Monetary Policies in Response to COVID-19



This paper focuses on the preferential monetary measures adopted by BRITACOM jurisdictions that consist of 36 Council Member Tax Administrations and 30 Observers, with a view to providing suggestions on supporting financial markets and reducing the negative impact of the COVID-19 pandemic. The material in this paper is mainly selected from websites of BRITACOM, OECD, IMF,  official websites of BRITACOM jurisdictions, etc.
The global economy has been deeply hit by the spread of COVID-19. To reduce the impact of the pandemic and stimulate economy, BRITACOM jurisdictions have taken various measures in response, among which monetary policy plays a significant part. This kind of policy, adopted by monetary authorities, mainly focuses on increasing money supply and providing liquidity to businesses and financial sectors, as well as restoring market confidence during pandemic lockdown.
1. Monetary Policies
1.1 Afghanistan, Islamic Republic of
Da Afghanistan Bank postponed the International Financial Reporting Standards 9 (IFRS-9) implementation to June 2021 and froze loan classifications at the pre-pandemic cutoff of end-February. It also suspended administrative penalties and fees, with no retrospective applications for breaches/noncompliance during the period of suspension.
1.2 Algeria
April 6. The Bank of Algeria announced that it was easing solvency, liquidity and non-performing loans ratios for banks. Banks are also allowed to extend payments of some loans without a need to provision against them.
1.3 Angola
March 31. The central bank announced the following measures: A liquidity line with a maximum value of 100 billion KZ will be established for the acquisition of government securities held by non-financial corporations. Bank reserves will be used to extend credit to 54 producers in the agriculture, fisheries, and industry sectors that fall under the export diversification program. Restrictions to the import of basic foods and medicines are relaxed.
1.4 Armenia
June 17. The Central Bank of Armenia reduced the policy rate by another 50 bps to 4.5 percent. The interbank market has been active, and the central bank has easily met liquidity needs so far and provided a few foreign exchange swap operations to assure sufficient liquidity in dram and in foreign exchange. 
1.5 Bangladesh
The Export Development Fund was raised to 5 billion USD, with the interest rate now fixed at 2 percent and the refinancing limit increased.
Bangladesh Bank has created several refinancing schemes amounting to a total of 380 billion TK, a 360-day tenor special repo facility and a credit guarantee scheme to support exporters, farmers, small and medium-sized enterprises (SMEs) and to facilitate the implementation of the government stimulus packages.
Bangladesh Bank has taken measures to delay non-performing loan classification, relax loan rescheduling policy for Non-Bank Financial Institutions, waive credit card fees and interests, suspend loan interest payments, impose restrictions on bank dividend payments, extend tenures of trade instruments, and ensure access to financial services.
1.6 Cambodia
The National Bank of Cambodia has implemented four measures to improve liquidity in the banking system: (i) delaying additional increases in the Capital Conservation Buffer; (ii) cutting the interest rate in its Liquidity Providing Collateralized Operations, decreasing banks’ funding costs in domestic currency; (iii) cutting the interest rate on Negotiable Certificates of Deposit to encourage banks to disburse loans; and (iv) lowering required reserves that banking and financial institutions must maintain at the National Bank of Cambodia both for local and foreign currencies. The Central Bank has also issued guidelines to financial institutions on loan restructuring for borrowers experiencing financial difficulties (but still performing) in priority sectors (tourism, garments, construction, transportation and logistics).
1.7 Cameroon
March 25. The Commission Bancaire de l’Afrique Centrale informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution.
July 22. The Bank of Central African State announced a new program of government securities purchases for the next 6 months. The purchase program is meant as a safety net, to ensure full cover of government securities issuances during the second half of 2020.
1.8 Congo, Democratic Republic of
August 10. The central bank has postponed the adoption of new minimum capital requirements and encouraged the restructuring of non-performing loans.
The central bank announced measures to reduce contamination risks in bank notes and promote the use of e-payments.
1.9 Côte d’Ivoire
March 25. The West African Development Bank decided to grant the West African Monetary and Economic Union member countries 120 billion XOF in concessional loans (15 billion XOF per country) to be disbursed immediately. These loans benefit from an interest subsidy mechanism financed by the Central Bank of West African States and the West African Monetary and Economic Union Commission with 25 billion XOF and 15 billion XOF, respectively.
1.10 Cyprus
March 29. The Parliament passed a bill providing a general moratorium on loan repayments for all creditworthy borrowers until the end of December 2020.
April 10. The Central Bank announced additional capital release measure, with a twelve-month extension of the phased-in introduction of Other Systemically Important Institutions capital buffer. This corresponds to a release of additional funds of approximately 90 million € as of January 1, 2021.
1.11 Ecuador
March 24. Announcement of extraordinary deferrals of credit obligations, including those from public banks, and a requirement for additional generic provisioning on banks' gross lending portfolio during 2020.
March 29. Selling of gold by the Central Bank, to obtain liquidity (300 million USD).
1.12 Ethiopia
The central bank has provided 15 billion birr (0.45 percent of GDP) of additional liquidity to private banks to facilitate debt restructuring and prevent bankruptcies. It has also provided 33 billion birr of additional liquidity to the Commercial Bank of Ethiopia.
1.13 Gabon
July 22. Extraordinary Monetary Policy Committee meeting the Bank of Central African States announced a new program of government securities purchases for the next 6 months. 
1.14 Gambia
May 28. The central bank has used 855 million GMD of retained earnings to increase its statutory capital and pay some of the central government liabilities to the Central Bank.
1.15 Georgia
June 1. Starting June 1, the National Bank of Georgia launched a new tool for liquidity management to support the financing of small and medium-sized businesses in Georgia.
1.16 Germany
The authorities extended all European Central Bank (ECB)-issued regulatory and operational relief to German banks under national supervision. In addition to measures at the euro area level: (i) release of the countercyclical capital buffer for banks from 0.25 percent to zero; (ii) additional 100 billion € to refinance expanded short-term liquidity provision to companies through the public development bank, in partnership with commercial banks; and (iii) following the structure of the former Financial Stabilization Fund, 100 billion € is allocated within the Economic Stabilization Fund to directly acquire equity of larger affected companies and strengthen their capital position. 
1.17 Greece
The European Central Bank has expanded its asset purchase program by an overall 870 billion EUR (7.3% of euro area GDP) until the end of 2020, while opening the door to freeing its self-imposed limits. Greece’s government bonds are included as eligible assets for this program.
On the supervisory front, the European Central Bank has temporarily lowered bank capital requirements and introduced flexibility regarding the treatment of non-performing loans.
1.18 Hungary
April 20. The central bank also announced the Funding for Growth Scheme Go! with 1,000 billion HUF(2.1% of GDP). Together with other lending schemes for banks, this provides a total of 1,500 billion HUF (3.2% of GDP) of lending source for SMEs.
May 4. The central bank announced a new government securities purchase program and a new mortgage bond purchasing program that targets securities with a maturity exceeding 3 years. Initially, 1,000 billion HUF (2.1% of GDP) are made available for government securities and 300 billion HUF (0.6% of GDP) for mortgage bonds.
May 7. The central bank provided 80 billion HUF (0.2% of GDP) to banks, including 20 billion HUF of loans with 3-year maturity, and 60 billion HUF of loans with 5-year maturity, both at a fixed interest rate of 0.9%.
1.19 Indonesia
April 14. Bank Indonesia cut the reserve requirement ratio by 200 basis points for conventional banks and 50 basis points for islamic banks (effective from May 1). BI also raised the macroprudential liquidity buffer ratio by 200 basis points for conventional banks and 50 basis points for islamic banks; to be fulfilled only via government bonds purchased in the primary market.
1.20 Iran, Islamic Republic of
The Central Bank of Iran has (i) announced the allocation of funds to import medicine; (ii) agreed with commercial banks that they postpone by three months the repayment of loans due in February 2020; (iii) offered temporary penalty waivers for customers with non-performing loans; and (iv) expanded contactless payments and increased the limits for bank transactions in order to reduce the circulation of banknotes and the exchange of debit cards.
1.21 Italy
Key measures adopted in the government’s Cura Italia’ and the Liquidity Decree emergency packages include: a moratorium on loan repayments for some households and SMEs, including on mortgages and overdrafts; state guarantees on loans to all businesses; incentives for financial and non-financial companies in the form of Deferred Tax Activities; state guarantee to the state development bank—Cassa Depositi e Prestiti—to support lending and liquidity to banks to enable them to finance medium- and large-sized companies; con-insurance scheme for exporters.
Securities market authority decided to maintain until October lower minimum threshold beyond which it is required to communicate the participation in a listed company. These measures are aimed to contain the volatility of the financial markets and to strengthen the transparency of the holdings in the Italian companies listed on the Stock Exchange.
1.22 Kazakhstan
April 21. The National Bank of Kazakhstan set temporary limits on the amount of cash that legal entities are permitted to withdraw from their bank accounts. The new measure will be effective starting from June 1, 2020 until December 31, 2020. 
July 20. The Central Bank reduced the base rate to 9.00% per annum with a narrowing of the interest rate corridor to +/- 1.5 percentage points. 
1.23 Kuwait
The Central Bank of Kuwait (CBK) implemented the following measures: (i) Committed to provide liquidity if needed; (ii) Reduced interest rates on all monetary policy instruments by 1 percentage point, following the U.S. Fed’s decision to cut interest rates to zero; (iii) Instructed banks to delay loan payments from companies affected by the shock for six months; (iv) Instructed exchange companies providing services through applications and online to open accounts using Electronic Know Your Customer (EKYC) and to link payments through SMS for existing clients, with the maximum amount of transfer not exceeding 1500 KD per month; (v) Instructed banks to provide SMEs affected by the shock with financing at maximum of 2.5% interest rate; (vi) Decreased the risk weights for SMEs (from 75 percent to 25 percent) in calculation of risk-weighted assets for determining capital adequacy; (vii) Reduced banks’ capital adequacy requirements by 2.5 percentage points to 10.5; (viii) Reduced the regulatory Net Stable Funding Ratio and Liquidity Core Ratio from 100 percent to 85 percent, and the Liquidity Ratio from 18 percent to 15 percent; (ix) Increased the Loan-to-Value limits for land purchase for residential projects from 50 to 60 percent, for existing homes from 60 to 70 percent, and for home construction from 70 to 80 percent.
1.24 Mongolia
March 18. The Bank of Mongolia (BOM) and the Financial Regulatory Commission implemented temporary financial forbearance measures on prudential requirements, loan classifications, and restructuring standards. 
April 13. The BOM: (i) cut the policy rate by 100 bps to 9 percent and (ii) allowed existing consumption loan borrowers to defer their principal and interest payments by up to 12 months.
1.25 Morocco
March 29. The Central Bank of Morocco announced a series of monetary measures to support access to credit for businesses and households by enhancing banks’ refinancing capacity with the Central Bank. Other measures have been taken to reinforce the specific refinancing program for the benefit of very small enterprises and SMEs by integrating, in addition to investment credits, operating credits and increasing the frequency of their refinancing.
April 15. And for a period of two years, the Central Bank established a credit line for refinancing new loans disbursed in favor of micro, small & medium enterprises, as part of the integrated business support and financing program.
Morocco’s stock market regulator, the Capital Market Authority, issued a communiqué capping the maximum variation thresholds for the value of shares on the Casablanca Stock Exchange. Depending on the mode of transaction or the nature of the security (shares or bonds), these prices can no longer vary by more than 2% or 4%.
1.26 Myanmar
April 9. The Central Bank of Myanmar announced a temporary reduction in banks’ required reserve requirement ratio from 5.0% to 3.5% of deposits till September 30, 2020. It also announced a temporary revision to the formula for calculating the liquidity ratio, increasing the weight of government treasury bonds with a remaining maturity of more than one year from 50 percent to 90 percent. 
1.27 Nepal
March 29. The Nepal Rastra Bank (NRB) temporarily relaxed reporting norms and announced that bank and financial institutions will not be charged or penalized for their non-compliance with regulatory and supervisory requirements in April. The size of the Refinance Fund has been increased to provide subsidized funding for banks willing to lend at a concessional rate to priority sectors including small and mid-size enterprises affected by the pandemic.
April 29. Businesses in affected sectors, if they can show the needs, can qualify for additional working capital loans of up to 10 percent of the approved amount of their existing working capital loans, to be repaid within a year at most.
July 17. The NRB requires banks to increase their loans to priority sectors, such as agriculture, energy, tourism, and micro, small and mid-size enterprises, to 40 percent from 25 percent by 2024.
1.28 New Zealand
March 20. The Reserve Bank of New Zealand announced measures to supply banks with more liquidity via both foreign exchange swaps and the reinstated Term Auction Facility, which offers banks term funding of up to one year against a range of collateral. It also put in place with the US Federal Reserve a 30 billion USD swap arrangement for at least six months.
April 30. The Reserve Bank of New Zealand decided to remove mortgage loan-to-value ratio (LVR) restrictions for 12 months starting from May 1, to ensure LVR restrictions does not impede the mortgage deferral scheme implemented in response to the COVID-19 pandemic.
1.29 Nigeria
March. The Central Bank of Nigeria (CBN) maintained its current monetary policy rate and introduced the following measures: (i) reduce interest rates on all applicable CBN interventions from 9% to 5% and introduce a one year moratorium on CBN intervention facilities; (ii) create 50 billion Naira (139 million USD) in targeted credit facilities; (iii) liquidity injection of 3.6 trillion Naira (2.4% of GDP) into the banking system, including 100 billion Naira to support the health sector, 2 trillion Naira to the manufacturing sector and 1.5 trillion Naira to impacted industries.
1.30 Pakistan
The State Bank of Pakistan (SBP) introduced temporary regulatory measures to maintain banking system soundness and sustain economic activity. These include: (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent; (ii) increasing the regulatory limit on extension of credit to SMEs by 44 percent to 180 million PKR; (iii) relaxing of the debt burden ratio for consumer loans from 50 percent to 60 percent; (iv) allowing banks to defer clients’ payment of principal on loan obligations by one year (with a total of 642 billion PKR being deferred to date); (v) relaxing regulatory criteria for restructured loans for borrowers who require relief beyond the extension of principal repayment for one year; and (vi) suspending bank dividends for the first two quarters of 2020 to shore up capital.
1.31 Papua New Guinea
The Bank of Papua New Guinea (BPNG) has announced a program to repurchase government securities in the secondary market to provide liquidity to the private sector. To cover for the 3-month loan repayment holiday for borrowers severely affected by the COVID-19 crisis, BPNG suspended loan-loss provisioning for affected loans during this period. A total of 806 million PGK is expected to be paid out the members from their superannuation savings.
1.32 Peru
April 9. The Central Bank of Peru cut the policy rate from 1.25 to 0.25 per cent. It has provided liquidity to the financial system through repo operations. Reserve requirements for commercial banks have been reduced, both in domestic and foreign currency, to release around 2000 million PEN (600 million USD).
1.33 Qatar
March. The Qatar Central Bank (QCB) has lowered its policy rates twice in line with the US Federal Reserve (to maintain the currency peg). The QCB also provides additional liquidity to banks operating in the country through a special repo window at zero interest rate for postponing loan installments or granting new loans.
1.34 Rwanda
March 18. The central bank announced liquidity support measures: (i) an extended lending facility worth 50 billion RWF available to liquidity-constrained banks for the next six months. Under this facility, banks can borrow at the policy rate and benefit from longer maturity periods; (ii) Treasury bond purchases through the rediscount window for the next six months; and (iii) lowering of the reserve requirement ratio by 100 basis points, from 5 to 4 percent, effective from April 1. Loan repayment conditions were also eased for impacted borrowers, and charges on electronic money transactions waived for the next three months. The central bank is also working closely with the Minister of Economy and Planning to provide support to microfinance institutions.
1.35 Samoa
A proposed fiscal and economic response package includes provision of a three-month grace period to be applied for all loan payments. To compensate part of the losses in interest income, local commercial banks will receive payments from the government.
1.36 Saudi Arabia
March 14. A 50 billion SAR (2 percent of GDP) package is announced to support the private sector, particularly SMEs, by providing funding to banks to allow them to defer payments on existing loans and increase lending to businesses.
June 1. The central bank will cover fees for private sector stores and entities for point-of-sale and e-commerce transactions for 3 months. The central bank has also instructed banks to delay payments of loans extended to all Saudi employees by three months without extra fees, to provide financing needed by customers who lose their jobs and to exempt customers from various banking fees.
1.37 Senegal
The regional central bank for the West-African Economic and Monetary Union has: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with COVID-19 related repayment difficulties to postpone for a 3-month-renewable period debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. 
1.38 Serbia
May. Local-currency denominated corporate bonds became eligible for open market operations and as collateral for banks to receive daily liquidity loans and short-term liquidity from the National Bank of Serbia (NBS).
June 11. The NBS relaxed the loan-to-value cap for first-home buyers mortgage loans, increasing the limit from 80% to 90%.
July. The NBS set up a repo line arrangement with the European Central Bank (ECB) to address possible euro liquidity needs of Serbian financial institutions. Under this repo line, the ECB provides euro liquidity (up to 1 billion EUR) to the NBS in exchange for adequate euro-denominated collateral. Moreover, a new 2-month moratorium was introduced, relieving debtors of repaying their liabilities during August and September.
1.39 Sierra Leone
March 18. The central bank held an emergency Monetary Policy Committee meeting. They decided to: (i) reduce the monetary policy rate (mostly signaling) by 150 bps from 16.5 percent to 15 percent, effective March 19; (ii) create a special credit facility (500 billion Leone) to support production, procurement and distribution of essential goods; and (iii) extend the reserve requirement maintenance period from 14 to 28 days to ease tight liquidity.
1.40 Singapore
March 19. The Monetary Authority of Singapore (MAS) announced the establishment of a 60 billion USD swap facility with the US Federal Reserve. The MAS is drawing on this facility to provide USD liquidity to Singapore banks through weekly auctions held every Monday since late March. On July 30, MAS announced that the swap facility has been extended to the end of March 2021.
April 8. The MAS announced a 125 million $ support package to sustain and strengthen financial services and FinTech capabilities. The package, funded by the Financial Sector Development Fund, has three main pillars: (i) supporting workforce training and manpower costs; (ii) strengthening digitalization and operational resilience; and (iii) enhancing FinTech firms’ access to digital tools.
1.41 Slovakia
The National Bank of Slovakia (NBS) has implemented the following measures as part of a coordinated approach with the ECB and the European Banking Authority (EBA): (i) banks may partially meet Pillar 2 requirements using capital instruments that do not qualify as common equity tier 1 (CET1) capital; (ii) banks may, in duly justified cases, temporarily operate below the level of capital defined by the capital conservation buffer; (iii) banks will also, where justified, be temporarily exempted from full compliance with the liquidity coverage ratio. The NBS decided to reduce the capital conservation buffer rate from 1.5 to 1.0 percent as of Aug 1, 2020, repealing its previous decision to increase the rate to 2.0 percent. 
1.42 Somalia
The Central Bank is releasing funding-for-lending support for medium and small enterprises through commercial banks, initially for 2.9 million $ with more in the pipeline and encouraging commercial banks to use excess liquidity to support lending. 
The Central Bank is also identifying an emergency response group and developing a crisis communication strategy. In coordination with international partners, it is exploring measures to ease the inflow of current transfers, including remittances.
1.43 South Korea
March 26. The Ministry of Economy and Finance, the Financial Services Commission and the Bank of Korea eased the foreign exchange market stability rules to expand foreign currency liquidity: (i) Raising ceilings on the foreign exchange derivatives positions of local banks (from 40% to 50% of their equity capital) and foreign bank branches in Korea (from 200% to 250% of their equity capital). (ii) Temporarily lifting the levy on non-deposit foreign exchange liabilities of financial institutions. (iii) Temporarily lowering the foreign exchange liquidity coverage ratio by 10 percentage points to 70%.
1.44 South Sudan
July 7. The Bank of South Sudan (BSS) introduced additional measures to mitigate the impact of the pandemic. It further cut the Central Bank Rate by 3 percentage points, down to 10 percent, further reduced the Reserve Requirement Ratio to 10 percent, and suspended the recent regulation of higher minimum paid-up capital for commercial banks. BSS also reiterated that the South Sudanese Pound (SSP) is the only legal tender of domestic debt payments and also encouraged banks to restructure loans if needed. 
1.45 Surinam
May 20. The central bank announced that it would lower the domestic currency reserve requirement from 35% to 27.5%. The central bank has also instructed banks to provide loans to persons or businesses affected by COVID-19 at an interest rate of 7.5%, below market lending rates. On the regulatory side, commercial banks may now grant 3 to 6 months deferral of payments to companies, institutions and individuals who are affected by COVID-19.
1.46 Tajikistan
March. The National Bank of Tajikistan (NBT) has taken measures to ease monetary and liquidity conditions and adopted an Action Plan to address effects of pandemic on the banking sector. It allowed a one-off 5 percent exchange rate depreciation and greater exchange rate flexibility to align the official rate with the market rate is also envisaged. The policy rate was cut by 100 basis points to 11.75 percent in April. On the face of mounting pressures, it lowered reserve requirements, relaxed enforcement of prudential requirements, and provided foreign exchange liquidity. It is also promoting the use of electronic payments to facilitate remote transactions.
1.47 Timor-Leste
May 11. The authorities introduced a moratorium on the fulfillment of capital and interest obligations arising from credit agreements, which delayed maturity by three months and reduced debtors’ interest payment obligation to 40% of the original amount with the remaining 60% financed by the government.
1.48 Ukraine
March 17. The National Bank of Ukraine (NBU) has launched various initiatives to support banks during the crisis, including postponing stress testing and the introduction of capital buffers and cancelling field checks.
March 19. The NBU has introduced a long-term refinancing mechanism for banks for up to 5 years, in addition to standard short-term refinancing instruments.
April 11. Effective on April 11, The NBU has modified the calculation of reserve requirements so as to free up additional domestic currency liquidity.
Penalties on clients not servicing loans during the period March 1 to April 30 should not apply if there are reasonable grounds.
2. Main Features
The monetary policy adopted by monetary authorities of nations mainly falls into four categories. 
2.1 The first category, which is the most widely used, increases money supply in financial sector so as to maintain liquidity of the whole market during the pandemic. Measures of this category include lowering required reserve ratio or policy rate for banks and providing extra funding for financial institutions to encourage them to lend out. 
2.2 The second is to ease the burden of borrowers. Measures such as providing moratorium, eliminating credit fees and penalties, and facilitating credit for private sector to help business and household to get through the economic shock. 
2.3 The third category uses special expenditure to help those who/which are more influenced. Many governments provided loans and programs to certain industry such as tourism and exporters.
2.4 The last category contains other measures adopted to ensure market stability and confidence, for instance, several governments release guidelines or bans during the pandemic to regularize market activities.

    NO. 3(A) Longqing Street, Economic and
    Technological Development Area,
    Beijing, CHINA


    BRITACOM Secretariat Office