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COVID-19 Market Updates: Monetary policy
In addition to the monetary policy responses from the jurisdictions below, the IMF has also published a Policy Tracker summarising key economic responses of governments worldwide. The key economic responses are categorised under fiscal, monetary and macro-financial, and exchange rate and balance of payments.

Jurisdictions (more to be added):

International

24 March 2020: IMF publishes policy tracker summarising key economic responses of governments

The IMF has published a policy tracker that summarizes the key economic responses governments are taking to limit the human and economic impact of the COVID-19 pandemic as of 24 March 2020. The tracker includes G-20 economies and the European Union/Euro Area. More countries will be added soon.

19 March 2020: Federal Reserve announces the establishment of temporary U.S. dollar liquidity arrangements with other central banks

The Federal Reserve on Thursday announced the establishment of temporary U.S. dollar liquidity arrangements (swap lines) with the Reserve Bank of Australia, the Banco Central do Brasil, the Danmarks Nationalbank (Denmark), the Bank of Korea, the Banco de Mexico, the Norges Bank (Norway), the Reserve Bank of New Zealand, the Monetary Authority of Singapore, and the Sveriges Riksbank (Sweden). These facilities, like those already established between the Federal Reserve and other central banks, are designed to help lessen strains in global U.S. dollar funding markets, thereby mitigating the effects of these strains on the supply of credit to households and businesses, both domestically and abroad.

These new facilities will support the provision of U.S. dollar liquidity in amounts up to $60 billion each for the Reserve Bank of Australia, the Banco Central do Brasil, the Bank of Korea, the Banco de Mexico, the Monetary Authority of Singapore, and the Sveriges Riksbank and $30 billion each for the Danmarks Nationalbank, the Norges Bank, and the Reserve Bank of New Zealand. These U.S. dollar liquidity arrangements will be in place for at least six months.

15 March 2020: Coordinated Central Bank Action to Enhance the Provision of U.S. Dollar Liquidity

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.

These central banks have agreed to lower the pricing on the standing U.S. dollar liquidity swap arrangements by 25 basis points, so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 25 basis points. To increase the swap lines' effectiveness in providing term liquidity, the foreign central banks with regular U.S. dollar liquidity operations have also agreed to begin offering U.S. dollars weekly in each jurisdiction with an 84-day maturity, in addition to the 1-week maturity operations currently offered. These changes will take effect with the next scheduled operations during the week of March 16.1 The new pricing and maturity offerings will remain in place as long as appropriate to support the smooth functioning of U.S. dollar funding markets.

The swap lines are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses, both domestically and abroad.


Eurozone:

Key policy rates: Deposit facility -0.50%; Main refinancing operations 0.00%; Marginal lending facility 0.25% (last revised on 18 September 2019)

7 April 2020: ECB announces package of temporary collateral easing measures

The Governing Council of the European Central Bank (ECB) adopted a package of temporary collateral easing measures to facilitate the availability of eligible collateral for Eurosystem counterparties to participate in liquidity providing operations, such as the targeted longer-term refinancing operations (TLTRO-III). The package is complementary to other measures recently announced by the ECB, including additional longer-term refinancing operations (LTROs) and the Pandemic Emergency Purchase Programme (PEPP) as a response to the coronavirus emergency.

Full press release

2 April 2020: ECB extends review of its monetary policy strategy until mid-2021


Full press release

30 March 2020: ECB addresses questions on CSPP and non-financial commercial paper

In the format of a FAQs page the ECB explains how the Eurosystem will operational commercial paper, following the Governing Council decision of 18 March 2020 to extend CSPP eligibility to non-financial commercial paper. The ECB may periodically update these FAQs and, therefore, please check the website for new FAQs or revisions to a previously issued FAQ.

26 March 2020: ECB addresses questions on the Pandemic emergency purchase programme (PEPP)

In the format of a FAQs page the ECB explains the Pandemic emergency purchase programme (PEPP), including key differences between the PEPP and the asset purchase programme (APP), PEPP rating requirements, bond maturities and target volumes, among other characteristics. The ECB may periodically update these FAQs and, therefore, please check the website for new FAQs or revisions to a previously issued FAQ.

25 March 2020: ECB publishes Decision (EU) 2020/440 of the European Central Bank of 24 March 2020 on a temporary pandemic emergency purchase programme (ECB/2020/17)

Taking into account the exceptional economic and financial circumstances associated with the spread of coronavirus disease 2019 (COVID-19), on 18 March 2020, the Governing Council decided to launch a new temporary pandemic emergency purchase programme ('PEPP') including all the asset categories eligible under the APP. Purchases under the PEPP will be separate from, and in addition to, purchases carries out under the APP, with an overall additional envelope of EUR 750 billion until the end of 2020. The PEPP is established in response to a specific, extraordinary and acute economic crisis which could jeopardise the objective of price stability and the proper functioning of the monetary policy transmission mechanism. Due to these exceptional, fast evolving and uncertain circumstances, the PEPP requires a high degree of flexibility in its design and implementation compared with the APP and its monetary policy objectives are identical to that of APP.

See decision here


25 March 2020: ECB publishes Decision (EU) 2020/441 of the European Central Bank of 24 March 2020 amending Decision (EU) 2016/948 of the European Central Bank on the implementation of the corporate sector purchase programme (ECB/2020/18)

Taking into account the exceptional economic and financial circumstances associated with the spread of coronavirus disease 2019 (COVID-19), on 18 March 2020, the Governing Council decided to expand the range of eligible assets under the CSPP to non-financial commercial papers, making all commercial papers of sufficient credit quality eligible for purchase under CSPP. Amendments are as follows:
  • If a marketable debt instrument has an initial maturity of 365/366 days or less, the minimum remaining maturity shall be 28 days at the time of its purchase by the relevant Eurosystem central bank.
  • If a marketable debt instrument has an initial maturity of 367 days or more, the minimum remaining maturity shall be 6 months and the maximum remaining maturity shall be 30 years and 364 days at the time of its purchase by the relevant Eurosystem central bank.
See decision here

18 March 2020: ECB announces €750 billion Pandemic Emergency Purchase Programme (PEPP)
 
The Governing Council announced the launch of a new temporary asset purchase programme of private and public sector securities to counter the serious risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the outbreak and escalating diffusion of the coronavirus, COVID-19. This new Pandemic Emergency Purchase Programme (PEPP) will have an overall envelope of €750 billion. Purchases will be conducted until the end of 2020 and will include all the asset categories eligible under the existing asset purchase programme (APP).

Furthermore, it will expand the range of eligible assets under the corporate sector purchase programme (CSPP) to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.

12 March 2020: ECB announces comprehensive package of monetary policy measures in response to COVID-19 risks

At its meeting on 12 March 2020, the ECB’s Governing Council decided on a comprehensive package of monetary policy measures intended to anticipate potential downside risks resulting from the COVID-19 pandemic. These included:
  • A temporary increase in the APP until the end of the year, adding additional net purchases of €120bn. The ECB emphasised a strong contribution from the private sector purchases programmes, suggesting a relative step-up in CSPP purchases.
  • Additional longer-term refinancing operations (LTROs).  These will be carried out through a fixed rate tender procedure with full allotment, with an interest rate that is equal to the average rate on the deposit facility.
  • More favourable terms applied to all outstanding targeted longer-term refinancing operations (TLTROs) for the period of June 2020 to June 2021, intended to provide additional support through bank-lending to SMEs.
Furthermore, the ECB announced that banks will be allowed partially to use some of their non-Tier 1 capital buffers, as well as their liquidity coverage ratio, to provide capital relief for the banking sector intended to support lending to the real economy.

The ECB decided to leave rates unchanged.


US:

Key policy rates: Excess reserves rate 0.10%; Federal funds rate 0.00% -0.25%; Discount rate 0.25% (last revised on 15 March 2020)

9 April 2020: Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy

The Federal Reserve has taken additional actions to provide up to $2.3 trillion in loans to support the economy. The additional actions will increase flow of credit to households and businesses through capital markets, by expanding the size and scope of the Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) as well as the Term Asset-Backed Securities Loan Facility (TALF), among other measures.

6 April 2020: New York Fed Opens Registration Process for Commercial Paper Funding Facility (CPFF)

The Federal Reserve Bank of New York opened the registration process for the Commercial Paper Funding Facility (CPFF). The CPFF will begin funding purchases of commercial paper on April 14, 2020.

6 April 2020: The Federal Reserve addresses questions about the Commercial Paper Funding Facility (updated from 25 March 2020)

In the format of a FAQs page the Federal Reserve explains the rationale for establishing the CPFF as well as its functionality. The Federal Reserve may periodically update these FAQs and, therefore, please check the website for new FAQs or revisions to a previously issued FAQ.

31 March 2020: Federal Reserve announces establishment of a temporary FIMA Repo Facility to help support the smooth functioning of financial markets

The Federal Reserve announced the establishment of a temporary repurchase agreement facility for foreign and international monetary authorities (FIMA Repo Facility) to help support the smooth functioning of financial markets, including the U.S. Treasury market, and thus maintain the supply of credit to U.S. households and businesses. The FIMA Repo Facility will allow FIMA account holders, which consist of central banks and other international monetary authorities with accounts at the Federal Reserve Bank of New York, to enter into repurchase agreements with the Federal Reserve. In these transactions, FIMA account holders temporarily exchange their U.S. Treasury securities held with the Federal Reserve for U.S. dollars, which can then be made available to institutions in their jurisdictions. The FIMA Repo Facility will be available beginning April 6 and will continue for at least 6 months.

25 March 2020: The Senate unanimously passed the Coronavirus Aid, relief, and Economic Security Act ('CARES Act')
 
The Senate has passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which sets out a USD 2 trillion stimulus package including USD 500 billion in corporate liquidity from the Federal Reserve.

23 March 2020: Fed announces commitment to unlimited purchases of US Treasuries and agency MBS

The Federal Reserve commits to use its full range of tools to support the U.S. economy in this challenging time and thereby promote its maximum employment and price stability goals.

The Federal Open Market Committee is taking further actions to support the flow of credit to households and businesses by addressing strains in the markets for Treasury securities and agency mortgage-backed securities. The Federal Reserve will continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions. The Committee will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases.

In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will continue to closely monitor market conditions, and will assess the appropriate pace of its securities purchases at future meetings.

23 March 2020: Fed announces extensive new measures to support the economy

In addition to the commitment to unlimited purchases of US Treasuries and agency MBS, the Fed also announces a package of additional measures. These inlcude:

Supporting the flow of credit to employers, consumers, and businesses by establishing new programs that, taken together, will provide up to $300 billion in new financing. The Department of the Treasury, using the Exchange Stabilization Fund (ESF), will provide $30 billion in equity to these facilities.
  • Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
  • Establishment of a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
  • Facilitating the flow of credit to municipalities by expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes (VRDNs) and bank certificates of deposit.
  • Facilitating the flow of credit to municipalities by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities. In addition, the pricing of the facility has been reduced.
18 March 2020: Fed announces establishment of a Money Market Mutual Fund Liquidity Facility (MMLF)

The Federal Reserve Board broadened its program of support for the flow of credit to households and businesses by taking steps to enhance the liquidity and functioning of crucial money markets. Through the establishment of a Money Market Mutual Fund Liquidity Facility, or MMLF, the Federal Reserve Bank of Boston will make loans available to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.

17 March 2020: Fed announces establishment of a Primary Dealer Credit Facility (PDCF)

The Federal Reserve Board announced that it will establish a Primary Dealer Credit Facility, or PDCF, to support the credit needs of American households and businesses. The facility will allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households.

The PDCF will offer overnight and term funding with maturities up to 90 days and will be available on 20 March 2020. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment grade debt securities, including commercial paper and municipal bonds, and a broad range of equity securities. The interest rate charged will be the primary credit rate, or discount rate, at the Federal Reserve Bank of New York. More detailed terms and conditions and an operational calendar will be subsequently released.

17 March 2020: Fed announces establishment of a Commercial Paper Funding Facility (CPFF)

The Federal Reserve Board announced that it will establish a Commercial Paper Funding Facility (CPFF) to support the flow of credit to households and businesses. The CPFF will provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper rated A1/P1 (as of March 17, 2020) directly from eligible companies.

Please note that on 6 April 2020, the Federal Reserve published an extended revision of its FAQs page about the Commercial Paper Funding Facility.

15 March 2020: Fed announces actions to support the flow of credit to households and businesses

As well as cutting the primary credit rate for its discount window 150 basis points to 0.25% and a 100 basis point reduction in its target rate for federal funds to a range of 0% to 0.25%, the Fed encouraged more active use of the discount window, allowing depository institutions to borrow for periods up to 90 days, payable or renewable on a daily basis.

Furthermore, the Fed is encouraging depository institutions to utilize intraday credit extended by Reserve Banks, is encouraging banks to use their capital and liquidity buffers as they lend to households and businesses who are affected by the coronavirus, and has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period.

15 March 2020: FOMC announces $500bn purchases of Treasuries and $200bn of MBS

Effective 16 March 2020, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) to increase over coming months the System Open Market Account (SOMA) holdings of Treasury securities and agency mortgage-backed securities (MBS) by at least $500 billion and at least $200 billion, respectively.  The FOMC instructed the Desk to conduct these purchases at a pace appropriate to support the smooth functioning of markets for Treasury securities and agency MBS. The FOMC also directed the Desk to continue rolling over at auction all principal payments from Treasury securities holdings and to reinvest all principal payments from agency debt and agency MBS holdings in agency MBS.

12 March 2020: NY Fed launches $500bn one-month and three-month repo operations

The Federal Reserve Bank of New York announced that its Open Market Trading Desk (the Desk) will offer $500 billion in a three-month repo operation settling on March 13, 2020. On March 13, the Desk will further offer $500 billion in a three-month repo operation and $500 billion in a one-month repo operation for same day settlement. Three-month and one-month repo operations for $500 billion will be offered on a weekly basis for the remainder of the monthly schedule. The Desk will continue to offer at least $175 billion in daily overnight repo operations and at least $45 billion in two-week term repo operations twice per week over this period.


UK:

Key policy rates: Bank rate 0.10% (last revised on 19 March 2020)

6 April 2020: Bank of England’s Term Funding Scheme to open 15 April 2020

The Bank of England announced the TFSME will open for drawings on 15 April 2020, sooner than previously anticipated. The TFSME allows eligible banks and building societies to access four-year funding at rates very close to Bank Rate.

Full press release

2 April 2020: Bank of England publishes Market Notice on Asset Purchase Facility (APF): Additional Corporate Bond Purchases

At its special meeting on 19 March 2020 the MPC judged that a further package of measures was warranted to meet its statutory objectives. In line with the MPC’s statement, the Bank intends to purchase at least £10 billion of eligible sterling non-financial corporate bonds in coming months, taking the stock of purchased corporate bonds to at least £20 billion. The Bank will keep the size of the Scheme and purchase pace under review in light of prevailing market conditions, market function and any future MPC decisions.

30 March 2020: Bank of England announces continuation of CTRF

The Bank of England announced that it will continue to offer the Contingent Term Repo Facility (CTRF) on a weekly basis through April 2020. 3-month term CTRF operations will continue to run weekly until 30 April. In addition, beginning this week there will also be a 1-month term CTRF operation each week, with the final operation scheduled on 1 May.

27 March 2020 (update from 20 March 2020): Bank of England addresses questions about the Covid Corporate Financing Facility (CCFF)

In the format of a FAQs page the Bank of England has provided further information for those seeking to participate in the CCFF scheme.
 
The Bank will accept CP with standard features that is issued using ICMA market standard documentation. ICMA is making generally available to non-ICMA members the Euro Commercial Paper materials from the ICMA Primary Market Handbook previously available only to ICMA members. This is available from ICMA’s website.  

To support companies seeking to set up CP programmes quickly, the Bank will accept simplified versions of the commercial paper documentation, based on the ICMA standard, which are available on the Bank’s FAQ page (for ease of review, these are provided in clean and blackline to the ICMA recommended templates where appropriate).
 
The Bank may periodically update these FAQs and, therefore, please check the website for new FAQs or revisions to a previously issued FAQ.

24 March 2020: Bank of England launches Contingent Term Repo Facility (CTRF) and publishes CTRF Activation Market Notice

In response to financial market conditions the Bank of England has activated the Contingent Term Repo Facility (CTRF) - a temporary enhancement to its sterling liquidity insurance facilities. The CTRF is a flexible liquidity insurance tool that allows participants to borrow central bank reserves (cash) in exchange for other, less liquid assets (collateral).

The Bank’s liquidity insurance facilities support financial market functioning by providing market participants with predictable and reliable sources of liquidity as well as supporting financial stability by reducing the cost of disruption to critical financial services.  

CTRF operations will run on 26 March 2020 and 2 April 2020, in addition to the Bank’s regular liquidity insurance facilities including the Indexed Long-Term Repo (ILTR) and Discount Window Facility (DWF).

The size of the CTRF operations will be unlimited, and the price will be a fixed rate of Bank Rate plus 15bps with a term of 3 months.

19 March 2020: MPC announces further rate cut and additional purchases of UK government and non-financial corporate bonds

At a special meeting on 19 March, the MPC judged that a further package of measures was warranted to meet its statutory objectives. It therefore voted unanimously to increase the Bank of England’s holdings of UK government bonds and sterling non-financial investment-grade corporate bonds by £200 billion to a total of £645 billion, financed by the issuance of central bank reserves.

The majority of additional asset purchases will comprise UK government bonds. The purchases will be completed as soon as is operationally possible, consistent with improved market functioning. The Bank will issue further guidance to the market in due course.

The MPC also voted unanimously to reduce the Bank Rate by 15 basis points to 0.10%.   

The Committee further voted unanimously that the Bank of England should enlarge the TFSME scheme, financed by the issuance of central bank reserves.

17 March 2020: HM Treasury and the Bank of England launch a Covid Corporate Financing Facility (CCFF)

The CCFF will provide funding to businesses by purchasing commercial paper of up to one-year maturity, issued by firms making a material contribution to the UK economy. It will help businesses across a range of sectors to pay wages and suppliers, even while experiencing severe disruption to cashflows.

The facility will offer financing on terms comparable to those prevailing in markets in the period before the COVID-19 economic shock, and will be open to firms that can demonstrate they were in sound financial health prior to the shock.  The facility will look through temporary impacts on firms’ balance sheets and cash flows by basing eligibility on firms’ credit ratings prior to the COVID-19 shock. Businesses do not need to have previously issued commercial paper in order to participate.

The scheme will operate for at least 12 months and for as long as steps are needed to relieve cash flow pressures on firms that make a material contribution to the UK economy. The Bank will publish further details of the operation of the CCFF in a Market Notice on Wednesday 18 March. The Bank will implement the facility on behalf of the Treasury and will put it into place as soon as possible.

By providing an alternative source of finance for a wide range of companies, the scheme will help to preserve the capacity of the banking system to lend to other companies, including small and medium-sized enterprises, which rely on banks.

11 March 2020: FPC releases the UK Countercyclical Capital Buffer

To support further the ability of banks to supply the credit needed to bridge a potentially challenging period, the Financial Policy Committee (FPC) has reduced the UK countercyclical capital buffer rate to 0% of banks’ exposures to UK borrowers with immediate effect. The rate had been 1% and had been due to reach 2% by December 2020.

The FPC expects to maintain the 0% rate for at least 12 months, so that any subsequent increase would not take effect until March 2022 at the earlies

The release of the countercyclical capital buffer will support up to £190 billion of bank lending to businesses. That is equivalent to 13 times banks’ net lending to businesses in 2019.

In addition, the Prudential Regulation Authority (PRA) has today set out its supervisory expectation that banks should not increase dividends or other distributions, such as bonuses, in response to these policy actions.

11 March 2020: MPC reduces Bank Rate and launches new Term Funding Scheme with additional incentives for SMEs

At its special meeting ending on 10 March 2020, the Monetary Policy Committee (MPC) voted unanimously to reduce Bank Rate by 50 basis points to 0.25%.  The MPC voted unanimously for the Bank of England to introduce a new Term Funding scheme with additional incentives for Small and Medium-sized Enterprises (TFSME), financed by the issuance of central bank reserves. The MPC voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion


Switzerland:

Key policy rates: SNB policy rate –0.75% (from 13 June 2019) SARON –0.715% (from 18 March 2020) interest rates on sight deposits –0.75% (valid from 22 January 2015)

25 March 2020: Swiss National Bank introduces new COVID-19 refinancing facility (CRF)

The Swiss National Bank (SNB) has introduced the new SNB COVID-19 refinancing facility (CRF). This measure is aimed at strengthening the supply of credit to the Swiss economy by providing the banking system with additional liquidity. There is no upper limit on the amounts available under the CRF, and drawdowns can be made at any time. The CRF operates in conjunction with the federal government’s guarantees for corporate loans. The facility allows banks to obtain liquidity from the SNB, which is secured by the federally guaranteed loans. The SNB thereby enables banks to expand their lending rapidly and on a large scale and, at the same time, to access the required liquidity. The interest rate for these refinancing transactions corresponds to the SNB policy rate. Under the CRF, the SNB can also conduct additional refinancing transactions in order to supply the banking system with further liquidity if required. The SNB has also submitted a proposal to the Federal Council requesting that the countercyclical capital buffer be reduced to 0% with immediate effect.

19 March 2020: SNB Monetary policy assessment Press Release

SNB maintains expansionary monetary policy, raises negative interest exemption threshold, and is examining additional steps

According to the SNB, it believes its expansionary monetary policy is more necessary than ever for ensuring appropriate monetary conditions in Switzerland. It is keeping the SNB policy rate and interest on sight deposits at the SNB at −0.75%. The SNB is intervening more strongly in the foreign exchange market to contribute to the stabilisation of the situation. In so doing, it takes the overall exchange rate situation into account. Negative interest and interventions are necessary to reduce the attractiveness of Swiss franc investments and thus counteract the upward pressure on the currency.  

The SNB will also provide liquidity as part of the extended swap arrangements with other central banks, particularly in US dollars.

Finally the SNB is examining whether a relaxation of the countercyclical capital buffer would be possible despite the risks to the mortgage and real estate markets.


China

3 April 2020: Open market operation rate: 2.20% for 7-day

From 3 February 2020 to 31 March 2020, the People's Bank of China has conducted a total of more than 3.1 trillion yuan open market operations with reverse repo and its medium term lending facility to ensure sufficient liquidity supply.
 
25 March 2020: People’s Bank of China central bank bills swap
In order to improve the liquidity of FI perpetual bond market and support banks in issuing perpetual bonds to replenish capital and lend to the real economy, PBOC conducted a RMB 5 billion Central Bank Bills Swap. The tenor was 3 months and rate 0.10%. A similar operation was conducted on 28 February 2020.
 
13 March 2020: People’s Bank of China to implement targeted reserve requirement ratio (RRR) cuts for eligible banks

The measures, effective 16 March, are intended to release RMB 550 billion of long-term funds. Banks that meet certain criteria will be entitled to 50 to 100 basis points of RRR cuts. In addition, eligible joint-stock commercial banks will be given an additional targeted RRR cut of 100 basis points to support lending.

7 February 2020: PBOC conducted a RMB 1.7 trillion open market operation with reverse repo to ensure sufficient liquidity supply

Since early February, China regulators have introduced dozens of other interim measures in response to the effects of the coronavirus, those most relevant to the capital markets are:
  • NAFMII, Shanghai Stock Exchange, Shenzhen Stock Exchange have generally streamlined onshore bond approvals by facilitating online and remote applications. In Hubei province, corporate bond issuers have been allowed fast-track approvals.
  • CSRC (securities regulator) will allow more flexibility and potential extensions of deadlines for disclosure of listed companies; and in some cases reduce listing fees.

 Hong Kong

Key policy rates: Base Rate 0.86% (from 16 March 2019)

3 April 2020: HKMA letter to Authorised Institutions regarding liquidity measures in response to Covid-19 outbreak

HKMA sent a letter to Authorised Institutions outlining its liquidity measure response to COVID-19. To ensure the continued smooth operation of the interbank market and the banking system, HKMA has taken or plans to assist the industry in managing liquidity through its Liquidity Facilities Framework, the Federal Reserve’s Temporary FIMA Repo Facility, and supervisory expectation on the use of liquidity buffers under the liquidity coverage ratio (“LCR”) and liquidity maintenance ratio (“LMR”) regimes.

See full letter

16 March 2020: HKMA Announces Countercyclical Capital Buffer for Hong Kong

The Monetary Authority announced that the countercyclical capital buffer (CCyB) for Hong Kong is reduced from 2.0% to 1.0% with immediate effect.

Economic indicators and other relevant evidence have signaled that the economic environment in Hong Kong has deteriorated further since the novel coronavirus outbreak. The HKMA has been taking actions, including the establishment of the Banking Sector SME Lending Coordination Mechanism, to encourage the banking sector to continue supporting the financing need of SMEs in Hong Kong.  

Lowering the countercyclical capital buffer at this juncture will allow banks to be more supportive to the domestic economy, in particular those sectors and individuals that are expected to experience additional short-term stress due to the impact arising from the outbreak.


Japan

24 March 2020: Bank of Japan announces additional measures to maintain stability of the repo market

In addition to the market operations announcement 13 March 2020, the BoJ released a statement on further measures implemented to maintain stability of the repo market. These include an extension of the implementation period for increasing the number of Japanese government securities (JGS) issues offered in the Securities Lending Facility (SLF) and a relaxation of the upper limit on the number of JGS issues allowed for the submission of bids for the SLF.

16 March 2020: Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19)
 
The Bank of Japan judged appropriate to enhance monetary easing through (1) the further ample supply of funds by conducting various operations including purchases of Japanese government bonds (JGBs) and the U.S. dollar funds-supplying operations, (2) measures to facilitate corporate financing including the introduction of a new operation, and (3) active purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs). The Bank will take these measures with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets, thereby preventing firms' and households' sentiment from deteriorating.
 
The measures to facilitate corporate financing include  
  • The Introduction of the Special Funds-Supplying Operations to Facilitate Corporate Financing regarding the Novel Coronavirus (COVID-19)
    The Bank decided, by a unanimous vote, to introduce a new operation to provide loans against corporate debt (of about 8 trillion yen as of end-February 2020) as collateral at the interest rate of 0 percent with maturity up to one year. Twice as much as the amount outstanding of the loans will be included in the Macro Add-on Balances in current accounts held by financial institutions at the Bank. This operation will be conducted until the end of September 2020. 
  • Increase in purchases of CP and corporate bonds
    The Bank decided, by a unanimous vote, to increase the upper limit to purchase CP and corporate bonds by 2 trillion yen in total and conduct purchases with the upper limit of their amounts outstanding of about 3.2 trillion yen and about 4.2 trillion yen, respectively.2 The additional purchases will continue until the end of September 2020.
13 March 2020: Bank of Japan announces market operations measures for end of March period

Considering the recent unstable movements in global financial and capital markets, the Bank of Japan announced its plans for the provision of ample liquidity and maintaining stability of the repo market.


Australia

Key policy rates: TFF interest rate 0.25% (as from 19 March 2020)

19 March 2020: Reserve Bank of Australia announces comprehensive package to support the Australian economy

  1. A reduction in the cash rate target to 0.25 per cent.
  2. A target for the yield on 3-year Australian Government bonds of around 0.25 per cent.
  3. A term funding facility for the banking system, with particular support for credit to small and medium-sized businesses.
  4. Exchange settlement balances at the Reserve Bank will be remunerated at 10 basis points, rather than zero as would have been the case under the previous arrangements.
The Reserve Bank will also continue to provide liquidity to Australian financial markets by conducting one-month and three-month repo operations in its daily market operations until further notice. In addition, the Bank will conduct longer-term repo operations of six-month maturity or longer at least weekly, as long as market conditions warrant.


New Zealand

Key policy rates:
Official Cash Rate (OCR) 0.25% (as from 16 March 2020)

2 April 2020:
RBNZ introduces longer-term funding to support business lending

The Reserve Bank is introducing a Term Lending Facility (TLF), a new longer-term funding scheme for the banking system, in support of the Government’s Business Finance Guarantee Scheme to help promote lending to businesses. The TLF is similar to the recently announced, Term Auction Facility (TAF), and both provide liquidity to the banking system. The TLF aims to complement the Government’s Business Finance Guarantee Scheme, announced last week, by ensuring access to funding for banks at low interest rates for up to 3 years duration, which is longer than the Bank’s other liquidity facilities.

23 March 2020
: RBNZ to implement $30bn Large Scale Asset Purchase Programme of NZ Govt Bonds

20 March 2020: Reserve Bank of New Zealand measures to provide additional support to domestic markets

Regular market operations continue to ensure there is ample liquidity in the financial system.

The Term Auction Facility (TAF) is a program that will alleviate pressures in funding markets. The TAF gives banks the ability to access term funding, with collateralised loans available out to a term of 12 months.

The Reserve Bank is providing liquidity in the FX swap market, to ensure this form of funding can be accessed at rates near the Official Cash Rate (OCR).

The Reserve Bank has re-established a temporary USD swap line with the US Federal Reserve. This will support the provision of USD liquidity to the New Zealand market, in an amount up to USD 30 billion. This is a facility that is being offered to many other central banks globally.

The Reserve Bank has been providing liquidity to the New Zealand government bond market to support market functioning.


India

3 April 2020: RBI Notifies Changes in Market Hours to four hours

The RBI revised trading hours for various markets in order to minimise market liquidity and volatility risks and to ensure that market participants maintain adequate checks and supervisory controls while optimising thin resources and ensuring safety of personnel. These arrangements will become effective from April 7, 2020 (Tuesday) and continue up to April 17, 2020 (Friday) [both days inclusive].

Full press release

27 March 2020: The RBI published a statement on developmental and regulatory policies
 
The RBI Statement sets out various developmental and regulatory policies that directly address the stress in financial conditions caused by COVID-19. They consist of:
  1. expanding liquidity in the system sizeably to ensure that financial markets and institutions are able to function normally in the face of COVID-related dislocations;
  2. reinforcing monetary transmission so that bank credit flows on easier terms are sustained to those who have been affected by the pandemic;
  3. easing financial stress caused by COVID-19 disruptions by relaxing repayment pressures and improving access to working capital; and
  4. improving the functioning of markets in view of the high volatility experienced with the onset and spread of the pandemic. The policy initiatives in this section should be read in conjunction with the MPC’s decision on monetary policy actions and stance in its resolution.
20 March 2020: Reserve Bank of India Announces OMO Purchase of Government of India Dated Securities

On a review of the current liquidity and financial conditions, the Reserve Bank has decided to conduct purchase of Government securities under Open Market Operations (OMOs) for an aggregate amount of ₹30,000 crores in two tranches of ₹15,000 crores each in the month of March 2020.


Indonesia

19 March 2020: Bank Indonesia 7-Day Reverse Repo Rate Lowered 25 bps to 4,50%: Maintaining Stability, Mitigating The Risk of COVID-19

The BI Board of Governors agreed on 18 and 19 March 2020 to lower the BI 7-day Reverse Repo Rate by 25 bps to 4,50%, Deposit Facility (DF) rates lowered 25 bps to 3,75% and Lending Facility (LF) rates lowered 25 bps to 5,25%. In addition, BI has adopted several policy measures to mitigate the risk of COVID-19.


Philippines

24 March 2020: BSP cuts RRR by 200 bps to boost domestic liquidity

The 200 bps reduction in the reserve requirement ratio of reservable liabilities of universal and commercial banks will be effective 30 March 2020.

The RR cut is intended to calm the markets and to encourage banks to continue lending to both retail and corporate sectors. This will ensure sufficient domestic liquidity in support of economic activity amidst this global pandemic due to the Coronavirus Disease (COVID-19).

23 March 2020: Monetary Board approves additional PHP 300 billion support to the National Government to fight COVID-19

The Monetary Board authorized the Bangko Sentral ng Pilipinas (BSP) to purchase government securities from the Bureau of Treasury (BTr) under a repurchase agreement in the amount of Php 300 billion.
The fund generated from the said agreement shall be used to support the National Government’s (NG) programs to counter the impact of Coronavirus Disease 2019 (COVID-19).

20 March 2020: Bangko Sentral ng Pilipinas reduction in policy rates

The Monetary Board (MB), in its meeting dated 19 March 2020, decided to reduce the policy rate by 50 basis points and approved the temporary reduction in the term spread on Peso rediscounting loans relative to BSP’s overnight lending rate to zero. As such, the applicable rediscount rate for loans under the Peso Rediscount Facility has been set at 3.75 percent, regardless of loan maturity (i.e., 1- 180 days).

The said Peso rediscount rate shall be effective for a period of 60 days from 20 March 2020 or until 19 May 2020, subject to further extension as may be approved by the MB.


Taiwan

20 March 2020: Taiwan central bank lowers benchmark rate and sets in place accommodation facility for SMEs

The discount rate, the rate on accommodations with collateral, and the rate on accommodations without collateral will, effective 20 March 2020, be reduced by 0.25 percentage points to 1.125%, 1.50%, and 3.375%, respectively.

Under the special accommodation facility, the Bank will, preliminarily, provide banks with additional funds of a total amount of NT$200 billion and at a rate of one percentage point lower than the policy rate on accommodations with collateral, in order to support credit extensions to SMEs.


Malaysia

27 March 2020: Additional Measures to Further Support SMEs and Individuals Affected by the COVID-19 Outbreak

In its efforts to cushion the impact of disruptions caused by COVID-19 outbreak, Bank Negara Malaysia (BNM) announces additional measures including a reduction of interest rate (IRCC) and profit rate (PRCC) stress factor caps applied under the Risk-Based Capital Framework for Insurers and Risk-Based Capital Framework for Takaful Operators (Frameworks), respectively.

25 March 2020: Measures to Assist Individuals, SMEs and Corporates Affected by COVID-19

Bank Negara Malaysia announces a number of regulatory and supervisory measures in support of efforts by banking institutions to assist individuals, small and medium-sized enterprises (SMEs) and corporations to manage the impact of the Covid-19 outbreak, including open market operation outright purchase of government securities, FX swaps, reverse repos and the standing facility.


Republic of Korea

24 March 2020: Financial Services Commission outlines measures to stabilize financial markets

Key measures include financing support for businesses; establishment of a bond market stabilization fund; financing for corporate bond issuance; liquidity measures for the repo and commercial paper markets; and a stock market stabilization fund.


Singapore

30 March 2020: MAS Monetary Policy Statement - April 2020

MAS will adopt a zero percent per annum rate of appreciation of the policy band starting at the prevailing level of the S$NEER. There will be no change to the width of the policy band. This policy decision hence affirms the present level of the S$NEER, as well as the width and zero percent appreciation slope of the policy band going forward, thus providing stability to the trade-weighted exchange rate.


Middle East

16 March 2020: CBK Cuts its Discount Rate by 1% from 2.50% to 1.50%

The Central Bank of Kuwait’s Board of Directors has decided on 16 March 2020 to cut the discount rate 1% (from 2.5% to 1.5%) effective from 17 March 2020. This decision is part of the preventative measures the CBK has taken to contain the negative impact of the COVID-19 outbreak on the global and national economic growth, in addition to the steep decline in oil prices and its impact on Kuwait’s fiscal position, and the 15 March 2020 Federal Reserve decision to cut interest rates by 1%.

This historical low interest rate aims to reduce the cost of borrowing across economic sectors for both individuals and corporations, to foster an atmosphere conducive to sustainable economic growth, and to maintain monetary and financial stability.

16 March 2020: QCB lowers policy rates in line with US Federal Reserve

The Qatar Central Bank (QCB) has lowered its policy rates twice in March in line with the US Federal Reserve (to maintain the currency peg). The deposit rate has been reduced by 100bps to 1 percent; the lending rate has been reduced by 175 bps to 2.5 percent; and repo rate has been reduced by 100 bps to 1.5 percent. The QCB will also provide additional liquidity to banks operating in the country.

16 March 2020: SAMA lowers policy rates 16 March 2020, following previous 3 March 2020 rate cuts.

The Saudi Arabian Monetary Authority (SAMA) has reduced its policy rates twice in March, lowering its reverse repo and repo rates by a combined 1.25 pp to 0.5 and 1 percent respectively. On 14 March, SAMA announced a SAR 50 billion ($13.3 billion, 1.9 percent of GDP) package to support the private sector, particularly SMEs, by providing funding to banks to allow them to defer payments on existing loans and increase lending to businesses. The central bank will also cover fees for private sector stores and entities for point-of-sale and e-commerce transactions for 3 months. The Governor has announced that the central bank stands ready to supply liquidity if needed.

14 March 2020: Central Bank of the UAE announces Targeted Economic Support Scheme

The CBUAE has announced a comprehensive AED 100 billion Targeted Economic Support Scheme (TESS) to contain the repercussions of the pandemic COVID-19 and subsequently published its Standards for the CBUAE's TESS.