and Financial Policy and Regulation Board issued some temporary modifications to the Monetary, Financial, Securities Code and Insurance Resolutions to support the private sector, including extraordinary deferrals of credit obligations, including from public banks, and a requirement of additional generic provisioning on banks' gross lending portfolio during 2020.
The central bank has provided 15 billion birr (0.45 percent of GDP) of additional liquidity to private banks to facilitate debt restructuring and prevent bankruptcies.
April 15. The Central Bank of Gambia (CBG) has used 855 million GMD of retained earnings to increase its statutory capital and pay some of the central government liabilities to the Central Bank, thus providing additional fiscal space to the government.
The CBG stepped up the monitoring of banks' foreign exchange net open positions but has not imposed any specific exchange measures; the CBG is committed to maintaining a flexible exchange rate to absorb balance-of-payments (BOP) shocks.
The National Bank of Georgia (NBG) announced measures to support capital and liquidity in the banking sector. Banks have been asked to evaluate the quality of the loan portfolio; on-site inspections have been suspended; and a moratorium on fines was introduced where a breach emerged due to the crisis. In addition, starting June 1 the NBG launched a new tool for liquidity management to support the financing of small and medium-sized businesses in Georgia.
NBG has sold 270 million $ in the foreign exchange market, since the beginning of the year to prevent disorderly depreciation.
The authorities extended all the European central bank (ECB)-issued regulatory and operational relief to German banks under national supervision. A three-month payment moratorium on consumer loans established before March 15 is granted until June 30, 2020 if the debtor is financially affected by the COVID-19 crisis. Loans issued under Kreditanstalt für Wiederaufbau (KfW) guarantees are exempt from the calculation of lenders' own funds requirement, their leverage ratio, as well as the large exposure limit.
April 3. A scheme for the support of the economy through the issuance of guarantees by the Hellenic Development Bank has been approved under the E.U. temporary framework for state aid. The scheme will partially guarantee eligible working capital loans, with the total exposure of the Hellenic Development Bank capped at 40% of the volume of loans issued by a financial intermediary. The total size of the scheme will amount to 2 billion EUR.
Banks will allow deferral of principal payments on existing loans for hard-hit individuals through end-September and firms through end-December (in addition to the interest payment subsidies mentioned above).
May 4. The Magyar Nemzeti Bank (MNB) launched its government securities and mortgage bonds purchase program as a part of Quantitative Easing strategy to strengthen monetary policy transmission.
Regarding macro-prudential measures, (i) the Foreign Exchange Coverage Ratio (FECR), which imposes a limit on the difference between forex-denominated assets and liabilities of credit institutions as a percent of total assets, was reduced from 15 to 10 percent; and (ii) the additional capital buffer requirement for systemically-important banks will be temporarily eliminated as of July 1.
The exchange rate has been adjusting flexibly.
Bank Indonesia (BI) adjusted macro-prudential regulation to ease liquidity conditions and support bond market stability. A Presidential decree has expanded BI's authority to maintain the stability of the financial system in presence of the COVID-19 shock, including by facilitating BI liquidity assistance to banks, allowing BI to purchase government bonds in the primary market, and financing the deposit insurance agency for bank solvency problems.
BI has also reaffirmed that global investors can use global and domestic custodian banks to conduct investment transactions in Indonesia. The stimulus packages also include measures to lift restrictions on imports and exports, aiming to ease global supply-chain disruptions caused by the virus.
The Central Bank of Iran has (i) announced the allocation of funds to import medicine; (ii) agreed with commercial banks that they postpone by three months the repayment of loans due in February 2020; (iii) offered temporary penalty waivers for customers with non-performing loans; and (iv) expanded contactless payments and increased the limits for bank transactions in order to reduce the circulation of banknotes and the exchange of debit cards.
The Central Bank of Iran announced it injected 1.5 billion USD in the foreign exchange market to stabilize the rial. In July it injected another 1 billion USD.
Key measures adopted in the government's Cura Italia' and the Liquidity Decree emergency packages include: a moratorium on loan repayments for some households and SMEs, including on mortgages and overdrafts; state guarantees on loans to all businesses; incentives for financial and non-financial companies in the form of Deferred Tax Activities; state guarantee to the state development bank—Cassa Depositie Prestiti—to support lending and liquidity to banks to enable them to finance medium- and large-sized companies; con-insurance scheme for exporters.
To support banks and the economy, the authorities have, since the imposition of the state of emergency, (i) lowered risk weights (for SME from 75% to 50%, for foreign exchange loans from 200% to 100%, and for syndicated loans from 100% to 50%); (ii) expanded the list of eligible collaterals; (iii) lowered capital conservation buffer (by one percentage point); (iv) reduced the liquidity coverage ratio requirement (from 80% to 60%), and (v) lowered limits on foreign currency positions.
The National Bank of the Republic of Kazakhstan (NBK) lowered the ceiling of foreign exchange purchase without supporting import documents for the duration of the state of emergency.
March 24. President Moon announced a financial stabilization plan of 100 trillion KRW (5.3 percent of GDP). The main elements are: (i) expanded lending of both state-owned and commercial banks to SMEs, small merchants, mid-sized firms, and large companies (the latter on a case-by-case basis); (ii) a bond market stabilization fund to purchase corporate bonds, commercial paper, and financial bonds; (iii) financing by public financial institutions for corporate bond issuance through collateralized bond obligations and direct bond purchases.
April 8. A package of measures totaling 36 trillion KRW (1.9 percent of GDP) was announced to ease financing constraints for exporters, including increasing the amount and maturity of trade credit and expanding trade insurance.
April 22. Additional measures were announced totaling 25 trillion KRW (1.3 percent of GDP), mainly through creation of a special purpose vehicle to purchase corporate bonds and commercial paper (10 trillion KRW) and additional funds for SME lending (10 trillion KRW).
The Bank of Korea (BOK) opened a bilateral swap line with the U.S. Federal Reserve for 60 billion USD. Other measures taken to facilitate funding in foreign exchange include raising the cap on foreign exchange forward positions to 50 percent of capital for domestic banks (previously 40 percent) and 250 percent for foreign-owned banks.
The Central Bank of Kuwait (CBK) has been working with commercial banks to ensure uninterrupted access to financial services. In addition, the CBK implemented the following measures: (i) Reduced banks' capital adequacy requirements by 2.5 percentage points, to 10.5; (ii) Reduced the regulatory Net Stable Funding Ratio and Liquidity Core Ratio from 100 percent to 85 percent, and the Liquidity Ratio from 18 percent to 15 percent; (iii) Increased the Loan-to-Value limits for land purchase for residential projects from 50 to 60 percent, for existing homes from 60 to 70 percent, and for home construction from 70 to 80 percent.
1.24 Macao Special Administrative Region
Under the exchange rate peg in place, the Base Rate of the discount window was adjusted downward on March 4 and 16, by 50 and 64 basis points respectively, reaching 0.86 percent on March 16.
April 13. The Bank of Mongolia (BOM) allowed existing consumption loan borrowers to defer their principal and interest payments by up to 12 months.
March 6. As part of a gradual and orderly transition to a more flexible exchange rate regime, the authorities broadened the dirham's fluctuation band to +/- 5 percent (from +/- 2.5 percent).
April 24. The Moroccan insurance supervisor relaxed some provisioning requirements to mitigate the impact of COVID-19 on the insurance sector.
May 21. The government announced a post crisis facility to support businesses that will provide financing to cover working capital needs at subsidized interest rate (with a 4 percent maximum interest rate). A sovereign guarantee of 95 percent will be provided to SMEs, for an equivalent of up to ten percent of annual turnover.
April 23. The Central Bank of Myanmar (CBM) announced the extension of the deadline for compliance with four prudential regulations (enacted in July 2017) by three years from end-August 2020 to end-August 2023 to enable banks to support the economy cope with the impact of COVID-19.
The kyat has been allowed to adjust flexibly, with limited rules-based intervention to manage excessive exchange rate volatility.
1.28 New Zealand
Since March, the Reserve Bank of New Zealand (RBNZ) has been providing liquidity in the foreign exchange swap market and re-established a temporary US dollar swap line (30 billion $) with the U.S. Federal Reserve.
The RBNZ has removed, effective as of May 1, mortgage loan-to-value ratio (LVR) restrictions for the next 12 months.
Other related measures taken by the government that could contribute to financial stability include a six-month freeze on residential rent increases and increased protections for tenants for termination of tenancies.
The exchange rate has been allowed to adjust flexibly.
In response to the crisis, the Central Bank of Nigeria (CBN) introduced measures, including: (i) liquidity injection of 3.6 trillion N (2.4 percent of GDP) into the banking system, including 100 billion N to support the health sector, 2 trillion N to the manufacturing sector, and 1.5 trillion N to the real sector to impacted industries; and (ii) creating a 50 billion N targeted credit facility.
The State Bank of Pakistan (SBP) introduced temporary regulatory measures to maintain banking system soundness and sustain economic activity. These include: (i) increasing the regulatory limit on extension of credit to SMEs by 44 percent to 180 million PRs; (ii) suspending bank dividends for the first two quarters of 2020 to shore up capital.
More recently, the SBP has introduced mandatory targets for banks to ensure loans to construction activities account for at least 5 percent of the private sector portfolios by December 2021.
The SBP has introduced further regulatory measures to facilitate the import of COVID-19-related medical equipment and medicine.
1.31 Papua New Guinea
The Bank of Papua New Guinea (BPNG) has directed the Authorized Foreign Exchange Dealers to give priority to retailers and wholesalers of medical drugs, medical and pharmaceutical companies, particularly the imports of products related to COVID-19.
March 14. Expanded credit coverage for up to 90% for SMEs and exporters of the Growth Fund (Fondo Crecer), for financing, granting of guarantees and similar, and other financial products.
March 30. Central bank will inject loans guaranteed by the Ministry of Economy and Finance to support companies and sustain their payment chain.
The central bank has been intervening since late February to mitigate disorderly conditions in the foreign exchange market.
March 18. The central bank announced liquidity support measures: (i) an extended lending facility worth 50 billion RWF (0.5 percent of GDP) available to liquidity-constrained banks for the next six months; and (ii) Treasury bond purchases through the rediscount window for the next six months.
The central bank remains committed to maintaining exchange rate flexibility and limiting foreign exchange market interventions to avoiding excessive exchange rate volatility.
The Central Bank of Samoa (CBS) will encourage commercial banks to reduce interest rates, and/or associated bank fees and charges. The CBS will also make sure to maintain ample liquidity in the banking system to support businesses and stands ready to activate its lending facilities for the financial institutions.
1.35 Saudi Arabia
March 14. The Saudi Arabian Monetary Authority (SAMA) announced a 50 billion SAR (2 percent of GDP) package to support the private sector, particularly SMEs, by providing funding to banks to allow them to defer payments on existing loans and increase lending to businesses. The central bank will also cover fees for private sector stores and entities for point-of-sale and e-commerce transactions for 3 months.
June 1. SAMA announced the injection of 50 billion SAR into the banking sector through deposit placements to support banking liquidity and private sector credit.
The West-African Economic and Monetary Union (WAEMU) authorities have extended by one year the five-year period initiated in 2018 for the transition to Basel II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 as initially planned.
June 11. The National Bank of Serbia (NBS) has provided liquidity (both in dinars and euros) to banks through additional EUR/RSD swap auctions and repo purchase auctions and outright purchases of dinar government securities, and reduced the foreign exchange swap interest rates (NBS deposit facility rate plus 10 bps for dinars and 0 percent for euros).
In July, the NBS set up a repo line arrangement with the European Central Bank (ECB) to address possible euro liquidity needs of Serbian financial institutions.
The NBS has intervened heavily in the foreign exchange market to maintain a relatively stable exchange rate during the crisis period.
1.38 Sierra Leone
March 18. The central bank held an emergency Monetary Policy Committee meeting. They decided to create a special credit facility (500 billion Le) to support production, procurement and distribution of essential goods.
April 7. The Monetary Authority of Singapore (MAS) announced that it will adjust selected regulatory requirements and supervisory programs to enable financial institutions to better deal with issues related to the pandemic.
April 8. The MAS announced a 125 million $ support package to sustain and strengthen financial services and FinTech capabilities. The package, funded by the Financial Sector Development Fund, has three main pillars: (i) supporting workforce training and manpower costs; (ii) strengthening digitalization and operational resilience; and (iii) enhancing FinTech firms' access to digital tools.
The Central Bank is releasing funding-for-lending support for medium and small enterprises through commercial banks. To better monitor financial and liquidity conditions, the Central Bank has increased the frequency and granularity of data collection, including employing one-off surveys.
1.41 South Sudan, Republic of
July 7. The Bank of South Sudan (BSS) suspended the recent regulation of higher minimum paid-up capital for commercial banks. BSS also reiterated that the South Sudanese Pound (SSP) is the only legal tender of domestic debt payments and also encouraged banks to restructure loans if needed.
The government of Spain has extended up to 100 billion € government guarantees for firms and self-employed, covering both loans and commercial paper of medium-sized companies that participate in Spain's Alternative Fixed Income Market (MARF); launched a new Instituto de Crédito official (ICO) line of guarantees to promote investment activities particularly in the areas of environmental sustainability and digitization (40 billion €); created a state rescue fund to support strategic business (10 billion €); adoption of a new macroprudential liquidity tool empowering the National Securities Market Commission to modify requirements applicable to management companies of Collective Investment Schemes.
The government has drafted regulations on forbearance of loan repayments for three months to ease the pressure on private sector.
May 20. On the regulatory side, commercial banks may now grant 3 to 6 months deferral of payments to companies, institutions and individuals who are affected by COVID-19. If necessary, specific measures will be taken for each institution aimed at temporarily alleviating the solvency and liquidity requirements, but also tightening up the governance. In cases where an institution has temporarily deviated from the generally applicable guidelines, additional actions and reporting obligations will be imposed.
The National Bank of Tajikistan (NBT) is promoting the use of electronic payments to facilitate remote transactions.
The NBT has relaxed enforcement of prudential requirements to ease banking pressures and maintain credit. In April, the NBT temporarily (until September) waived supervisory sanctions against those banks that are providing adequate loan loss provisions and as a result fail to meet capital adequacy ratio and liquidity ratio. The NBT has recommended that credit institutions not pay dividends or bonuses to shareholders, but keep these profits to boost capital. Credit institutions are exempt from paying fees for the settlement system and have been asked to avoid non-essential expenditures.
The NBT adjusted the official exchange rate with cash market rate.
April 29. The authorities decided to extend access to the Credit Guarantee System to micro-enterprises, increasing the type of economic activities eligible for the program.
May 11. The authorities introduced a moratorium on the fulfillment of capital and interest obligations arising from credit agreements, which delayed maturity by three months.
The National Bank of Ukraine (NBU) has adopted a regulation that facilitates restructuring of loans to borrowers facing financial difficulties due t o impact of the COVID-19. Penalties on clients not servicing loans during the period starting on March 1 and until 30 days after the quarantine finishes should not apply if there are reasonable grounds.
The NBU eliminated the tariffs for banks using its electronic payments system and provided banks with guidance to ensure and promote their remote/cashless services.
The NBU recommended to the Financial Services Regulator to transfer the regulation of insurance companies to the NBU starting July 1st.
The NBU and the European Bank for Reconstruction and Development (EBRD) have agreed to set up and partially activated a 500 million $ foreign exchange swap facility to support the real economy and strengthen Ukraine's macrofinancial stability.
1.48 United Arab Emirates (UAE)
April 15. The Dubai International Financial Centre (DIFC) announced a new support package for its business partners. Retailers based at DIFC-owned assets now benefit from a three-month rent-free period on their base rent (April to June), providing businesses with added flexibility and financial relief.
The central bank has temporarily relaxed the regulations in the securities and payments markets.
Loan payments for households and businesses that occur between March 1 and August 31, 2020 are to be deferred for up to 180 days.
The fund that guarantees loans for SMEs will be expanded from 50 million $ to 500 million $ (utilizing financing from international organizations). That will allow to guarantee the SME loans totaling 2.5 billion $. In addition, the rate of commission charged by the fund will be reduced substantially.
The exchange rate has been allowed to adjust, with the central bank intervening to limit undue volatility in the market.
2.1 Most jurisdictions have announced and/or adopted macro-financial measures such as launching government securities and mortgage bonds purchase program, buying government securities on the secondary market to ensure that there is adequate liquidity in the financial system to support the operation of financial institutions.
2.2 Many jurisdictions provided financial relief to households and corporate borrowers, including allowing financial institutions to modify the terms of their loans for households and enterprises affected by the COVID-19 outbreak without changing the classification of the loans, encouraging banks to postpone loan installments and obligations of the private sector, providing interest free loans to private companies, recommending banks to consider restructuring (i.e. extending maturity) loans that face temporary hardship.
2.3 Many jurisdictions have introduced temporary regulatory measures to relax the enforcement of prudential requirements.
2.4 Some jurisdictions have announced several measures to achieve price stability in the context of a flexible exchange rate regime.