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Regulators rush to prop up economies and businesses

Across the world, central banks and regulators have been activating emergency plans, designed to support economies, banks and corporates as the wide-ranging and devastating impact of the COVID-19 crisis are felt across all walks of life. Here are some of the headline announcements from around the globe we have seen this month:


The European Central Bank (ECB) has launched 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.

The new Pandemic Emergency Purchase Programme (PEPP) will have an overall envelope of €750bn. Purchases will be conducted until the end of 2020 and will include all the asset categories eligible under the existing asset purchase programme (APP).

For the purchases of public sector securities, the benchmark allocation across jurisdictions will continue to be the capital key of the national central banks. At the same time, purchases under the new PEPP will be conducted in a flexible manner. This allows for fluctuations in the distribution of purchase flows over time, across asset classes and among jurisdictions.

A waiver of the eligibility requirements for securities issued by the Greek government will be granted for purchases under PEPP.

The Governing Council will terminate net asset purchases under PEPP once it judges that the coronavirus COVID-19 crisis phase is over, but in any case not before the end of the year.

The ECB also committed to 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.

It is also looking to ease the collateral standards by adjusting the main risk parameters of the collateral framework. In particular, the ECB will expand the scope of Additional Credit Claims (ACC) to include claims related to the financing of the corporate sector. This is designed to ensure that counterparties can continue to make full use of the Eurosystem’s refinancing operations.

Elsewhere, the European Securities ands Markets Authority (ESMA) issued a public statement on the implications of the COVID-19 pandemic on the deadlines for publishing financial reports which apply to listed issuers under the Transparency Directive.

The statement acknowledged the difficulties encountered by issuers in preparing financial reports and the challenges faced by auditors in carrying out timely audits of accounts due to the COVID-19 pandemic, which may impair the ability of issuers to publish within the legislative deadlines.

On that basis, the statement recommended National Competent Authorities (NCAs) to apply forbearance powers towards issuers who need to delay publication of financial reports beyond the statutory deadline. At the same time, it underlined that issuers should keep their investors informed of the expected publication delay and that requirements under the Market Abuse Regulation still apply. ESMA, together with NCAs, will continue to monitor the situation and re-assess the need to extend the forbearance period.

In the UK, a joint letter to UK banks from HM Treasury, the Bank of England and the FCA highlighted the national measures being taken to get a handle on the financial crisis springing from the pandemic. For large firms of investment grade or equivalent, the COVID Corporate Financing Facility (CCFF) will provide additional help to address COVID-19 related disruption to cash flows. For small and medium-sized businesses (SMEs), the Coronavirus Business Interruption Loan Scheme (CBILS) will provide government-backed finance of up to £5m and the new Term Funding Scheme with additional incentives for SMEs, will help banks to continue to provide credit to businesses and households who need finance to bridge across this period of economic disruption. The government has also taken steps to support jobs and income through the Coronavirus Jobs Retention Scheme, deferral of VAT payments and the scaling up of HMRC’s Time to Pay helpline.

A number of decisions taken by the regulators are designed to ensure the UK financial system has the capacity to ensure the uninterrupted supply of credit to the firms and households that need it. These include the reduction of the countercyclical capital buffer to 0%, supervisory guidance reminding firms to make use of their capital and liquidity buffers as necessary, the Bank of England’s statement on provisioning under relevant accounting standards, and the decision to cancel the 2020 stress test and to amend the timetable for the biennial exploratory scenario. The Bank of England and the FCA have also identified a number of other prudential and conduct measures that will be adapted or delayed in order to alleviate operational burdens on firms. For example, the FCA has related the financial reporting deadline for listed companies, giving them 6 months to publish audited annual reports from the end of the financial year. We had previously reported how the FCA had requested a delay to the forthcoming announcement of preliminary financial accounts.


In the US, the Federal Reserve board approved a Commercial Paper Funding Facility (CPFF) to sure up the flow of credit to the companies that need it. In response, the Association for Financial Professionals (AFP) urged that this should be expanded to include Tier 2 commercial paper.

Elsewhere, the Securities and Exchange Commission (SEC) announced that it is extending the filing periods covered by its previously enacted conditional reporting relief for certain public company filing obligations under the federal securities laws, and that it is also extending regulatory relief previously provided to funds and investment advisers whose operations may be affected by COVID-19.  In addition, the SEC’s Division of Corporation Finance issued today its current views regarding disclosure considerations and other securities law matters related to COVID-19.

“Health and safety continue to be our first priority,” said SEC chairman Jay Clayton. “These actions provide temporary, targeted relief to issuers, investment funds and investment advisers affected by COVID-19. At the same time, we encourage public companies to provide current and forward-looking information to their investors and, in these uncertain times, companies are reminded that they can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for forward-looking statements.”

Public company relief

To address potential compliance issues, the Commission issued an order that, subject to certain conditions, provides public companies with a 45-day extension to file certain disclosure reports that would otherwise have been due between March 1 and July 1, 2020. That order superseded and extended the Commission’s original order of March 4. Among other conditions, companies must continue to convey through a current report a summary of why the relief is needed in their particular circumstances for each periodic report that is delayed. The Commission may provide extensions to the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant. 

Investment fund and adviser relief

The Commission also issued orders that would provide certain investment funds and investment advisers with additional time with respect to holding in-person board meetings and meeting certain filing and delivery requirements, as applicable. Among other conditions, entities must notify the Division staff and/or investors, as applicable, of the intent to rely on the relief, but generally no longer need to describe why they are relying on the order or estimate a date by which the required action will occur. The time periods for relief are described in the Orders. The Commission says it may provide extensions to the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant. 

Public company disclosure guidance

The US Division of Corporation Finance issued Disclosure Guidance Topic No. 9, providing the staff’s current views regarding disclosure and other securities law obligations that companies should consider with respect to COVID-19 and related business and market disruptions. The Division has been monitoring how companies are reporting the effects and risks of COVID-19 on their businesses, financial condition, and results of operations and is providing the guidance as companies prepare disclosure documents during this uncertain time.

The guidance encourages timely reporting while recognising that it may be difficult to assess or predict with precision the broad effects of COVID-19 on industries or individual companies. 

The SEC divisions and offices that oversee companies, accountants, investment advisers, mutual funds, brokerage firms, transfer agents, and other regulated entities and financial professionals will continue to closely track developments, and, if appropriate, consider additional relief from other regulatory requirements for those affected by the Coronavirus.

Temporary regulatory relief and assistance to market participants

The SEC also announced that it is providing additional temporary regulatory relief to market participants. The actions announced involve (1) parties needing to gain access to make filings on the EDGAR system, (2) certain company filing obligations under Regulation A and Regulation Crowdfunding, and (3) a filing requirement for municipal advisors.


Maintaining USD liquidity has been a theme in Asia. The Monetary Authority of Singapore (MAS) announced that it will provide up to US$60bn of funding to banks in Singapore through a new MAS USD Facility. This facility is designed to support more stable USD funding conditions in Singapore, and facilitate USD lending to businesses in Singapore and the region. It will also contribute to global efforts by central banks to maintain stability and normal functioning of financial markets.

MAS said it will obtain USD, in exchange for SGD, through a US$60bn swap facility with the US Federal Reserve (Federal Reserve), which was announced on 19 March 2020. MAS will lend the USD obtained from the Federal Reserve, to banks in Singapore through the new MAS USD Facility, allocated through auctions. 

The first auction was conducted on 27 March 2020, where US$10bn in 7-day funds was offered. This was designed to cater to increased end-of-quarter demand for USD during this period. MAS then conducted another two auctions on 30 March 2020, where US$12bn in 7-day funds and US$8bn in 84-day funds were offered. After this, regular weekly auctions will be conducted every Monday. D

MAS said it will continue to maintain a high level of SGD and USD liquidity in the banking system through its daily money market operations. The MAS USD Facility complements and reinforces what MAS has been doing to ensure that funding to banks in Singapore remains ample so that they can play their role in providing credit to businesses and individuals. Banks in Singapore are strongly encouraged by the MAS to avail themselves of the liquidity facilities provided so that they can better meet the USD funding needs of their customers in Singapore and the region.

Elsewhere in Asia, the Bank of Japan took part in coordinated central bank action, also to enhance the provision of USD liquidity. Joining the Bank of Japan were the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank. The collective participated in 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 US dollar liquidity swap arrangements by 25 basis points, so that the new rate will be the US 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 US dollar liquidity operations have also agreed to begin offering US dollars weekly in each jurisdiction with an 84-day maturity, in addition to the 1-week maturity operations currently offered. The new pricing and maturity offerings will remain in place as long as appropriate to support the smooth functioning of US dollar funding markets.

The swap lines are available standing facilities and serve as a 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.

The Bank of Japan also confirmed the eligible standards for criteria for current account transactions. The Bank set that financial institutions that are subject to the capital buffer and liquidity coverage ratio (LCR) requirements under applicable laws and regulations should satisfy these requirements under the rules and criteria for the Bank’s operations. These include the criteria for eligibility to hold current accounts at the Bank and to have access to its lending facilities, the criteria for selecting counterparties for the Bank’s market operations, and the conditions for eligible counterparties for the Complementary Lending Facility.

Even if a financial institution does not satisfy the requirements prescribed in the laws and regulations, in cases where the Bank judges that there is a high probability that the institution will steadily improve toward meeting these requirements, the institution remains eligible for the operations. The Bank is confirming this application of eligible standards in view of the need for financial institutions to provide support for firms’ funding conditions due to the growing impact of COVID-19 on the economy.


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