FPC reviews actions taken to help UK firms’ cash flow through the coronavirus COVID-19 pandemic

FPC reviews actions taken to help UK firms’ cash flow through the coronavirus COVID-19 pandemic

LNB News 24/03/2020 52

The Bank of England (BoE) has published a summary and report of the Financial Policy Committee’s (FPC) March 2020 meetings, which were dominated by the outbreak and spread of coronavirus COVID-19.

The FPC says that, in concert with the BoE, the Monetary Policy Committee (MPC) and the Prudential Regulation Committee (PRC), it has taken action to respond to the financial stability risks with the aim of ensuring that that the financial system can be a source of strength for the real economy during this challenging period.

At the meeting the FPC reviewed the steps taken to help firms bridge through COVID-19-related cashflow disruptions, including:

• reducing the UK countercyclical capital buffer (CCyB) rate to 0% of banks’ exposures to UK borrowers with immediate effect 

• the BoE’s new term funding scheme (TFSME), announced by the MPC on 11 March 2020, which will increase the availability of funding for banks, and thus lending, especially to small and medium-sized enterprises

• the announcement by HM Treasury and the BoE of a COVID Corporate Financing Facility (CCFF) to provide additional help to firms. By providing an alternative source of financing for companies that make a material contribution to the UK economy, and that had an investment-grade rating (or equivalent) prior to being affected by COVID-19, the CCFF aims to retain the capacity of the banking system to lend to a much broader range of companies

Given the pace at which the situation is evolving, the FPC will continue to monitor closely the credit conditions faced by UK households and businesses, and the operation of the UK financial system, and will take any further actions deemed appropriate to support UK financial stability.

Source: Financial policy summary and record—March 2020

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