Yale School of Management

Posts by UK

Bank of England activates the Contingent Term Repo Facility

March 26, 2020
On March 24, 2020, the Bank of England activated a liquidity “insurance” facility that it created after the 2007-09 Global Financial Crisis to be available in a crisis such as the current one. The Contingent Term Repo Facility (CTRF) aims to “help alleviate frictions observed in money markets in recent weeks, both globally and domestically, as a result of the economic shock caused by the outbreak of Covid-19.” Financial institutions will be able borrow cash from the central bank reserves for a 3-month term in exchange for less liquid assets. CTRF operations will run for the next two weeks and the Bank of England will announce further operations as needed. Continue reading “Bank of England activates the Contingent Term Repo Facility”

UK, EU Move to Ease Impact of Accounting Rules for Borrowers Affected by COVID-19

March 21, 2020
On March 20, the Bank of England and European Central Bank (ECB) provided guidance to banks on how to follow accounting rules in evaluating loans to borrowers affected by the COVID-19 crisis.  The new IFRS 9 accounting standard, implemented in most of the world outside the U.S., requires banks to set aside loan loss allowances against all future expected losses for loans to borrowers who are categorized in high-risk groups. For borrowers in the low-risk group, the standard only requires banks to set aside allowances for 12 months of expected losses. Continue reading “UK, EU Move to Ease Impact of Accounting Rules for Borrowers Affected by COVID-19”

UK Introduces Covid Corporate Financing Facility

March 20, 2020
On March 17, the UK government announced the creation of the Covid Corporate Financing Facility (CCFF) to purchase commercial paper from issuers that “make a material contribution to the UK economy.” Eligible issuers will broadly include all UK-incorporated companies, including those with foreign parents. The program will not purchase commercial paper issued by banks or their affiliates, or by leveraged investment vehicles. Continue reading “UK Introduces Covid Corporate Financing Facility”

Loan Guarantee Programs May Include Nonbanks

March 20, 2020
Loan guarantee programs that involve nonbank lenders may be more effective than bank-only programs at getting credit quickly to small businesses that need it during the coronavirus crisis. Small and medium-sized enterprises (SMEs) play a major role in the world economy, representing roughly 90% of businesses and 50% of employment worldwide. Many countries operate credit guarantee programs to encourage lending to SMEs. These programs are typically limited to bank loans. For example, the UK launched a Coronavirus Business Interruption Loan Scheme this week, taking advantage of existing programs, but the program is limited to forty previously accredited bank lenders.  Continue reading “Loan Guarantee Programs May Include Nonbanks”