Beginning in March 2020, the New Bagehot project shifted its focus to real-time analysis of financial policies created in response to the ongoing COVID-19 pandemic and its economic consequences. Posts are regularly published on YPFS’ Systemic Risk Blog, where individuals can follow to read examinations of policies around the world—including lessons learned as programs develop and are utilized. Additionally, YPFS keeps a collection of all blog posts related to the COVID-19 crisis in a single PDF document, available here.
Below the are posts from our Systemic Risk Blog organized by subject area. Some subject areas also include Resource Guides that gather and synthesize materials on crisis response within that area of interest. New blog posts and resource guides will be added as they become available.
Critical industries
Critical industries play key roles in supply chains and transportation and are often vital to keep the economy running smoothly. However, due to high fixed costs, these industries are also highly vulnerable to targeted economic shocks. Policies targeted to aid these critical industries must take account of the tools available, as well as obligations to protect taxpayers by attempting to guarantee recuperation of funding.
Analysis
Case Studies and Policy Changes
Resource guides
Liquidity and market liquidity
Central banks support will normally provide large amounts of liquidity to encourage credit markets to operate in times where they tend to slow or completely freeze. Market and emergency liquidity relief comes in various forms, such as increased central bank repurchase agreement activity, large-scale direct purchases of obligations like government debt, corporate bonds, or commercial paper on primary and secondary markets, and expanding the scope of existing facilities and operations by increasing tenor and widening eligibility, to name a few.
Analysis
- Central Banks Introduce Programs to Improve Liquidity in Key Markets
- Treasury Backstop for Fed Lending under CARES Act: Lessons from 2008 TALF
- Barriers to Access Impede Utilization of Municipal Liquidity Facility
- Federal Reserve Programs Involve More Risk than in GFC
- Federal Reserve to Report Monthly on CARES Act Program
- How Available Is the ESF for New Fed Facilities?
Federal Reserve program usage
- Early Use of Federal Reserve Programs
- Use of Federal Reserve Programs as of May 7
- Use of Federal Reserve Programs as of May 14
- Use of Federal Reserve Programs as of May 21
- Use of Federal Reserve Programs as of May 28
- Use of Federal Reserve Programs as of June 4
- Use of Federal Reserve Programs as of June 11
- Use of Federal Reserve Programs as of June 18
- Use of Federal Reserve Programs as of June 25
- Use of Federal Reserve Programs as of July 2
- Use of Federal Reserve Programs as of July 9
- Use of Federal Reserve Programs as of July 16
- Use of Federal Reserve Programs as of July 23
- Use of Federal Reserve Programs as of August 26
- Use of Federal Reserve Programs as of September 23
- Use of Federal Reserve Programs as of October 22
- Use of Federal Reserve Programs as of December 2
- Use of Federal Reserve Programs as of December 18
- Use of Federal Reserve Programs as of January 6, 2021
Case studies and policy changes
- Fed Introduces Modified Primary Dealer Credit Facility
- Fed Reintroduces Commercial Paper Funding Facility
- Fed Provides Liquidity Options to Cities and States
- Fed Reintroduces Term Asset-backed Securities Loan Facility
- Bank of England activates the Contingent Term Repo Facility
- Federal Reserve Supports Corporate Bond Markets
- ECB Unveils Pandemic Emergency Purchase Programme
- Federal Reserve Expands Support to Corporate Bond Markets
- Federal Reserve Broadens Range of Eligible Collateral for TALF
- Federal Reserve Announces New Municipal Liquidity Facility
- Bank of Canada Establishes Series of Programs to Promote Market Liquidity
- Federal Reserve Expands Eligibility for Municipal Liquidity Facility
- India Extends Special Liquidity Facility to Mutual Funds
- Bank of Japan Increases Liquidity Measures
- The Bank of Mexico Plans to Inject $30 billion to Provide Liquidity
- Federal Reserve Expands Support to Corporate Bond Markets Again
- Japan Begins Capital Injections for Financial Institutions in Response to COVID-19
- ECB Announces New Eurosystem Repo Facility to Provide Euro Liquidity
- Brazil’s central bank injects liquidity in financial markets
- RBI to provide liquidity to non-bank financial firms
- Second Report of the Congressional Oversight Commission on the Use of CARES Act Funds
- Implications of the German Constitutional Court’s Objection to the ECB’s Public Sector Purchase Program
- The Federal Reserve expands eligible counterparties and agents in three emergency facilities
- Federal Reserve Extends Lending Programs to December 31
- Bank of England Rapidly Expands Asset Purchase Facility
- UK Introduces Covid Corporate Financing Facility
- Fed introduces Money Market Mutual Fund Liquidity Facility
- Federal Reserve Announces $2.3 trillion Lending Package
- Federal Reserve further expands access to Municipal Liquidity Facility
- Federal Reserve Lowers Pricing for Municipal Liquidity Facility
- RBI announces further liquidity measures in response to COVID-19
- RBI reinforce liquidity measures while keeping the interest rate constant
Resource guide
Macroprudential policy
Central banks do not just support the economy using their ability to set interest rates and provide lender-of-last-resort financing. They, and their financial supervisory colleagues, also have a set of tools to keep financial markets and institutions from running too hot or too cold. These are known as macroprudential policies. With these policies, governments might allow financial institutions to do things like use their capital buffers, allow payment standstills on loans, or use their liquidity buffers. Authorities typically use macroprudential policies to complement fiscal policy and monetary policy.
Analysis
- Countries Implement Broad Forbearance Programs for Small Businesses, Sometimes with Taxpayer Support
- Authorities Restrict Short Sales during COVID-19 Crisis
- Easing Liquidity Regulations to Counter COVID-19
- Countries Ease Bank Capital Buffers
- Governments Provide Financial Regulatory Relief
- Conventional Monetary Policy and the Zero-Lower-Bound
- Authorities Urge Prudence in Loan Loss Accounting
- COVID-19 and Insurance (1 of 3): Helping Individuals and Businesses
- COVID-19 and Insurance (2 of 3): Operational Regulatory Relief
- COVID-19 and Insurance (3 of 3): Capital Conservation and Countercyclical Regulation
- Banks’ Second-Quarter Results Boosted by Non-Interest Income and Official Support
- Risks May Suggest a Role for an Extension of Bank Debt Issuance Guarantees
- Countering COVID-19 with Countercyclical Bankruptcy Policy
- What macroprudential policies are countries using to help their economies through the Covid-19 crisis?
Case studies and policy changes
- UK, EU Move to Ease Impact of Accounting Rules for Borrowers Affected by COVID-19
- Denmark Plans to Pay Fixed Costs for SMEs Hit by Coronavirus Lockdown
- US Eases Impact of Accounting Rules for Borrowers Affected by COVID-19
- Dividend Bans: ECB Extends, APRA Eases, and BoE Promises Further Analysis
- Senate Bill Temporarily Restores Treasury, FDIC Guarantee Authority Eliminated Post-GFC
- U.S. Bank Regulators Modify Liquidity Regulation to Support Participation in Fed Programs
- Fed Reveals Details of First Mid-Cycle Stress Test
- Despite Stated Exclusion, the Fed Is Buying Bank Debt
- Spain Implements Tranched, Adaptive Credit Guarantee Program to Meet Firm Demand
- Fed Deems Banks Have Enough Capital Following COVID-19 Stress Test
Resource guides
Mortgage relief
Mortgage and rent costs constitute a major component of many individuals’ cashflows. As fixed cost commitments, measures taken to alleviate the payment burden can greatly improve the likelihood of homeowners’ staying in homes. Policies targeted to aid these individuals must take account of the duration of financial struggle, underlying financial circumstances of borrowers and renters, and the impacts such policies can have on lenders.
Analysis
Case studies and policy changes
- FHFA Relaxes Standards for GSE Mortgage Servicers
- FHFA Allows Payment Deferral for Forbearance Payments While Extending Foreclosure and Eviction Moratoria
- SIGTARP Proposes Using Leftover TARP Funds for COVID Relief
- Governments Extend Mortgage Forbearance and Other Relief as Virus Endures
- HFA Announces Several Changes to Residential Mortgage Market Relief Programs
- Centers for Disease Control and Prevention Halt Evictions for the Rest of 2020
Resource guides
Multinational organizations
Multinational organizations comprise the IMF, the World Bank, the European Union, the G-20, and other various regional multilateral development banks. These organizations provide programs and financing facilities to assist governments and the private sector in responding to the COVID-19 crisis. Actions of multinational organizations include loans, grants, guarantees, forbearance, and technical assistance. Many of these actions tend to target vulnerable countries and populations around the world.
Analysis
- Multinational Organizations’ Efforts to Assist Countries through COVID-19 crisis
- The Limits of the G20's Debt Service Suspension Initiative
- Multilateral Development Banks in Latin America and the Caribbean
- Who's afraid of some (not so big or bad) debt relief?
- The G20’s impasse on Special Drawing Rights (SDRs)
Case study and policy changes
- Asian Development Bank Increases Funds for Producers of Critical Medical Supplies
- The IMF makes funds available in response to the COVID-19 crisis
- World Bank Support to Developing Countries
- The IMF Expands and Expedites Lending in Response to the COVID-19 crisis
- IFC Provides $8 Billion in Fast-Track Financing to Private Sector
- EU Programs Supporting non-EU Countries
- EU Programs in Support of Member Countries
- Update on the progress of the World Bank’s COVID-19 response efforts
- European Stability Mechanism Establishes Pandemic Support Credit Lines
- EU Member States Reach Unanimous Deal on Historic EUR 750 billion Fiscal Stimulus Package
- European Council finalizes Multiannual Financial Framework and Additional COVID-19 Response Measures
- Argentina’s Path to Debt Relief from Private Creditors
- Chile’s Central Bank Injects Liquidity in Financial Markets
Resource guides
Small and medium enterprises
The majority of workers in many economies are employed by SMEs, and these firms account for more than 90% of total businesses worldwide. Due to the COVID-19 pandemic, many SMEs were forced to shut-down. Government programs in response to the COVID-19 pandemic vary with some focused on providing access to finance, supporting employee wages, providing grants to cover various expenses, among others. In many cases, especially in emerging markets, governments are also providing support to informal economy workers and firms.
Analysis
- Credit Guarantee Programs for Small and Medium-Sized Enterprises
- Loan Guarantee Programs May Include Nonbanks
- Making SME Credit Guarantee Programs Affordable: Subsidized Interest Payments for an Initial Period
- Large-Scale Assistance Programs for Small Businesses
- Lessons Learned in Designing and Implementing Support for Small Businesses
- Countries Provide Support to Workers in the Informal Economy
- Governments Provide SMEs with Relief for Non-Wage Fixed Costs
- Countries Continue to Adopt and Update Credit Guarantee Schemes for Small Business Lending
- Governments Support Businesses through Equity Investments
- 78% of US Small Businesses Negatively Impacted by the COVID-19 Pandemic
- Design Considerations and Interesting Features of SME Support Programs
Case studies and policy changes
- MicroFinance Ireland: Targeted Lending for Microenterprises Impacted by COVID-19
- Federal Reserve Announces Main Street Lending Program
- Federal Reserve Introduces Paycheck Protection Program Liquidity Facility
- Germany Launches New Support Program After Partial Guarantee Insufficient to Promote Lending to Small Businesses
- Federal Reserve Waives Restriction on Wells Fargo to Allow Lending to Small Businesses
- Italy Expands and Updates its Credit Guarantee Programs
- UK Expands Support for Small Businesses After Limited Impact of Initial Program
- Switzerland Programs Serve as Model for Quick Support to Small Businesses
- Congress Expands Support to Small Businesses
- Germany Provides Public Funding for Recapitalization and Startup Equity
- ECB Considers Adopting EU Bad Bank
- UK Announces Support to Innovative Firms
- Federal Reserve Announces Changes to Main Street Lending Program
- UK Announces New 100% Loan Guarantee Program Targeted at Smallest Businesses
- Federal Reserve Expands Access to Paycheck Protection Program Lending Facility to Non-Depository Institution Lenders
- PPP Rules Changed to Better Target Funds
- Denmark Extends Duration of COVID-19 Support Programs and Introduces New Measures
- FHFA Allows Federal Home Loan Banks to Take PPP Loans as Collateral
- US Businesses Navigate Multiple Government Support Programs
- The Philippines Provides Support to Workers in the Informal Economy
- EU Expands Temporary Framework For State Aid to Allow Recapitalization
- Nepal Expands Public-Works Program
- Bank of Japan Introduces New Facility to Support Bank Lending to Small and Medium-Sized Firms
- Poland’s Financial Shield Provides Support to Businesses
- Bank of Mauritius Granted Permission to Make Equity Investments in Companies
- United States Congress Passes Amendments to Paycheck Protection Program
- SBA and Treasury Issue Guidance on PPP Loan Forgiveness
- Federal Reserve Amends Main Street Lending Program
- Germany Introduces Fixed Cost Support for SMEs
- Main Street Lending Program Opens for Lenders
- Small Business Administration Announces Updates to Small Business Support Programs
- SBA Will Disclose Certain Recipients of Paycheck Protection Program Aid
- ECB Announces New Eurosystem Repo Facility to Provide Euro Liquidity
- European Commission Expands Eligibility for SME Support and Increases Incentives for Private Recapitalization
- US Treasury Extends $700 Million Loan to YRC Worldwide Inc. under CARES Act Provision
- US Extends Paycheck Protection Program by 5 Week
- Fed Expands Main Street Lending Program to Include Nonprofits
- Utilization of Credit Support Programs for SMEs
- Portugal Announces SME Debt Securitization Program
- One-Quarter of SMEs Closed During the COVID-19 Lockdown
- Paycheck Protection Program spread loans widely, if not evenly
- Direct Lending to SMEs - Canada’s Business Credit Availability Program
- Paycheck Protection Program Loan Forgiveness Rules Eased for Smallest Borrowers
- As Need for Additional Small Business Aid Intensifies, Preliminary Evaluations of the PPP Suggest It Improved Business Survival
Resource guides
Support for individuals
Support for individuals includes all policies implemented to reduce the economic impact of a downturn on households. These measures support households by offsetting the decline in disposable income they face as a result of adverse economic conditions. Policies implemented to achieve this include direct payments, expanded unemployment benefits, or income tax cuts.
Analysis
- Government Support to Individuals and Households During Crises
- US Supports Individuals and Households in Response to COVID-19
- Programs Support Individuals through Unemployment Insurance and Wage Subsidies
- Programs Support Individuals through Direct Payments and Tax Cuts
- Programs Support Individuals through Tax-Deadline Extensions and Penalty Waivers
- Unemployment Insurance and Short-Time Compensation in the US and abroad
- Pandemic catalyzes transition to cashless benefits
Case studies and policy changes
- EU Proposes Support for Short-Time Work Schemes
- Korea Announces New Deal Budget Proposal Aimed at Developing its Post-COVID Economy
- Debate over new stimulus plan continues as unemployment benefits near expiration
- Cross-country Comparison of Economic Outcomes and Policy Responses to Support Individuals in June
- With Phaseout of Wage Subsidy Scheme, UK Announces Rehiring Bonus
- President Trump Takes Executive Action as Further Stimulus Bill Talks Stall
- Barriers to Wage Replacement Schemes
Resource guides
Swaps
To ensure that international trade continues during periods of financial stress, central banks establish short-term liquidity swap lines. While many states participate in swap lines, the prominence of the US dollar in global markets makes Federal Reserve swaps particularly useful. These work the same as any swap line: a foreign central bank uses their currency to purchase dollars at the market exchange rate, and agrees to use dollars to purchase back their currency at the original exchange rate, plus interest. The foreign central bank may then freely lend dollars to its domestic institutions. Because the exchange rate does not change, swaps are riskless transactions that effectively support foreign exchange liquidity.
Analysis
Case studies and policy changes
- Fed Creates Dollar Repo Facility for Central Banks, Extending Liquidity to Central Banks that Don’t Have Fed Swap Lines
- Reserve Liquidity Facilities Shift from Advanced Economies to Emerging Markets
- Federal Reserve extends temporary US dollar liquidity swap lines and FIMA repo facility to March 31, 2021
- ECB Announces New Eurosystem Repo Facility to Provide Euro Liquidity
Resource guides
Oversight and communication
Sweeping relief programs, if unchecked, can consume scarce funds and overrun their legal authorities. In many cases, the full account of a government’s actions will not be known for years. Oversight and official communication address this problem by bolstering transparency and communication while allowing policy administrators to focus on the work at hand.
Analysis
Case studies and policy changes
- First Report of the Congressional Oversight Commission on the Use of CARES Act Funds
- Federal Reserve to Report Monthly on CARES Act Program
- Mnuchin Clarifies that Treasury is Prepared to Lose Money on Fed Programs
- Paycheck Protection Program highlights numerous oversight concerns even as the SBA makes first disclosures
- GAO Report Highlights Opportunities to Improve Federal COVID Response and Recovery Efforts
- Third Report of the Congressional Oversight Commission on the Use of CARES Act Funds
- Fourth Report of the Congressional Oversight Commission on the Use of CARES Act funds
- Disagreements over the Municipal Liquidity Facility Erupt
- Congressional Oversight Commission Scrutinizes National Security Loans
Policy proposal and market commentary
Rather than describe the administration of crisis-fighting programs, these articles analyze the design of policies and comment on economic trends that are not easily contained in a single policy arena. They are largely prospective in nature, though some articles reflect on novel aspects of the coronavirus recovery without limiting their scope to a single policy area.
Analysis
- The FHLBs May Not be the Lenders-of-Next-to-Last Resort during the Coronavirus Crisis
- Flight from Maturity during the Coronavirus Crisis
- CARES Act $454 billion Emergency Fund Could add up to Much More for Businesses, States and Municipalities
- The FHLBs During the Coronavirus Crisis, Part II
- A Long Way to Go for Emerging Markets
- Understanding Parametric Triggers in Catastrophe Insurance
- The Mexican Government’s Economic Response to the COVID-19 Pandemic
- Part I of Crisis in Lebanon: Economic “Free Fall,” IMF Negotiations, and Beirut Explosion
- Part II of Crisis in Lebanon: Buildup of Interrelated Challenges
- Part III of Crisis in Lebanon: Public Protests, COVID-19 Crisis, and International Support
Case studies and policy changes
- Forecasting the Economy During COVID-19
- Countries Propose Catastrophe Insurance Through Public-Private Partnerships
- Debt Mounts for US Retail and Lodging Mortgagors
- U.S. Banks to Maintain Dividends for Now, Following Pre-COVID Stress Test
- The Bank of Greece proposes a national “bad bank”
- HEROES Act would provide $3 trillion in additional benefits but unlikely to progress
- Senate Republicans introduce HEALS Act, next round of COVID-19 response
- European and Japanese G-SIB Report Second-Quarter Results
- Rewritten HEROES Act lops $800 million off first proposal, but unlikely to proceed
- Congress Passes Additional $908 Billion Stimulus Bill
- European Commission gives tentative support for "network" of public asset management companies
Guest articles
These have either been written by YPFS authors and published elsewhere, or written by authors external to YPFS and published on the Systemic Risk Blog.
- Lender beware: Emergency relief efforts are inherently risky
- No bank should be paying dividends right now
- A New Index of Bank Resolution Reforms
- War Finance and Bank Leverage: Lessons from History
- Fixing Financial Data to Assess Systemic Risk
- Non-primary Home Buyers, Shadow Banking, and the U.S. Housing Market