Coronavirus: Top central banker calls on governments and banks to do even more
The head of the Bank for International Settlements (BIS) has urged governments and central banks to do more to aid their economies threatened by the coronavirus crisis.
On Sunday, Agustín Carstens, general manager of the BIS, an umbrella organisation founded to foster cooperation between the world’s central banks, said more stringent solutions were needed than those used to combat the 2008 financial crisis.
Contrary to the 2008 crash, when measures were put in place to discourage banks from providing loans larger than borrowers could afford, Carstens is now concerned by a drop off in lending as capital markets are closing to businesses.
“To give viable businesses a lifeline to tide them over the economic sudden stop wrought by Covid-19, a solution is needed to complete the last mile from potential lenders to those firms at the edge of the precipice,” he said.
While central banks across the world are funnelling trillions of dollars into the global banking system, Carsten outlined the need for the money to reach those who are most in need.
He called on banks to make use of capital buffers, a mandatory capital that financial institutions are required to hold.
A global freeze on bank dividends and share buybacks was also needed, he argued.
Tax help
Carsten also encouraged governments to guarantee “tax deferral loans” from banks to small and medium-sized businesses of an amount which would be equal to the taxes contributed by firms last year.
Any losses that occur would come out of government coffers, while the loans would be securitised and refinanced by central banks.
Carsten finished by reaffirming the need for these measures to be actioned on a global scale so money continues to flow through the world’s supply chains.
“For central bank liquidity to reach the far corners of the financial system, it must directly target individuals and businesses that need it most. Otherwise, central bank actions may be just pushing on a string,” he said.