Swiss government, central bank throw money at virus shutdown

Switzerland's national flag flies next to the logo of Swiss bank Credit Suisse at a branch office in Luzern, Switzerland October 19, 2017. — Reuters pic
Switzerland's national flag flies next to the logo of Swiss bank Credit Suisse at a branch office in Luzern, Switzerland October 19, 2017. — Reuters pic

ZURICH, March 25 — The Swiss government and Swiss National Bank (SNB) began pouring money into a sharply slowing economy hit hard by the coronavirus epidemic.

The cabinet on Wednesday launched a 20 billion Swiss franc (RM90 billion) emergency scheme under which companies can get state-backed loans of up to 500,000 Swiss francs via their banks without interest from tomorrow.

Companies suffering “substantial reductions in revenue” can also apply for bridging credit representing up to 10 per cent of their annual sales, to a maximum of 20 million francs.

Loans larger than 500,000 francs will be 85 per cent secured by the government and have an interest rate of 0.5 per cent.

The SNB set up a Covid-19 refinancing facility to boost the supply of credit to the Swiss banking system and to prevent liquidity from drying up.

The facility will have no upper limits on the amounts available and will be available from March 26, the bank said.

“Our society and the Swiss economy are confronted with enormous challenges,” Swiss National Bank Chairman Thomas Jordan said at a press conference.

“To combat this crisis, it is essential that companies have access to credit and the banking system has access to liquidity,” the SNB said.

The Covid-19 refinancing facility (CRF) allows banks to obtain liquidity from the central bank, secured by the government guaranteed loans.

The intention is to enable commercial banks to ramp up their lending to companies rapidly and on a large scale. The interest rate on the refinancing transactions is the same as the SNB’s policy rate of -0.75 per cent.

The SNB also asked the government to reduce the counter-cyclical capital buffer to 0 per cent with immediate effect.

The buffer, previously set at two per cent of relevant risk-weighted positions, was introduced in 2012 to prevent imbalances in lending occurring particularly in the home loans market.

Officials said the steps in effect meant banks must halt share buybacks and delay dividend payments. — Reuters

Related Articles