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Economics and Strategy

Policy Update

May 1, 2020

Policy Update – Tracking the global policy response to COVID-19 By Taylor Schleich / Jocelyn Paquet

Given the rapid spread of COVID-19 around the globe, central banks and fiscal policymakers have sprung into action. With so many measures announced/implemented in recent days, keeping track of it all can be a challenge. Here we’ve compiled a timeline of policy responses from the governments and central banks of major developed economies. These policies are in most cases designed to provide relief to those affected by the coronavirus and/or ensure sufficient financial market functioning and liquidity. This list will continue to be updated on an ongoing basis as new policies are announced. Given the quickly evolving nature of the virus and the subsequent policy responses, this list may not be exhaustive—though all efforts have been made to make it as such. For fiscal policy, not all measures have been officially ratified in each country’s respective legislation. In most cases, direct links to central bank/government press releases for each action have been provided.

Table of Contents

North American Policy Summary Table ........................................................................................................................................................................................... 2 Canada ........................................................................................................................................................................................................................................................ 3

Monetary Policy .................................................................................................................................................................................................................................... 3 Fiscal Policy ............................................................................................................................................................................................................................................ 5

United States ............................................................................................................................................................................................................................................. 9 Monetary Policy .................................................................................................................................................................................................................................... 9 Fiscal Policy ............................................................................................................................................................................................................................................ 11

Eurozone ..................................................................................................................................................................................................................................................... 13 Monetary Policy ................................................................................................................................................................................................................................... 13 Fiscal Policy ........................................................................................................................................................................................................................................... 13

United Kingdom ....................................................................................................................................................................................................................................... 15 Monetary Policy ................................................................................................................................................................................................................................... 15 Fiscal Policy ........................................................................................................................................................................................................................................... 16

Japan ........................................................................................................................................................................................................................................................... 17 Monetary Policy ................................................................................................................................................................................................................................... 17 Fiscal Policy ........................................................................................................................................................................................................................................... 17

China ............................................................................................................................................................................................................................................................ 18 Monetary Policy ................................................................................................................................................................................................................................... 18 Fiscal Policy ........................................................................................................................................................................................................................................... 18

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Policy Update

North American Policy Summary Table Summary of announced monetary and fiscal policy measures to date for Canada and the US

Country Monetary Policy Fiscal Policy

Canada

Policy rate lowered by 150 bps since early March Easing of OSFI regulations, reporting requirements Expanded bond buybacks (now replaced by large scale asset purchases) Expanded term repo operations with relaxed collateral requirements BoC is now purchasing: CMBs ($500 mln/week, $3.1 bln as of April 30),

provincial money market paper, ($4.1 bln as of April 30), BAs ($47 bln as of April 30), commercial paper ($2.9 bln as of April 22), Government of Canada bonds ($5 bln+/week, $26.1 bln as of April 30)

BoC will begin to purchase provincial bonds (up to $50 bln) and corporate bonds (up to $10 bln) in May

Increased frequency of treasury bill auctions and increased the percentage of each auction purchased by the Bank of Canada

CMHC will purchase up to $150 bln of insured mortgage pools

$145 bln in direct fiscal stimulus for those affected by virus (wage subsidies, grants, benefits, tax credit, loan payment holiday, unemployment, etc.)

$86 bln in lending for businesses $85 bln in tax deferrals for

business/individuals

United States

Policy rate lowered by 150 bps since early March Easing of collateral requirements, encourage credit use via discount

window, reduced reserve requirements Increased/expanded repo operations Uncapped Treasury/MBS purchases, expansion of purchases to include

commercial MBS The Fed introduced a number of funding/purchase facilities: Commercial

Paper Purchase Facility (CPPF), Money Market Mutual Fund Liquidity Facility (MMLF), Primary Dealer Credit Facility (PDCF), Primary and Secondary Market Corporate Credit Facilities (PMCCF, SMCCF), Term Asset-Backed Securities Loan Facility (TALF), Main Street Lending Facility, Repurchase Agreement Facility for Foreign and International Monetary Authorities (FIMA), Paycheck Protection Program Lending Facility (PPPLF)

Expanded and lowered the price on swap lines for USD funding

$8.3 bln for research, medical supplies, etc.

$105 bln in relief package for corporations and individuals via sick leave pay

$ 2.3 tln in cash for individuals and loans to companies and state and local governments (including the $350 bln Paycheck Protection Program)

An additional $484 bln stimulus package (including a $320 bln top-up to the PPP)

Source: NBF, Bank of Canada, Federal Reserve, US/Canada federal governments

Relative magnitude of Canada/US fiscal responses COVID-19-related fiscal measures as a share of GDP

Source: NBF, Canada/US federal governments

Central banks: Balance sheets on the rise Total assets held by the Federal Reserve and the Bank of Canada

Source: NBF, Bank of Canada, Federal Reserve

0

2

4

6

8

10

12

14

16

U.S. Canada

Yet to be determined Indirect stimulusDirect stimulus

% of GDP

30.3%

14.9%

0%

5%

10%

15%

20%

25%

30%

35%

2007 2009 2011 2013 2015 2017 2019

Federal Reserve Bank of Canada% of GDP

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Economics and Strategy

Policy Update

Canada Monetary Policy

Wednesday, March 4: At its regularly scheduled monetary policy meeting, the Bank of Canada lowered its target for the overnight rate by 50 basis points to 1.25% (Source: BoC)

Thursday, March 12: The BoC announced the expansion of its bond buyback program. This is intended to add market liquidity and support price discovery. With no defined end date, Government of Canada bond buybacks will extend across all benchmark maturity sectors (2Y/3Y/5Y/10Y/30Y) and are to be conducted at least weekly. Regular operations are conducted on a switch basis, while cash buybacks will be conducted following nominal bond auctions. (Source: BoC) Note: With the subsequent introduction of the Bank’s “QE” program, these cash/switch buybacks are no longer conducted.

Thursday, March 12: The BoC temporarily added 6- and 12-month term repo operations. These bi-weekly operations began on Tuesday, March 17 with a $4 bln 6-month repo and a $3 bln 12-month repo. The Bank also noted that 1-month and 3-month term repo operations will continue but could see the size and frequency changed depending on market conditions. (Source: BoC)

Friday, March 13: For the second time in nine days, the Bank of Canada lowered its target for the overnight rate by 50 basis points to 0.75%. This unscheduled rate decision was characterized as “a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices”. (Source: BoC)

Friday, March 13: The Bank announced its intention to introduce a Bankers’ Acceptance Purchase Facility (BAPF). Starting the week of Monday, March 23 the Bank will conduct secondary market purchases of 1-month BAs issued and guaranteed by any Canadian bank and of sufficiently high quality (minimum short-term credit rating of R-1 (low)). On March 23, the Bank conducted its first operation for $15 bln. As of April 30, the BoC has purchased $46 bln BAs. (Source: BoC, BoC)

Friday, March 13: It was also stated that in the coming weeks, the Bank of Canada will launch the Standing Term Liquidity Facility (STLF) which was first announced in November 2019. Under the STLF, the Bank could provide loans to eligible financial institutions in need of temporary liquidity support and where the Bank has no concerns about their financial soundness. The STLF will complement the Bank’s current tools for the provision of liquidity and will strengthen the Bank’s role as lender of last resort. The facility will launch on March 30, 2020. (Source: BoC, BoC)

Friday, March 13: OSFI announced it will lower the Domestic Stability Buffer requirement for domestic systematically important banks by 1.25% to 1.0% of risk weighted assets, effective immediately. OSFI indicated that the release of the buffer will support over $300 bln of additional lending capacity. OSFI also announced it was cancelling the introduction of a new benchmark rate used to determine the minimum qualifying rate for insured mortgages (initially set to come into force on April 6, 2020). (Source: OSFI)

Monday, March 16: The BoC announced that it would broaden eligible collateral for its term repo facility to include the full range of collateral eligible under the Standing Liquidity Facility (full list). Beyond Government of Canada securities and those explicitly guaranteed by the crown, this list includes provincial bonds, municipal bonds, government-sponsored pension bonds, commercial paper, ABS, BAs, corporates and US treasury bills/bonds, among others. However, each of these securities must meet minimum acceptable quality requirements and each security type is subject to rating thresholds. (Source: BoC)

Monday, March 16: The Bank also announced that it stands ready to provide support to the Canada Mortgage Bond market through purchases of CMBs for a weekly maximum of $500 mln. The Bank began its twice-weekly purchases starting March 17 and will continue as long as market conditions warrant. As of April 30, the Bank has purchased $3.1 bln CMBs. (Source: BoC, BoC, CMHC)

Monday, March 16: To give institutions greater flexibility in managing collateral, effective March 17, the Bank will allow LVTS participants to temporarily assign an additional 20 percent of their non-mortgage loan portfolio under the Bank’s Standing Liquidity Facility. This brings the total allowable amount to 40 percent of pledged collateral. In addition, the Bank of Canada is increasing the target for the minimum daily level of settlement balances to $1 bln, from its current level of $250 mln. (Source: BoC)

Monday, March 16: The Government of Canada, through CMHC, is launching a revised Insured Mortgage Purchase Program (IMPP) which will see the government prepared to purchase up to $50 bln of insured mortgage pools through CMHC. This is a return of program the government used during the 2008-2009 financial crisis where they pledged to buy up to $125 bln but ended up purchasing $69 bln. In its first operation, the full $5 bln offered for purchase was bought (Source: CMHC, CMHC). Note: In a subsequent release, the maximum purchase amount was increased to $150 bln.

Wednesday, March 18: In a loosening of an earlier measure, the Bank of Canada will now allow LVTS participants to temporarily assign 100 percent of their non-mortgage loan portfolio for the Standing Liquidity Facility. It will also increase the target for the minimum daily level of settlement balances to $2 bln from the current level of $1 bln. (Source: BoC)

Wednesday, March 18: A further expansion of eligible collateral for Term Repo operations, in addition to changes previously announced by the Bank, was made effective. Eligible securities for these operations will include the full range of collateral eligible for the Standing Liquidity Facility, as well as own-name covered bonds, term ABS and ABCP, but will exclude the non-mortgage loan portfolio, SDAs held at the Bank and USD securities. (Source: BoC)

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Friday, March 20: The BoC announced additional measures to support market functioning. First, the Bank will increase the frequency of its term repo operations to at least weekly. Second, the Bank intends to activate a Contingent Term Repo Facility by April 3 to counter any severe market liquidity stresses and support the stability of the Canadian financial system. Third, the Bank announced its intention to launch a USD term repo facility if necessary. Finally, the Bank will lower the operating band to 25 bps (from 50 bps) so that the deposit rate will be equal to the target for the overnight rate. (Source: BoC)

Monday, March 23: The Bank announced that the scope of its BA purchase facility will be broadened to include BAs with maturities of up to 3 months. The first operation with updated terms will take place on March 30, where the BoC will purchase up to $20 bln. (Source: BoC)

Monday, March 23: The BoC announced it would be increasing its treasury bill auction frequency from bi-weekly to weekly. In a related note, the Bank’s Quarterly Bond Schedule was released, showing a record 15 auctions in Q2. (Source: BoC, BoC)

Monday, March 23: For a third time, the list of eligible collateral for the Bank’s term repo operations was expanded. It will now include (on a temporary basis) BAs and promissory notes of LVTS participants, including those issued by the primary dealer or its affiliate. (Source: BoC)

Tuesday, March 24: The Bank announced it would be establishing a Provincial Money Market Purchase (PMMP) program which will acquire provincially-issued money market securities through the primary issuance market. The Bank will purchase up to 40 percent of each offering with maturities of up to 12 months. As of April 30, a total of $4.1 bln in provincial paper has been acquired. (Source: BoC)

Thursday, March 26: CMHC announced that it would be expanding its previously announced Insured Mortgage Purchase Program (IMPP) from up to $50 bln to up to $150 bln in NHA MBS purchases. It also announced that it would be expanding its CMB program to a total annual issuance amount of up to $60 billion. (Source: CMHC)

Friday, March 27: For the third time in 23 days, the Bank of Canada reduced its target for the overnight rate by 50 bps. This brings the policy rate to 0.25%—the effective lower bond. Governor Poloz indicated that it was unlikely that rates would be brought negative, though he said that the theoretical lower bound is around -0.5%. (Source: BoC)

Friday, March 27: Alongside its rate statement, the BoC announced it would be establishing a Commercial Paper Purchase Program (CPPP). Under this program, the Bank will purchase CP and asset-backed CP (with a maximum tenor of 3 months and minimum rating of R-1) in primary and secondary markets for the next 12 months. (Source: BoC)

Friday, March 27: To address strains in Canada’s bond market, the Bank also announced that it will begin to acquire GoC securities in the secondary market, essentially amounting to a formal QE program (though the Bank prefers to characterize this as Large Scale Asset Purchases and says they’re not doing this to target interest rates/yield curves). The Bank will begin with daily purchases at a pace of at least $5 bln per week all across the yield curve. The operations will be cash purchases conducted via reverse auctions and “will continue until the economic recovery is well underway.” (Source: BoC, BoC)

Friday, March 27: OSFI announced additional regulatory flexibility for banks, insurers and private pensions to support COVID-19 efforts by reducing some of the operational stress on institutions. These measures include delaying implementation of the remaining measures of the Basel III international capital standard until 2023. The implementation of revised minimum capital and liquidity requirements for small and medium sized banks was also postponed until 2023. Generally speaking, more leniency was allowed for reporting and regulatory requirements for institutions. (Source: OSFI)

Thursday, April 9: OSFI announced continued regulatory flexibility measures to support COVID-19 efforts for banks and insurers. Some of these additional measures include providing temporary exclusions (i.e. reserves, GoCs) to the leverage ratio requirements so that banks are able to support lending and lowering the capital floor for banks using the Internal Ratings Based approach to credit risk. In addition, reporting requirements were made more lenient. (Source: OSFI, OSFI)

Thursday, April 9: The Bank of Canada relaxed auction rules for government securities dealers (GSDs). Dealers can now bid on up to 50% (up from 40%) of the total auction size and the maximum price range within which dealers must meet their minimum level of bidding obligations will increase from 10 to 20 bps from the highest yield accepted. (Source: BoC)

Wednesday, April 15: The Bank of Canada announced that it would be launching a Provincial Bond Purchase Program (PBPP) which will see it buy up to $50 bln in CAD-denominated provincial and provincial agency debt with maturities of ten years and under. The program will launch in early May and will continue for 12 months. (Source: BoC)

Wednesday, April 15: Alongside the PBPP, the BoC also announced a Corporate Bond Purchase Program (CBPP) which will allow the Bank to buy up to $10 bln investment-grade (BBB and above), CAD-denominated corporate bonds with maturities of up to 5 years. The program will launch in early May and will continue for 12 months. (Source: BoC)

Wednesday, April 15: In the Bank of Canada rate statement, in addition to the PBPP and CBPP, the Bank announced it is temporarily increasing the amount of Treasury Bills it acquires at auctions to up to 40% (up from 25%), effective immediately. Moreover, the Bank will increase the level of purchases of Government of Canada bonds in the secondary market “as required to maintain proper

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Economics and Strategy

Policy Update

functioning of the government bond market”. Finally, the BoC is further enhancing its term repo facility to permit funding for up to 24 months. (Source: BoC)

Friday, April 24: The Bank of Canada revised the terms and conditions of its new Standing Term Liquidity Facility to include terms of up to 90 days (up from 30 days). (Source: BoC)

Thursday, April 30: The Bank of Canada released additional operational details on its Provincial Bond Purchase Program. Importantly, issuer names and amounts purchased by issuer will not published so fixed income indices will not be able to make adjustments based on its purchases. (Source: BoC)

Fiscal Policy Wednesday, March 11: Prime Minister Justin Trudeau announced a $1 bln fiscal package to help with the fight against COVID-19.

This package includes $500 mln to help provinces/territories buy equipment, increase testing and enhance surveillance and monitoring and $275 mln for research for a vaccine, among other measures. (Source: GoC)

Friday, March 13: Alongside the Bank of Canada, Finance Minister Bill Morneau announced the establishment of a Business Credit Availability Program. This will essentially act as a $10 bln credit facility to lend to businesses under stress as a result of COVID-19 and will be facilitated through EDC and BDC. (Source: GoC)

Wednesday, March 18: The federal government announced an $82 bln package that includes $27 bln in direct fiscal stimulus (enhanced benefits, tax credits, student loan payment postponement, among others measures) and $55 bln in tax payment deferrals for corporations and individuals until September. Implementation timelines range from immediately to early April to early May. The combined dollar value of these measures corresponds to over 3% of nominal GDP. See the table on the following page for a breakdown of the measures from the Government of Canada’s COVID-19 Economic Response Plan. (Source: GoC) Note: Some of these measures have since been folded into the Canada Emergency Response Benefit so $82 bln here is not directly additive to other announced measures.

Monday, March 23: The government announced new measures to support farmers and agri-food businesses in Canada facing financial hardship due to the impacts of COVID-19. Farm Credit Canada’s lending capacity will be increased by $5 bln. In addition, all eligible farmers who have an outstanding Advance Payments Program (APP) loan due on or before April 30 will receive a Stay or Default, allowing them an additional six months to repay the loan. This measure represents $173 million in deferred loans. (Source: GoC)

Wednesday, March 25: The government introduced the Canada Emergency Response Benefit (CERB), a simpler and more accessible combination of the previously announced Emergency Care Benefit and Emergency Support Benefit. This taxable benefit provides $2,000 a month for up to four months for workers who lose their income as a result of the COVID-19 pandemic. The CERB cover Canadians who have lost their job, are sick, quarantined, or taking care of someone who is sick with COVID-19, as well as working parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures. The CERB apply to wage earners, as well as contract workers and self-employed individuals who would not otherwise be eligible for Employment Insurance. Additionally, workers who are still employed, but are not receiving income because of disruptions to their work situation due to COVID-19, also qualify. This would help businesses keep their employees. Canadians who are already receiving EI regular and sickness benefits as of today will continue to receive their benefits and cannot apply to the CERB. Canadians would begin to receive their CERB payments within 10 days of application. The CERB would be paid every four weeks and be available from March 15, 2020 until October 3, 2020. The CERB is expected to cost another $25 bln, bringing the direct fiscal response to over $50 bln and, combined with the earlier-announced $55 bln in tax deferrals, moves the total value of COVID-19 response measures to well over $100 bln. (Source: GoC)

Friday, March 27: In addition to the $55 bln in tax deferrals laid out by Trudeau on March 18th, the Government of Canada announced additional GST/HST and customs duty payment deferrals to the end of June which could amount to $30 bln in relief for business and self-employed Canadians. Additionally, a number of new loan programs for businesses were introduced (see table on following page). First, the Canada Emergency Business Account, valued at $25 bln, will provide interest-free loans up to $40,000 to small business. Second, a new loan guarantee for SMEs will see EDC guarantee new term loans provided by financial institutions to the export sector as well as domestic companies. The cap for this program will be $20 bln. Finally, a new co-lending program for SMEs will bring BDC together with financial institutions to co-lend term loans to SMEs so that they can meet cash flow requirements. The potential lending for this program will also be $20 bln. Separately, it was announced (but not officially published) that the temporary business wage subsidy would be increased from 10% to 75% for business that don’t lay off workers. (Source: GoC)

Monday, April 1: The earlier-announced temporary business wage subsidy was formally presented as the Canada Emergency Wage Subsidy. It will see the Government subsidize 75% of employee wages for up to 3 months if the employer can demonstrate year-over-year revenue loss of 30% or more. The subsidy applies to the first $58,700 of income per employee (for a maximum subsidized amount of $847/week) and will be administered through the Canada Revenue Agency. The program is estimated to cost $71 bln and is expected to reduce the cost of the Canada Emergency Response Benefit from $25 bln to $24 bln. (Source: GoC)

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Tuesday, April 7: The terms of the Canada Emergency Wage Subsidy (CEWS) were liberalized to include companies that can demonstrate a 15% decline in revenue in March as a result of COVID-19 (threshold down from 30%). The 30% threshold still applies for April and May. Further, the CEWS was expanded to include a new 100% refund for certain employer-paid contributions to EI, the CPP, the QPP, and the Quebec Parental Insurance Plan. This refund would cover 100% of employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees. Finance Minister Morneau estimated that the revised cost of the subsidy will increase by $2 bln to $73 bln. (Source: GoC)

Wednesday, April 15: The government also announced an expansion of the Canadian Emergency Response Benefit eligibility to include more Canadians. Additionally, a temporary wage boost for low-income workers was announced. The government will cost-share a temporary top up to the salaries of low-income essential workers that the provinces and territories have deemed essential in the fight against COVID-19. The cost of the CERB expansion and wage top-up have yet to be announced (Source: GoC).

Thursday, April 16: The government announced a Canada Emergency Commercial Rent Assistance (CECRA) program for small businesses that, will seek to provide loans and/or forgivable loans to commercial property owners who in turn will lower or forgo the rent of small businesses for the months of April, May, and June. It will also expand the Canada Emergency Business Account to businesses that paid between $20,000 and $1.5 million in total payroll in 2019 (from previous range $50,000 to $1 mln). Details on estimated costs are still to come. (Source: GoC)

Friday, April 17: Prime Minister Trudeau announced $1.7 bln would be invested in the clean-up for orphan wells in Western Canada which would result in 5,200 jobs for Albertans. Additionally, he announced a $750 mln emission reduction fund with a focus on methane, to create jobs through efforts to cut pollution. Trudeau also announced a number of smaller measures for other affected sectors of the economy. These include: $962 mln for regional development agencies to help smaller employers in rural areas, $500 mln to support Canadians who work in the arts, culture and sports sectors and $270 mln for a program for entrepreneurial and industrial research. (Source: GoC)

Tuesday, April 22: Prime Minister Trudeau announced support for students and new graduates affected by COVID-19. Most significantly, the government established a Canada Emergency Student Benefit (CESB) which will provide $1,250 per month for eligible students from May through August 2020, and $1,750 for students with dependents and those with permanent disabilities. The program is expected to cost $5.3 billion. Additional supports include a Canada Student Service Grant, increased financial assistance for Fall 2020 and expanded student and youth programming. All together, the total cost of the new initiatives are estimated to be $8.8 bln in 2020-21. (Source: GoC)

Total Fiscal Response: To summarize, the Government of Canada has pledged more than $300 billion in relief via direct fiscal stimulus, tax payment deferrals and increased lending capacity. See next page for a tabular breakdown of all measures and associated costs.

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Government of Canada COVID-19 Fiscal Response Fiscal measures announced (through April 22, 2020) and associated 2020-21 cost

Policy 2020-21 cost (C$mln)

Protecting Health and Safety Immediate Public Health Response (of which, $25 million for PHAC in 2019-20) 50

COVID-19 Response Fund (of which, $500 million for Provinces and Territories in 2019-2020) 1,025

Funding for Personal Protective Equipment and Supplies (of which, $200 million in 2019-20) 2,000

Support for International Efforts 110

Health and Social Support for Northern Communities (critical priorities, air carriers, food subsidy enhancement) 115

Total - Protecting Health and Safety 3,299

Direct Support Measures Support for Individuals

Canada Emergency Response Benefit (CERB) 35,000

Canada Emergency Wage Subsidy (CEWS) 73,000

Enhanced GST Credit 5,515

Enhanced Canada Child Benefit 1,927

Canada Student Loan Payments 190

Lower RRIF Minimum Withdrawal 495

Waiving the Employment Insurance Waiting Period for People in Imposed Quarantine 5

Support for Students and Recent Graduates Youth Employment and Skills Development Programs 728

Canada Student Loans (over two years) 1,944

Canada Student Emergency Benefit 5,250

Canada Student Service Grant 912

Support for Vulnerable Groups Support for Indigenous Communities 305

Support for the homeless (through Reaching Home) 158

Support for women’s shelters and sexual assault centres, including in Indigenous communities 50

Support for Seniors (of which, $9 million in 2019-20), Children and Youth 17

Support for Food Banks and Local Food Organizations (of which, $25 million in 2019-20) 100

Support for Charities and Non-Profits Serving Vulnerable People 350

Support for Businesses

Temporary Business Wage Subsidy 975

Canada Emergency Business Account (CEBA) - 25% incentive4 13,750 Alternative Credit Support for Businesses Unable to Access other Emergency Measures (RDE, Community

Futures, Futurpreneur Canada, Industrial Research Assistance Program) 1,232

Enhancements to the Work-Sharing Program 12

Support for Indigenous Businesses and Aboriginal Financial Institutions 307

Support for Northern Businesses 15

Support for Sectors Emissions Reduction Fund for the Oil and Gas Sector (over two years) 750

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Cleaning up former Oil and Gas Wells 1,720

Support for the Air Transportation Sector (of which, $33.1 million in 2019-20) 331

Support for Food Inspection Services 20

Support for Food System Firms that hire Temporary Foreign Workers 50

Support for Cultural, Heritage and Sport Organizations 500

Support for the Broadcasting Industry 30

Total - Direct Support Measures 145,637

Tax Liquidity Support

CRA/CBSA liquidity support to businesses and individuals: Income Tax payment deferral until September 55,000

Sales Tax Remittance and Customs Duty Payments Deferral 30,000

Total – CRA/CBSA liquidity support 85,000

Grand Total - Protecting Health and Safety, Direct Support Measures and CRA/CBSA Liquidity Support 233,936

As % of GDP 10%

Other Liquidity Support and Capital Relief Business Credit Availability Program (BCAP) (through BDC and EDC):

Small and Medium-sized Enterprise Loan and Guarantee program 40,000

Canada Emergency Business Account (CEBA) (not including 25% incentive) 41,250

Credit and liquidity support for the Agricultural Sector 5,200

Credit and liquidity support through the Bank of Canada, CMHC and commercial lenders3 200,000

Total – BCAP, other credit and liquidity support 286,450

Capital Relief (OSFI Domestic Stability Buffer) 300,000

Grand Total - BCAP, other liquidity support and capital relief 586,450

Source: GoC (https://www.canada.ca/en/department-finance/news/2020/04/support-for-students-and-recent-graduates-impacted-by-covid-19.html)

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United States Monetary Policy

Tuesday, March 3: The Federal Reserve cut the target for federal funds by 50 bps in its first emergency rate cut since October 2008. This brought the upper bound of its target range down to 1.25%. (Source: Fed)

Monday, March 9: The Fed, via its New York Reserve Bank, announced it would be increasing the size of its overnight and term repo operations. Overnight repo offerings were to rise to at least $150 bln (+$50 bln) and 14-day repos would increase to at least $45 bln (+$25 bln). (Source: NY Fed)

Wednesday, March 11: The New York Fed once again ratcheted up its repo operations, bringing the overnight offering up to at least $175 bln and adding a total of three one-month repos with a maximum size of at least $50 bln. The Fed also extended it two-week operations, which were supposed to end on March 12, to April 13. (Source: NY Fed)

Thursday, March 12: The New York Fed said it would offer $1.5 tln in liquidity over two days via 3 separate repo operations (2 three-month and 1 one-month). The Fed also announced that going forward they will conduct $500 bln in 1-month repos and $500 bln in 3-month repos every week for the rest of the month. (Source: NY Fed)

Friday, March 13: The New York Fed accelerated its purchase of Treasuries, buying $37 bln worth in a single day (all maturities), meant to address highly unusual disruptions in the market for Treasury securities. The Fed had previously been committed to buy $80 bln of Treasuries per month to increase the supply of reserves. (Source: NY Fed)

Sunday, March 15: The Fed cut its main policy rate by 100 bps to a range of 0%-0.25%. In the statement, they provided some forward guidance saying: “the Committee expects to maintain this rate until it’s confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals”. (Source: Fed)

Sunday, March 15: The Fed also pledged to increase its holdings of Treasury securities by at least $500 bln and its holdings of agency mortgage-backed securities by at least $200 bln “over the coming months”. In the press conference call, Powell said this was left intentionally open-ended and there would be no weekly or months caps but that the Fed would buy at a “strong” pace. (Source: Fed)

Sunday, March 15: As part of its Sunday rate cut, the Fed took additional measures to ensure credit was able to flow to business in the coming days, weeks and months. The FOMC encouraged banks to use the discount window, (a lending facility to depository institutions), reducing the primary credit rate by 150 basis points to 0.25% effective March 16. Narrowing the spread of the primary credit rate relative to the general level of overnight interest rates was intended to encourage more active use of the window and enhance its role as a tool for banks in addressing potential funding pressures. The Fed also encouraged depository institutions to utilize intraday credit extended by Reserve Banks to support the provision of liquidity to households and businesses and the general smooth functioning of payment systems. Banks were also incited to use its capital and liquidity buffers and to lend to households/businesses affected by the virus. Finally, the Fed reduced the reserve requirement ratios to 0% effective March 26. (Source: Fed)

Sunday, March 15: In a joint statement with other major central banks, the Fed reduced pricing on standing USD liquidity swaps by 25 bps to OIS +25 bps. Swaps with an 84-day maturity were added, in addition to the 1-week operations already offered. (Source: Fed)

Monday, March 16: The Federal Reserve Bank of New York announced an additional $500 bln overnight repo. (Source: NY Fed)

Tuesday, March 17: The New York Fed added more overnight repo operations each afternoon for the rest of the week for a weekly total of $500 bln. Additionally, all morning overnight repo operations for the rest of the week will increase to $500 bln. (Source: NY Fed)

Tuesday, March 17: The Federal Reserve announced it will be establishing a Commercial Paper Funding Facility (CPFF) in which it will purchase USD CP and ABCP (rated at least A-1/P-1/F-1) at a price of 3-month OIS +200 bps plus a 10 bp facility fee. Purchases will be made through a special purpose vehicle which will be funded by the New York Fed. The US Treasury will provide $10 bln of credit protection to insure against losses. The Fed last purchased commercial paper during the financial crisis between 2008 and 2010. (Source: Fed)

Tuesday, March 17: The Fed announced the establishment of a Primary Dealer Credit Facility (PDFC) which will offer overnight and term funding with maturities up to 90 days, collateralized by a broad range of investment grade debt securities. This will be available on March 20th and will be in place for at least six months. Loans made under the PDCF will be made at a rate equal to the primary credit discount rate which was lowered to 0.25% on March 15. (Source: Fed)

Wednesday, March 18: The Fed introduced a Money Market Mutual Fund Liquidity Facility (MMLF) in which 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 funds. The MMLF will assist money market funds in meeting demands for redemptions by households and other investors, enhancing the overall market functioning and credit provision to the broader economy. Assets eligible include

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unsecured and secured commercial paper, agency securities, Treasury securities, among others. The Department of Treasury will provide $10 bln of credit protection to the Federal Reserve in connection with the MMLF from the Treasury’s Exchange Stabilization Fund. (Source: Fed)

Thursday, March 19: The Federal Reserve expanded its US dollar swap lines to the central banks of Australia, Brazil, Denmark, Korea, Mexico, Norway, New Zealand, Singapore and Sweden. These new facilities will support the provision of US dollar. liquidity in amounts of up to $30-60 bln, depending on the country. These liquidity arrangements will remain in place for at least six months (Source: Fed)

Friday, March 20: The Federal Reserve, with the BoE, BoC, ECB, BoJ and SNB agreed to increase the frequency of 7-day dollar swap operations from weekly to daily. (Source: Fed)

Friday, March 20: The Federal Reserve expanded the set of assets eligible under its earlier-announce Money Market Liquidity Fund to include certain high-quality assets purchased from single state and other tax-exempt municipal money market mutual funds. (Source: Fed)

Friday, March 20: The New York Fed again expanded its repo operations. It announced it would conduct $500 bln overnight repos each morning and afternoon until at least April 13. (Source: Fed)

Monday, March 23: The Fed announced that it would now be conducting treasury and MBS purchases “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy”. In other words, buying is uncapped. The FOMC will also now include commercial MBS in its securities eligible for purchase. Purchases for the week of March 23 will total approximately $75 bln per day of treasuries and $50 bln per day of agency MBS, with commercial MBS amounts yet to be announced. (Source: Fed, NY Fed)

Monday, March 23: The Fed announced it would establish two credit facilities to support large employers: The Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF). The PMCCF provide bridge financing for up to four years to eligible investment grade corporations and allows the borrowers to defer interest and principal payments for up to six months. The SMCCF will purchase investment grade corporate bonds of US companies and US-listed ETFs that are broadly exposed to IG corporate bonds in secondary markets. The Treasury will make an initial $10 bln equity investment in the PMCCF and the SMCCF. (Source: Fed, Fed)

Monday, March 23: The Fed also announced a Term Asset-Backed Securities Loan Facility (TALF). Under the TALF, the Fed will lend on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. (Source: Fed)

Monday, March 23: The Fed expanded its Money Market Liquidity Facility and CP Funding Facility to include a wider range of securities. In addition, the pricing on the CPFF was reduced. (Source: Fed)

Monday, March 23: Additionally, the Fed announced its intention to establish a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses. (Source: Fed)

Tuesday, March 31: The Fed announced the establishment of a temporary FIMA repurchase agreement facility for foreign and international monetary authorities. 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. This facility should help support the smooth functioning of the U.S. Treasury market by providing an alternative temporary source of U.S. dollars other than sales of securities in the open market. It should also serve, along with the U.S. dollar liquidity swap lines the Federal Reserve has established with other central banks, to help ease strains in global U.S. dollar funding markets. (Source: Fed)

Wednesday, April 1: To address strains in Treasury markets, the Fed announced that it would temporarily exclude treasuries and deposits in the calculation of its supplementary leverage ratio until March 31, 2021. This change would temporarily decrease tier 1 capital requirements of holding companies by approximately 2 percent. As banks’ balance sheets grow from significant consumer deposits and increased reserve levels, this rule relaxation is implemented to allow financial instructions to expand their balance sheets as appropriate to continue to serve as intermediaries and provide credit to businesses and households. (Source: Fed)

Monday, April 6: The Fed announced the establishment of a program to facilitate lending to small businesses via the Small Business Administration's Paycheck Protection Program ($350 bln loan program to small businesses announced as part of the $2 tln stimulus package) by providing term financing to banks against loans issued under the PPP program. Lenders had complained about having to hold loans on their books for up to seven weeks before they could be purchased by the government. The delay reduced lenders’ ability to issue more loans. The Fed’s program will help bridge that gap. (Source: Fed)

Thursday, April 9: The Fed established a Municipal Liquidity Facility which will purchase up to $500 bln of short-term notes directly from US States, counties and cities. (Source: Fed)

Thursday, April 9: The Fed outlined the details of the earlier announced Main Street Lending program. It will provide 4-year loans to companies with few than 10,000 employees or less than $2.5 bln in revenue with interest and principal payments deferred for one year. Firms seeking Main Street loans must make a reasonable effort to maintain payroll and retain workers and comply with

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compensation, stock repurchase and dividends restrictions. The Fed will purchase of up to $600 billion in loans through the Main Street Lending Program and the Department of the Treasury will provide $75 bln in equity. (Source: Fed)

Thursday, April 9: The Fed broadened the range of assets that are eligible collateral for its Term Asset-Backed Loan Facility (TALF) to include AAA CMBS and newly issued collateral loan obligations (CLOs). The TALF SPV initially will make up to $100 billion of loans available (Source: Fed, Fed)

Thursday, April 9: The Fed established the Paycheck Protection Program Lending Facility (PPPLF) which will extend credit to eligible financial institutions that original PPP loans, taking the loans as collateral at face value.

Thursday, April 9: The Fed broadened the scope for eligibility in its Primary Market Corporate Credit Facility (PMCCF) and Secondary Market Corporate Credit Facility (SMCCF) to include companies that had been downgraded to ‘junk’ status (i.e. below BBB-) after March 22. However, the company must remain at or above a BB- rating to remain eligible. The Treasury will make $50 bln investment in this PMCCF and $25 bln in SMCCF. Both facilities will leverage the Treasury equity at 10 to 1 when acquiring corporate bonds and syndicated loans for investment grade issuers and 7 to 1 for all other eligible assets. In the SMCCF, some funds will be invested in high-yield corporate bond ETFs. The combined size of the SMCCF and PMCCF will be $750 bln. (Source: Fed, Fed, Fed)

Monday, April 13: The New York Fed announced it would be reducing the frequency of some repo operations during the next 30 days in light of more stable repo market conditions. Beginning on Monday, May 4, they will return to regularly conducting one overnight repo operation per day in the morning, and to remove the afternoon overnight repo operation. In addition, the frequency of 3-month repo operations will be reduced to once every two weeks from once a week. They will continue to conduct one-month repo operations once per week. (Source: NY Fed)

Wednesday, April 29: The Fed left its policy largely unchanged at its first scheduled meeting since January. However, Chairman Jerome Powell conceded that the Fed would likely need to do more in its fight against COVID-19. It was reiterated that the Fed “will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning”. The committee also highlighted increased risks to the economic outlook over the medium term. (Source: Fed)

Thursday, April 30: The Fed announced that it will expand the scope and eligibility for the Main Street Lending Program by increasing the loan options available to businesses and raising the maximum size of businesses that are eligible for support under the program. The changes include: Creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage, lowering the minimum loan size for certain loans to $500,000 and expanding the pool of businesses eligible to borrow. (Source: Fed)

Thursday, April 30: The Fed expanded access to its Paycheck Protection Program Liquidity Facility (PPPLF) to additional lenders, and expanded the collateral that can be pledged. As a result of the changes, all PPP lenders approved by the SBA, including non-depository institution lenders, are now eligible to participate in the PPPLF. Additionally, eligible borrowers will be able to pledge whole PPP loans that they have purchased as collateral to the PPPLF. (Source: Fed)

Fiscal Policy Friday, March 6: $8.3 bln package divided as follows: $3 bln allocated to vaccine research. $800 mln for research for treatments;

$2 bln for the Centers for Disease Control and Prevention; $61 mln to the Food and Drug Administration; $2.2 bln for preparedness and prevention efforts; $1 bln used to purchase medical supplies and support Community health centers; $500 mln to allow Medicare providers to administer telehealth services. (Source: US Congress)

Wednesday, March 18: Congress passed a $105 bln relief package which introduces paid sick leave for companies with fewer than 500 employees (up to 12 weeks, maximum $511 per day, equivalent to $133,000 per year), available for people sick with the virus. Those that must miss work because of other coronavirus-related reasons – school closures for instance – will be eligible for sick leave payment worth 2/3 of their salaries for a maximum amount of $200 a day. Food assistance for vulnerable populations and financial help for coronavirus testing was also a part of the package. (Source: US Congress)

Wednesday, March 25: Senate Democrats and Republicans reached a deal on a $2.3 tln stimulus package featuring direct cash transfers to households and loans for businesses. Taxpayers making less than $75,000 per year will receive cheques worth up to $1,200 and an additional $500 for every child, with payments scaling down up to a top income bracket of $99,000 (total cost ~$300 bln). Unemployment benefits would be enhanced by $600 weekly (a large sum considering the average payout amounted to $385 before the crisis) while loosening eligibility requirements in order to cover more Americans (total cost ~$260 bln). The plan also would provide $500 bln in loans for companies, including $58 bln earmarked for US airlines. Any company receiving a government loan would be subject to a stock buyback blackout equal to the term of the loan plus one year. $350 bln of the package is for small and medium-sized businesses, which would be eligible for loans of up to $10 mln without interest or fees to pay for employees, rental costs and other expenses. These loans would then be forgiven in proportion to the share of staff firms keep on their payrolls (a firm that keeps all its employee would have nothing to pay back). The bill also includes $350 bln to help state and local governments cope with the outbreak as well as $153 bln for public health. Finally, $26 bln is earmarked for safety net enhancement and $44 bln for student debt relief. (Source: US Congress)

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Friday, April 24: President Trump signed a $484 bln stimulus package. $320 bln will be used to replenish the Paycheck Protection Program. Of that sum, $30 billion will be earmarked for banks and credit unions with $10 bln to $50 bln in assets. Another $30 bln will be assigned to even smaller institutions. $60 bln will be attributed to a separate lending program (the Economic Injury Disaster Loan Program, for which farms and ranches will now be eligible), $75 bln will go to hospitals and $25 bln will be used to increase testing for coronavirus.

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Eurozone Monetary Policy

Thursday, March 12: The ECB pledged to increase its asset purchase program in 2020 by €120 bln (~€13 bln per month) from its prior commitment of €20 bln per month. The ECB said the additional asset purchases would be focused on corporate bonds, but the central bank would maintain flexibility in how it bought assets. These purchases could be frontloaded and favour certain member states (those suffering the most from the crisis). (Source: ECB)

Thursday, March 12: In an effort to encourage banks to keep lending to businesses, the ECB change three parameters of its Targeted Longer-Term Refinancing Operations (TLTRO-III). Namely, it will increase the borrowing allowance from 30% to 50%, modify the maximum bid limit for individual TLTROs-III and offer an early repayment option for amounts borrowed under TLTROs-III 12 months after the settlement of each operation, instead of 24 months. This means the ECB will, in effect, be subsidizing banks to lend (it will lend to them at a lower rate than what it pays on their deposits). (Source: ECB, ECB)

Thursday, March 12: The ECB, via the Single Supervisory Mechanism, also provided temporary capital and operational relief by allowing banks to fully use capital and liquidity buffers and relax capital requirements (specifically, Pillar 2 Requirements). (Source: ECB)

Sunday, March 15: In a joint statement with the Fed, BoC, BoJ, BoE and SNB, the ECB announced reduced pricing on standing USD liquidity swaps by 25 bps to OIS +25 bps. Swaps with an 84-day maturity were added, in addition to the 1-week operations already offered. (Source: ECB)

Wednesday, March 18: At an emergency ECB meeting, a €750 bln “pandemic emergency purchase program” was announced in which the ECB will purchase all assets eligible under the current QE program as well as commercial paper and Greek government bonds until at least the end of 2020. This is in addition to the already-implemented €20 bln of net monthly purchases and the €120 bln of 2020 net purchases announced last week. In total, the ECB will purchase roughly €1.1 tln in assets before the end of the year. Collateral standards will also be eased by adjusting the main risk parameters of the collateral framework. (Source: ECB)

Friday, March 20: The ECB announced it would reactive its swap line with Denmark’s Nationalbank to provide euro liquidity and increase the maximum amount to be borrowed from €12 billion to €24 billion. It will remain in place as long as needed. (Source: ECB).

Friday, March 20: The ECB, with the BoE, BoC, Fed, BoJ and SNB agreed to increase the frequency of 7-day dollar swap operations from weekly to daily. (Source: ECB)

Thursday, March 26: The ECB announced the removal of some legal constrains to its bond-buying program. The issue limit, which capped to a third the amount of each member states’ sovereign bonds that could be held by the ECB, was scrapped for the PEPP purchases. (Source: ECB)

Friday, March 27: In its role as regulator, the ECB recommended eurozone banks to freeze dividend payments and share buybacks until at least October 1st. According to some estimate this will provide banks with an extra €30 bln. (Source: ECB)

Monday, April 7: The ECB announced a package of temporary collateral easing measures. These measures include a reduction in the acceptable credit quality of collateral, increasing the allowable percentage of unsecured debt that can be used in collateral pools and reducing collateral haircuts by 20%. Notably, the ECB also issued a waiver to accept Greek sovereign debt instruments as collateral in Eurosystem credit operations. (Source: ECB)

Wednesday, April 22: The ECB further reduced the acceptable credit quality of collateral, stating it would now accept bonds that have recently lost their investment grade rating (“fallen angels”). This measure is designed to ease financing strains for the sizeable number of European corporations that are likely to be downgraded to junk as a result of the coronavirus outbreak and associated lockdowns. The looser rules will remain until September 2021. (Source: ECB)

Thursday, April 30: kept its main deposit rate unchanged at -0.5% but tweaked the terms of its targeted long-term refinancing operations (TLTROs) scheme. Under the new rules, banks that meet certain lending criteria will be able to borrow from the ECB at an interest rate equal to the deposit rate minus 0.5% (-1.0%). This represents a 25 bp discount from previously-announced terms. Also, the ECB introduced a new lending program called the non-targeted pandemic emergency longer-term refinancing operations (PELTROs) which will offer unconditional financing to banks at a rate of -0.25%. Starting in May, the ECB will conduct seven separate PELTROs operations which will come to maturity between July and September 2021. (Source: ECB)

Fiscal Policy [Italy] Friday, February 28: €900 mln was pledged for families and business affected by the virus.

[Italy] Sunday, March 1: The Italian government announced a €3.6 bln package (0.2% of GDP) to fight the effects of the virus in which tax credits would be awarded to companies reporting a 25% drop in revenues. Other tax cuts were promised, and extra cash was pledged for the health system.

[Italy] Thursday, March 5: The €3.6 bln announced earlier in the week was expanded to €7.5 bln.

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[Italy] Tuesday, March 10: The Italian government suspended all mortgage payments and tax payments for small companies. (Note: Only ~13% of Italian owned a property with an outstanding mortgage). Additionally, the package announced first on March 1 and expanded on March 5, was again boosted—this time to €10.0 bln. An additional €15.0 bln was also made available for further measures to be announced later.

[Spain] Thursday, March 12: The Spanish government announced a €3.8 bln injection into the country’s health system, a €14 bln tax exemption for small business and freelance workers and a €400 mln government credit line to help the tourism sector.

[Germany] Friday, March 13: The German government announced an expansion of the loans that can be provided to businesses by the KfW (the state development bank) from €460 bln to roughly €550 bln. This could be increased further as the government said there was no upper limit to the aid that could be provided to affected companies. The terms offered on the loans were also softened so that the federal government assumes more risk. Loan applications were simplified and accelerated, and access to credit was expanded to smaller businesses. The government also announced that it would allow companies to defer billions of euros in tax payments. Finally, Germany expanded its short-time work scheme under which companies that put their workers on reduced hours can receive state support. This is meant to encourage businesses to reduce employee hours instead of laying off.

[Spain] Tuesday, March 17: The Spanish government pledged €17 bln of direct stimulus. Measures included a moratorium on mortgage payment and utility bills for people whose income has been affected by the crisis, the introduction of a program in which the state compensates employees that are put on reduced-hour programs, suspension of some social security payments for companies, and €600 mln to help people most affected by the crisis (this includes people who would normally not have paid enough in social security contributions to be eligible for unemployment benefits). The self-employed will also be able to claim benefits similar to those for the unemployed. Finally, the government pledged to guarantee €100 bln in loans made to businesses.

[Italy] Tuesday, March 17: The government adopted a €25 billion (1.4 percent of GDP) “Cura Italia” emergency package. It includes (i) funds to strengthen the Italian health care system and civil protection (€3.2 billion); (ii) measures to preserve jobs and support income of laid-off workers and self-employed (€10.3 billion); (iii) other measures to support businesses, including tax deferrals and postponement of utility bill payments in most affected municipalities (€6.4 billion); as well as (iv) measures to support credit supply (€5.1 billion). (Source: IMF)

[France] Tuesday, March 17: The French government announced €45 bln in direct tax breaks and direct state payments for the economy. This includes €35 bln for a month of corporate tax deferrals and reduced social security charges for companies. Another €8.5 bln was allocated for two months of unemployment benefits for workers forced to work part-time temporarily. Also, there will be €2 bln for a solidarity fund for the self-employed and shopkeepers. The government also pledged to guarantee €300 bln of bank loans to companies. Finally, the government said it stood ready to “nationalize” companies if needed, recapitalizing them by buying some – or all – of their shares.

[France] Wednesday, March 18: BPI, France’s state-backed investment bank, waived all loan payments for the next six months. It also planned to double the amount of zero-collateral loans it is willing to make to about €5 bln (90 per cent of which will be guaranteed by the French state). Small companies can borrow up to €5 mln while for medium-sized companies that increases up to €30 mln. The application process has also been simplified.

[Germany] Monday, March 23: The German government introduced a €156 bln supplementary budget which will require issuing €150 bln in new debt. €3.5 bln will be used to buy protective masks and suits, fund research for a vaccine and repatriate Germans abroad. The labour ministry will also relax rules granting access to welfare payments and will protect tenants struggling to pay rent from eviction (small companies will receive grants of up to €15,000 to that purpose). Approximately €10 bln will be used to boost short-time hour programs, under which the state pays 60-67% of the forgone wages of workers whose hours are cut. An extra €500 bln has also been pledged. €100 bln will be allocated to the Economic Stabilization Fund (WSF in German) and used to recapitalize companies affected by the virus (the government will take equity stakes in these companies). A similar fund had also been set up back in 2009 to bail out banks (the German government still has a 15.6% stake in Commerzbank). The other €400 bln consists in state guarantees to underwrite the debt of companies affected by the turmoil. The government committed a further €100 bln to KfW, the state development bank, which had earlier been empowered to provide unlimited cash to businesses hit by the virus (see above). Taken together, the supplementary budget, the €100 bln to WSF and the €100 bln to KfW amount to a total of €356 bln, about 10% of Germany’s GDP. Passing those measures required ministers to seek authorization to suspend the “debt brake” that constitutionally limits new government borrowing to just 0.35% of GDP. The law contained a bailout clause which allowed the government to run larger deficit whenever the country got hit by emergencies or catastrophes that “significantly impact the government’s fiscal position.”

[Italy] Monday, April 6: The Liquidity Decree allowed for additional state guarantees of up to €400 billion (25 percent of GDP). The guarantee envelope from this and earlier schemes is aimed to unlock more than €750 billion (close to 50 percent of GDP) of liquidity for businesses and households (see below). The authorities indicated that further fiscal measures are being considered.

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United Kingdom Monetary Policy Wednesday, March 11: The Bank of England reduced its main bank rate by 50 bps to 0.25%. (Source: BoE)

Wednesday, March 11: The BoE introduced a TLTRO-like measure called the Term Funding Scheme for Small and Medium-sizedEnterprises (TFSME) which provides banks 4-year term funding at a cost of just 0.25%. This program is expected to last one year andprovide in excess of £100 bln in funding. (Source: BoE)

Wednesday, March 11: The BoE also loosened capital requirements for banks, freeing up approximately £200 bln to be used tomake loans to businesses. It reduced the countercyclical buffer rate to 0% (from 1.0%) of banks’ exposure to UK borrowers. (Source:BoE)

Wednesday, March 11: The Prudential Regulation Authority, the arm of the BoE that supervises lenders and insurers, suggestedbanks should not increase dividends or bonuses. (Source: BoE)

Sunday, March 15: In a joint statement with the Fed, BoC, BoJ, ECB and SNB, the BoE announced reduced pricing on standing USDliquidity swaps by 25 bps to OIS +25 bps. Swaps with an 84-day maturity were added, in addition to the 1-week operations alreadyoffered. (Source: BoE)

Tuesday, March 17: The Bank of England introduced a new “unlimited” commercial paper facility to prevent companies from running out of short-term funding. The central bank will print money that it will use to make loans to corporations. The government willindemnify the BoE for the risk of these loans. Exact pricing details are still to come but it will be at a rate equal to the maturity-matched OIS rate plus some spread. (Source: BoE, BoE)

Thursday, March 19: The Bank of England reduced its main bank rate by 15 bps to 0.1%. (Source: BoE)

Thursday, March 19: The BoE also voted unanimously to increase its holdings of UK government bonds and sterling non-financialinvestment-grade corporate bonds by £200 bln to a total of £645 bln. The purchases were set to start as soon as operationallypossible. The Committee also voted to enlarge the TFSME scheme. (Source: BoE)

Friday, March 20: The BoE, with the ECB, BoC, Fed, BoJ and SNB agreed to increase the frequency of 7-day dollar swap operationsfrom weekly to daily. (Source: BoE)

Tuesday, March 24: The Bank of England launched a Contingent Term Repo Facility. The CTRF will lend an unlimited amount ofreserves to eligible banks and building societies for a period of three months at a rate of the Bank Rate plus 15 bps. The CTRF willbegin with two operations (March 26, April 2) and will add more subject to market demand. (Source: BoE, BoE)

Thursday, April 9: HM Treasury and Bank of England announce a temporary extension to Ways and Means facility which will providea short-term source of additional liquidity to the government if needed to smooth its cashflows and support the orderly functioningof markets, through the period of disruption from Covid-19. This essentially amounts to monetary financing although the BoEemphasized that ”any use of the W&M facility will be temporary and short-term” and “any drawings will be repaid as soon aspossible before the end of the year.” (Source: BoE)

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Fiscal Policy Wednesday, March 11: The UK government announced £12 bln in direct stimulus specifically targeting the virus, including £5 bln in

extra funding for the NHS (with possibility of increasing that amount further) and £7 bln to support the labour market. A £500 mln“hardship fund” was also introduced and is to be given to local authorities to help the most vulnerable people. The government willalso backstop sick pay for small businesses for up to 14 days and remove the minimum floor for universal credit. Loan schemes willbe implemented for small and medium-size business on an amount up to £1.2 mln, with the government guaranteeing up 80% ofthese loans. The business rate will be scrapped for a year in sectors most hit by the crisis (e.g. hospitality, tourism, etc.) and all smallbusiness that pay no business rates will receive a £3,000 cash grant. Finally, there will be a 90% cut in the entrepreneur’s tax.

Tuesday, March 17: The UK government announced it would guarantee £330 bln worth of loans to businesses and provide anadditional £20 bln to help struggling businesses. Mortgage-payers will be granted a payment holiday for up to three months.Business rates will be exempted for companies of any size and there will be £25,000 grants for struggling retailers and pubs.

Friday, March 20: The UK chancellor announced a massive stimulus package which will see the government pay up to 80 per cent ofthe wages of anyone furloughed, rather than made redundant. Also, the next quarter of VAT would be deferred, loans to businesseswill be interest free for 12 months and the welfare system will be expanded by increasing the Universal Credit by £1,000 a year.

Thursday, March 26: Chancellor Rishi Sunak rolled out a £9 bln package to support the self-employed. Around 3.8 million workers willbe eligible to receive a £2,500 grant each month for the next three months. The grant will only be available to self-employed workerswho filed in a tax return in 2019. The package could be extended if needed.

Friday, March 27: The government bonified its job retention scheme, saying it would now assume payments for national insurancecontributions and statutory pension contributions for all furloughed workers (capped at a maximum salary of £2,500 per month). Thiswill amount to approximately £300 pound per worker. This will raise the total costs of the job retention plan up to around £12 billionover 3 months. (The precise cost cannot be estimated precisely because nobody knows how many people it will cover. This will dependon what businesses decide to do: furlough workers or lay them off).

Wednesday, April 8: The UK government announced £750 mln of funding for charities affected by the coronavirus lockdown.(Source: UK)

Monday, April 27: The British Chancellor announced a “Bounce Back Loan” scheme under which small companies will be able to borrow up to £50,000 with the government underwriting the entire loan. The loans will be free of interest, fees and payments for 12 monthsand will eb available from May 4.

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Japan Monetary Policy Monday, March 13: The Bank of Japan announced it would be conducting multiple term repos that mature over the end of March

in order to provide ample liquidity and ensure market stability going into month-end. It also increased the number of issues of Japanese government securities on offer in its Securities Lending Facility to include all JGSs held by the Bank. (Source: BoJ)

Monday, March 16: The BoJ announced it would double its annual ETF-buying program to ¥12 tln (mostly ETFs tracking the TOPIXindex). As a result, the stock portfolio of the BoJ will reach ¥40 tln by the end of the year, making the central bank the largest holderof domestic stocks, in front of the Japanese state pension fund. It also doubled the pace of purchases for Japanese real estatetrust funds to ¥180 bln. (Source: BoJ)

Monday, March 16: The central bank increased the upper limit for its purchases of commercial paper and corporate bonds by ¥2tln, with the stronger pace continuing until the end of September 2020. (Source: BoJ)

Monday, March 16: The BoJ introduced a new 1-year lending facility for banks at a 0% interest rate, designed to encouragecorporate lending. Loans will be collateralized by corporate debt and the operations will be conducted until the end of September.(Source: BoJ)

Monday, March 16: The Bank, in coordination with other global central banks, lowered the loan rate on USD funding by 25 bps andannounced it would offer U.S. dollars weekly with an 84-day maturity, in addition to the 1-week maturity operations already offered.(Source: BoJ)

Tuesday, March 17: The Bank of Japan conducted an 84-day dollar funding operation valued at $30.3 bln, its biggest injection ofUS dollars since 2008.

Friday, March 20: The BoJ, with the ECB, BoC, Fed, BoE and SNB agreed to increase the frequency of 7-day dollar swap operationsfrom weekly to daily. (Source: BoJ)

Tuesday, March 24: The BoJ implemented additional measures in its Securities Lending Facility to ensure financial stability andliquidity. The central bank extended the period under which all available Japanese government securities (JGS) will be available inthe SLF to April 30 and temporarily raised the upper limit on the number of JGS issues allowed for bidding in the SLF. (Source: BoJ)

Monday, April 27: At a meeting held a day earlier than planned, the Bank of Japan maintained its overnight interest rate at -0.1%.However, the BoJ scrapped the ¥80tn-a-year limit on its government bond purchase program, vowing instead to buy an unlimitedamount of JGBs in order to keep 10-year yields at about 0% (±0.2%). Removing the guidance on its bond buying was a symbolicmove -the central bank already needed to buy far less than the stated limit to keep long rates on target - but the move still signaleda willingness to do more if needed. To ease corporate funding strains, the BOJ also announced it would nearly triple the maximumamount of corporate bonds and commercial paper it would buy to ¥20tn. Finally, the BoJ eased collateral rules and offered to paya 0.1% interest rates to financial institutions tapping its new loan program aimed at boosting lending to businesses.

Fiscal Policy Tuesday, March 10: The Japanese government unveiled a ¥430 bln coronavirus package, part of which will be drawn from this fiscal

year’s budget reserve (¥270 bln). The package will help fund improvement in medical facilities and provide subsidies to working parents who must take leave because of closed schools. This package boosts special financing for small and mid-sized firms hit by the virus from the ¥500 bln previously announced to ¥1.6 tln. Further, government-affiliated lenders would offer funds at no interest and without collateral to small firms whose sales slumped during the outbreak. These steps are in addition to ¥13.2 trillion in fiscal stimulus already in the pipeline from December.

Tuesday, April 7: The government of Japan introduced the Emergency Economic Package Against COVID-19, a ¥108 tln (US$1 tln)stimulus package to help cushion the economic blow leveled by COVID-19. The package includes ¥26 tln in tax deferrals and ¥6 tln in cash payouts for households.

Thursday, April 16: Prime Minister Shinzo Abe promised that the Japanese government would provide ¥100,000 for every Japanesecitizen, after the cash payouts announced in the ¥108 stimulus bill “for people who had suffered significant losses” was complicated and unfair. Finance Minister Taro Aso said the cash handout should be ready by next month.

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Economics and Strategy

Policy Update

China Monetary Policy Wednesday, January 15: The People’s Bank of China introduced a RMB300 bln one-year medium-term lending facility at 3.25%

aimed at national banks and local banks operating in the Wuhan region.

Saturday, February 1: China’s banking and insurance regulators extended the deadline beyond the end of 2020 for companies tomeet new asset management rules. The regulations were part of a government effort to reduce exposure to shadow lending.Regulators also allowed insurance to surpass the 30% cap on investment in equity markets to support stock prices.

Sunday, February 2: The Central bank lowered the interest rate on reverse repo operations by 10 basis points, bringing the 7-dayfacility from 2.50% to 2.40% and the 14-day facility from 2.65% to 2.55%.

Monday, February 3: The Central Bank provided RMB1.2 tln in additional liquidity to money markets via open market operations to“maintain reasonable and adequate liquidity in the banking system and sound operation of the money market during the period ofepidemic prevention and control”. (Source: PBOC)

Friday, February 14: The China Banking and Insurance Regulatory Commission allowed the country’s banks to raise their tolerancefor non-performing loans. Regulators will ease rules on bad loans so that banks won’t need to raise new capital against these loans.

Sunday, February 16: The PBOC lowered the one-year medium-term lending facility rate from 3.25% to 3.15% (the medium-termlending facility was introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from thecentral bank using securities as collateral).

Friday, March 13: The PBOC cut reserve requirements ratio for banks by 0.5-1.0%, freeing up around RMB550 bln that the authoritieswant banks to lend to businesses hit by the outbreak. (Source: PBOC)

Monday, March 16: China’s central bank injected RMB100 bln via the medium-term lending facility into the financial system usingopen market operations at an interest rate of 3.15%.

Tuesday, March 31: The PBOC announced it would cut the interest rate it charges to banks on 7-day reverse repurchase agreementsfrom 2.4% to a record low of 2.2%. This was the biggest cut since 2015.

Friday, April 3: The PBOC announced a 1% reduction in smaller banks’ required reserve ratio. The cut will be delivered in two stages:50bp on April 15 and another 50bp on May 15. The central bank expects this measure to free ¥400 billion for the banking sector. ThePBOC also reduced interest paid on excess reserves from 0.72% to 0.35%.

Monday, April 20: The PBOC cut the 1-year prime rate from 4.05% to 3.85% and the 5-year prime rate from 4.75% to 4.65%.

Fiscal Policy An estimated RMB 2.6 trillion (or 2.5 percent of GDP) of fiscal measures or financing plans have been announced, of which 1.2 percent

of GDP are already being implemented. Key measures include: (i) Increased spending on epidemic prevention and control. (ii) Production of medical equipment. (iii) Accelerated disbursement of unemployment insurance. (iv) Tax relief and waived social security contributions. The overall fiscal expansion is expected to be significantly higher, reflecting the effect of already announced additional measures such as an increase in the ceiling for special local government bonds of 1.3 percent of GDP, improvements of the national public health emergency management system, and automatic stabilizers.” (Source: IMF)

Economics and Strategy

Policy Update

Economics and Strategy

Montreal Office Toronto Office 514-879-2529 416-869-8598

Stéfane Marion Matthieu Arseneau Warren Lovely Chief Economist and Strategist Deputy Chief Economist Chief Rate Strategist, Economics and Strategy stefane.marion@nbc.ca matthieu.arseneau@nbc.ca warren.lovely@nbc.ca

Krishen Rangasamy Paul-André Pinsonnault Marc Pinsonneault Taylor Schleich Senior Economist Senior Economist Senior Economist Associate, Rates Strategist, Economics and Strategy krishen.rangasamy@nbc.ca paulandre.pinsonnault@nbc.ca marc.pinsonneault@nbc.ca taylor.schleich@nbc.ca

Kyle Dahms Jocelyn Paquet Angelo Katsoras Economist Economist Geopolitical Analyst kyle.dahms@nbc.ca jocelyn.paquet@nbc.ca angelo.katsoras@nbc.ca

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Economics and Strategy

Policy Update

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