On 15 March, the European Central Bank (ECB) launched the Pandemic Emergency Purchase Programme, with a €750bn envelope until the end of 2020. That was in addition to €120bn of bonds-buying power the ECB announced just three days before.
With a total value equivalent to 7.3% of EU GDP, the scheme is available to all national jurisdictions and will remain in place until the organisation assesses that the coronavirus crisis has passed.
In a 19 March blog post, ECB president Christine Lagarde wrote that the new instrument has three, main advantages:
She added: “This is reflected in the terms and conditions of the new programme. While the benchmark allocation across jurisdictions will continue to be the capital key of the national central banks, purchases 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.”
On 17 March – just days on from his debut Budget speech in the House of Commons – chancellor Rishi Sunak unveiled £330bn of guarantees to protect UK businesses from the impacts of COVID-19, aka novel coronavirus: a sum equivalent to 15% of the nation’s GDP.
Encompassed in the package were three measures of interest to corporates:
As part of a $2 trillion juggernaut of economic assistance, the Federal Reserve announced on 23 March that it would support credit flow to employers, consumers and businesses with new initiatives that, together, would comprise up to $300bn in new financing.
Through the US Exchange Stabilization Fund, the Department of the Treasury would provide $30bn in equity to those facilities.
Among those schemes, the Fed revealed, it would:
As social distancing took hold in late March and the financial markets entered an indefinite period of uncertainty, Marketwatch reported a spike in the use of commodities-based fintech apps.
Linked to gold vaults in London, New York, Singapore, Toronto and Zurich, Goldex experienced a 125% rise in user activity, with the firm saying: “Overall we’re seeing a substantial increase in gold demand in the first three months of the year, with this month already surpassing our previous record, which was set in January 2020.
“We’re also seeing a significant increase in customers, with user registrations up 35% since the beginning of the year as investors flock to safe-haven assets amid plummeting stock markets.”
However, that app’s performance figures were dwarfed by those of UK start-up Glint which, in the preceding five weeks, had experienced a 718% rise in the use of its gold-purchasing service. Founder and CEO Jason Cozens said: “Sales are going through the roof. We are breaking records every day… Gold is the ultimate form of money.”
On Monday 30 March, Reuters reported that, in the preceding week, European corporates had issued more than €20bn of debt – with Volkswagen and AB InBev launching fresh bond issues on the very morning the news agency’s story emerged.
As tempting as it is to interpret that as a positive sign, though, Reuters pointed out that the issues are in fact compensating for a shortfall in another area of the financial market, with Innogy SE head of treasury Volker Heischkamp saying: “Over the past two weeks, there was no way to get any commercial paper issued at all.”
Another treasurer, who preferred to remain anonymous, said: “The commercial paper market is dead. Unless liquidity returns, we will have to turn to the banks and draw down our credit facilities, and draw all the liquidity from banks.”
A corporate bond banker who worked on some of the bond issues of the week commencing 23 March noted: “For corporates, the ability to burn cash has increased and the appetite for risk is much diminished, which has hit the commercial paper market badly. That's a concern because it's impacting the highly rated corporates for the first time, as they use commercial paper as a fundamental tool for working capital.”
Maintaining its role as a thought-leading body in the world of treasury, The Association of Corporate Treasurers (ACT) called on the UK government to extend to smaller firms the BofE bridging-loan scheme that Sunak announced on 17 March – and to accelerate delivery of the relevant funds.
ACT CEO Caroline Stockmann told Reuters on 19 March: “It’s vital that credit lines are readily available to businesses. If we can get this right, then it effectively mitigates some immediate risks to businesses.”
On 25 March, specialist software provider GTreasury announced that it has joined the Treasury Coalition: a network of technology vendors who are keeping tabs on how corporate treasurers are dealing with the business-related fallout of COVID-19.
Comprised of software brands such as BELLIN, Bottomline Technologies, HighRadius and Kyriba, plus consultancy The Carfang Group and other organisations, the network is seeking weekly, professional input via its Treasury Coalition Global Crisis Monitor: An Immediate & Ongoing Survey of COVID-19 Impact & Response.
Find the Treasury Coalition’s official website here.
Matt Packer is a freelance business, finance and leadership journalist