Below we report on operational Fed programs, based on the Fed’s weekly H.4.1 release. Since last week, central banks have continued to reduce their use of the swap agreements with the Federal Reserve. The outstanding amount of the Fed’s purchase and lending programs has not increased significantly.
On July 1, the US Treasury announced it would make a $700 million loan to YRC Worldwide Inc., a heavyweight equipment transportation company that was deemed by the US Secretary of Defense to be critical to national security. Treasury will receive a 29.6% equity stake in the company in connection with the loan.
Most of the largest U.S. banks announced Monday that they will continue to pay dividends in the third quarter at the same level as the second quarter. This news comes just two business days after the Federal Reserve announced the results of its annual stress test and an unprecedented “sensitivity analysis” estimating the potential impact of different economic recoveries from the COVID recession on bank performance. Based on these scenarios, the Fed announced a number of temporary restrictions on dividends and other corporate actions.
On June 19, the European Central Bank (ECB) joined the central banks of England, Japan, and Switzerland in scaling back the frequency of their US dollar liquidity swaps with the Federal Reserve (Fed). Central bank liquidity swap lines facilitate access to foreign capital during periods of international financial stress. While these bilateral swap operations with the Fed have slowed, the ECB announced on June 25 the establishment of the Eurosystem repo facility for central banks (EUREP). The new facility will complement the ECB’s current bilateral swap lines by allowing for less stable currencies to participate in repurchase agreements. This post summarizes the recent activity on Fed swap lines and documents the shift in currency facilities from those aimed at the sturdiest reserve institutions to those aimed at central banks with smaller stocks of dollars.
On June 29, the European Commission (EC) announced it will extend support to SMEs that were previously ineligible for state aid and amended recapitalization measures to incentivize private investor participation.
As coronavirus cases continue to rise around the world, governments have started to extend mortgage forbearance and other relief policies that they launched back in March and April when the crisis began.