ZURICH (hooly-news.com) – The Swiss National Bank (SNB) and the Federal Council on Wednesday announced new financial aid to the economy in general and to banks in particular in an attempt to limit the impact of the coronavirus epidemic.
The federal authority of the financial sector for its part suggested to banks and insurers to stop the payment of dividends and share buybacks to favor credit.
Switzerland, which has nearly 100 deaths from the coronavirus and where the number of confirmed cases of infection approaches 10,000, has closed its borders with all its neighbors except Liechtenstein.
“Our society and the Swiss economy are facing enormous difficulties,” said SNB President Thomas Jordan at a press conference. “To fight this crisis, it is essential that businesses have access to credit and that the banking system has access to liquidity.”
The Federal Council (the Swiss government) has launched an emergency plan of 20 billion francs (18.8 billion euros) which will, among other things, enable companies to take out interest-free loans guaranteed by the State up to 500,000 francs, as well as bridging loans likely to reach 10% of turnover.
The SNB will launch a new unlimited financing facility for banks on Thursday to support credit and prevent a drying up of liquidity.
“The consequences of the coronavirus pandemic will weigh heavily on the Swiss economy,” she said in a statement. “For the economy to overcome this crisis, it is essential that businesses have access to credit and that the banking system has sufficient liquidity.”
The central bank also proposed to FINMA, the supervisory authority for the financial sector in the confederation, to reduce to zero the countercyclical capital buffer imposed on banks in order to free up capital to increase their credit activity. A request immediately accepted by the supervisory authority.
FINMA welcomed the decision of all the country’s banks and insurance companies to suspend their share buyback programs.
“FINMA further recommends that the boards of directors of financial institutions carefully assess the amount of dividends to be distributed in the current environment,” she added.
“Maintaining its capital strength is not a sign of weakness,” she added.
“This is not a ban, this is an appeal,” said Mark Branson, the managing director of FINMA. “We are asking boards of directors to decide who needs the money the most: Swiss clients or international and institutional investors.”
(Marc Angrand, edited by Jean-Michel Bélot)