In such challenging times, banks have a fundamentally important role to play. This begins with central banks and then ripples out through economies via the banks themselves as they provide funding liquidity to support businesses and individuals.
Globally and locally, central bank actions have taken decisive and significant measures to mitigate the impact of these challenging times. The Federal Reserve (Fed) in the US has slashed interest rates by a full percentage point to effectively zero and launched a US$700bn package of quantitative easing (QE). The European Central Bank (ECB) cut rates and extended its QE program in September, however didn’t follow the FED and Bank of England with further cuts as of March 12th. They have announced measures to support bank lending and expanded its asset purchase program by 120 billion euros (US$135.28 billion). There has also been a deal between six major central banks including the Fed and the ECB to lower their rates on currency swaps to help financial markets function normally.
These measures set the context in which banks can better support their customers. It won’t be an easy ride ahead. Many businesses are likely to face severe difficulties in the coming weeks and months, and life will get tougher for the banks too. But the right steps are being taken by regulators and banks to bolster the system and help stabilize the situation.
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The COVID-19 pandemic crisis has dramatically gathered pace in recent weeks, with fresh developments almost by the hour. Many countries have declared national emergencies and are fighting to contain the virus’ spread.