April 15, 2020 | Blog post by Nicolas Véron, with prior publication by PIIE and Bruegel.
The new Fed rule is a material breach of Basel III, a new development as the US had hitherto been the accord’s main champion. This action undermines the global order without being ostensibly justified by narrower considerations of US national interest.
The financial shock surrounding the COVID-19 pandemic has prompted the US Federal Reserve to temporarily loosen an important capital-to-asset ratio requirement for American banks. In so doing, the US is walking away from a decade-long commitment to global financial reform that it made in the wake of the global economic meltdown of 2008-10.
This breach, together with other recent US government actions, might signal a broader departure from the Trump administration’s general adherence in its first three years to international financial standards, an area in which it had so far not acted against the global rules-based order. The motives for the breaches are not compelling enough to offset the downsides for the global financial system and for the United States itself.
The new Fed rule breaches the Basel III Accord
On 1 April, the Federal Reserve announced a temporary change to a regulatory requirement on banks, known as the supplementary leverage ratio (or simply the leverage ratio). The leverage ratio, calculated as regulatory capital (or own funds) divided by unweighted assets, supplements the more refined ratios of capital to risk-weighted assets, which are the mainstay of bank capital regulation. While a crude measure of capital strength, the leverage ratio is an apt response to the incentives banks have to underestimate risk-weights. It acts as a simple sanity check, thus the epithet ‘supplementary.’
The new change, which the Fed adopted unanimously, exempts banks’ holdings of US sovereign debt (Treasuries) and deposits at the Fed from the assets total in the ratio calculation, until end-March 2021. This exemption reduces the denominator, making it easier for banks to meet their minimum-ratio requirements during that period. By exempting sovereign exposures, the rule deviates from the internationally agreed definition of the leverage ratio that is part of the Basel III accord, initially published in 2010 by the Basel Committee of Banking Supervision on the back of a mandate given by the G20 in 2008-09.
The Fed’s decision echoes separate congressional action in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on 27 March 2020. Section 4014 of CARES gives banks the option of ignoring an accounting obligation known as current expected credit loss (CECL) provisioning. Most banks started implementing this obligation in January 2020. CECL was introduced in response to a 2009 mandate from the G20, which was implemented in 2016 by the US Financial Accounting Standards Board (FASB), and separately earlier in 2014 by the International Accounting Standards Board (IASB), whose standards are applied in most jurisdictions other than the United States. By opting out of CECL, banks can avoid booking losses that are expected from the dramatic deterioration in the economic outlook from the pandemic and can thus make their capital positions look correspondingly more flattering.
The Fed’s rule change and the Congress’s action in the CARES Act suggest an incipient trend of US departures from the comprehensive package of global financial standards enacted by various bodies under the G20’s authority since 2008. One earlier signal of this came in November 2019, when the Fed and other federal bank regulators made a change – also in breach of Basel III – to an arcane rule on measuring counterparty credit risk in certain transactions.
To be sure, the United States is far from the only offender, let alone the worst. Most notoriously, in 2014, the Basel Committee found the European Union “materially non-compliant” with Basel III, the only jurisdiction in that category – partly for similar counterparty-credit-risk shenanigans as with the US rule of November 2019. Nor are the recent American breaches wholly unprecedented, if one goes far enough back. In the years before the 2008-10 financial crash, US authorities were reluctant to adopt the previous Basel II accord, for prudential reasons that the subsequent crisis experience largely vindicated. But from the first G20 summit in late 2008 up to recent months, the United States was the leading champion of G20 financial reform, and that compliant stance was maintained under the first few years of the Trump administration. Even as some financial rules were relaxed, they were kept above the minimum levels set in international accords. Indeed, the final bits of Basel III were agreed in December 2017 after Randal Quarles, a Trump appointee, replaced his Obama-era predecessor Daniel Tarullo as the Fed’s point person in Basel Committee discussions.
The motivations for these changes are unconvincing
The US departures from global standards respond to specific demands from the US banking industry and some federal agencies, but whether they are in the US national interest is questionable. The experience so far of the COVID-19 crisis is precisely that strong capital standards, such as Basel III, are helpful protections against unforeseen events. Globally-applied minimum prudential standards ensure a degree of international financial stability from which the United States benefits. Standards also prevent the most blatant competitive distortions in international banking markets – a key driver of the first Basel accord in the 1980s. It is not clear that the leverage ratio breach has benefits that offset the loss of such advantages.
The motivations for the Fed’s new rule appear to include the fact that the pandemic-induced volatility has disrupted the Treasuries market and has also resulted in a sudden influx of deposits into US banks. If banks are less constrained by the leverage ratio limit, so the thinking appears to go, they can buy more Treasuries and thus contribute to more orderly markets. But it is doubtful that leverage-ratio-related constraints played any role in the recent Treasuries market turmoil. As for the incoming deposits, banks can place them into deposits at the Federal Reserve, rather than Treasuries. A temporary exemption for such central bank deposits from the leverage ratio would not have breached Basel III in its current form. Moreover, the exemption for US sovereign exposures creates a highly problematic precedent that other jurisdictions with less creditworthy sovereign issuers might now be tempted to emulate, against the Basel Committee’s efforts to move its members towards consensus on a more rigorous recognition of the risks that such exposures might carry. Similarly, concerns about procyclical impacts of CECL could and should have been addressed by using the standard’s embedded flexibilities, similar to what was recommended outside the United States by the IASB and implemented by the euro area and the United Kingdom, among others.
By breaching G20 standards, these decisions contribute to institutional erosion at the global level and domestically. The breaches of Basel III are especially galling since Quarles now chairs the Financial Stability Board, an umbrella body whose permanent secretariat is located in the same building in Basel as the Basel Committee. On the domestic front, the Fed also acted alone, as the other federal banking regulators, including the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, did not endorse its new rule as is customary. The congressional override of FASB (and, in the same move, of the US Securities and Exchange Commission, which delegates to the FASB standard-setting authority), also is without precedent in nearly half a century.
The United States would lose from abandoning global financial standards
Possibly the recent breaches are one-offs, not the start of a broader trend of divergence. In a formal sense, both the Fed’s action on leverage ratio and Congress’s on accounting are temporary measures, even though they could be extended. They could, however, mirror a broader current pattern of the United States undermining the global rules-based order, from which the financial services area has been somehow ring-fenced until now. Be that as it may, these breaches are bad news for the authority of the G20, the Financial Stability Board and the Basel Committee, but are probably not crippling. Just as US agencies did not implement Basel II, and the FASB has declined to converge its standards with the IASB’s global standards, global financial standard-setting bodies can probably live with US lapses of compliance, at least for some time. It remains to be seen, however, how the implementation of the final piece of Basel III, which the Basel Committee has recently decided to delay by a year because of the COVID-19 pandemic, will be ultimately affected by an eclipse of US leadership in that area.
If the noncompliance trend is confirmed, the most damaging consequences could be to the United States itself. The chair of the foundation that hosts and oversees the FASB, in a letter that unsuccessfully attempted to persuade Congress not to pass Section 4014 of the CARES Act, argued that the action “fundamentally undermines the longstanding and time-tested approach in the U.S. to transparent, rigorous and independent accounting standard-setting, which market participants rely upon and that plays a critical role in supporting our capital markets and broader economy.”
The United States has benefited immensely from upholding best-in-class financial standards and regulations. If these standards are lowered, US economic achievements, all things equal, might be undermined as well.
Compliments of Nicolas Véron.

April 8, 2020 |
Today, the Commission is launching ESCALAR, a new investment approach, developed together with the European Investment Fund (EIF), that will support venture capital and growth financing for promising companies, enabling them to scale up in Europe and help reinforce Europe’s economic and technological sovereignty. It will provide up to €300 million aiming to increase the investment capacity of venture capital and private equity funds, triggering investments of up to €1.2 billion, or four times the original investment, to support promising companies.
With the launch of ESCALAR, the Commission is delivering on one of the actions announced in the new SME strategy to improve access to finance for SMEs. This initiative is particularly relevant in the difficult economic situation SMEs are facing currently due to the coronavirus outbreak. It will support innovative companies during, and after, the crisis, to ensure that Europe can develop and stay at the helm of global technological developments and accelerate its economic recovery.
Commissioner for Internal Market Thierry Breton said: “Commission is deploying all tools at its disposal to help companies overcome the coronavirus crisis. Today, we are strengthening our support to the many promising European companies to ensure they can continue to develop and grow in Europe. With ESCALAR, we are helping unlock significant additional private investments to support the creation of tomorrow’s market leaders.”
EIF Chief Executive Alain Godard said: “Scale-ups need to find growth finance to take their businesses to the next level. ­­ By improving the financing environment, more EU scale-ups may choose to stay in Europe to continue their growth, which is even more crucial now in this time of crisis, when growth companies may need additional support from their investors. The ESCALAR Pilot can help the funds themselves to scale up, resulting in larger fund sizes, thereby supporting the EU’s late stage venture capital and growth-focused fund ecosystems.”
In its pilot phase, ESCALAR will provide up to €300 million backed by the European Fund for Strategic Investments (EFSI). This will aim to increase the investment capacity of venture capital and private equity funds, triggering investments of up to €1.2 billion. Interested fund managers can participate in the scheme by responding to the open Call for Expressions of Interest published today by the EIF.
ESCALAR aims to support fund closing by committing up to 50% of the size of the fund. It targets both new funds focusing on financing scale-ups, as well as existing funds wishing to support high potential companies from their portfolio to further develop their growth.
The current ESCALAR call is a pilot phase for 2020 with the objective that ESCALAR, based on this pilot experience, becomes a mainstream European financial instrument, alongside the existing financial instruments after 2020, within the next multiannual framework (2021 – 2027). Analysis and selection of the funds is managed by the EIF.
Background information:
The current coronavirus outbreak has highlighted the fact that many companies in Europe encounter difficulties when looking for sufficient investments to develop and scale up in Europe. It is estimated that up to 90% of the fast-growing companies have problems financing their growth in Europe. This means either that companies fail to find finance in Europe and have to suspend operations or that promising European start-ups move out of Europe in their scale-up phase.
Due to the coronavirus crisis, the exit routes (such as trade sales or initial public offerings) for venture capital and private equity funds are temporarily closed, implying that these funds will have to support fast-growing portfolio companies for longer. An investment from ESCALAR will support funds making investments (including follow-on investments) in fast-growing companies, allowing them to get through this period of economic disruption.
ESCALAR aims to address some of these issues, by strengthening the availability of venture capital and growth financing in Europe. Venture capital, a form of financing of start-ups that have been deemed to have high growth potential, and growth finance are vital to a well-functioning Capital Markets Union, but remain underdeveloped in Europe, especially in the scale-up phase.
The initiative is complementary to existing financing instruments. It is unique in giving investors the possibility of a higher return, as the return for the ESCALAR shares is both partially subordinated and capped. This can help fund managers raise more private funds to increase their funding capacity and better meet the large financing needs of European scale-ups, especially in difficult times.
Compliments of the European Investment Fund.

April 16, 2020 | 
Today’s meeting takes place against the backdrop of a global public health challenge that is having profound consequences, particularly here in Europe.
Over just a few weeks, we have seen the ever-increasing impact of this virus on our citizens, our public services and our economies.
I’m sure we all join in expressing our sympathies to the bereaved, our best wishes to those who are ill and our gratitude to all those who are engaged in tackling this virus, particularly our frontline workers right across the Union.
Of course, we had planned to meet last month but that could not happen. I have tried, over the past number of days, to speak to as many of you as possible. To those of you with whom I was unable to speak directly, I hope that I can do so very soon and to all of you, I want to express my strongest commitment to work throughout my mandate as EU Trade Commissioner in close cooperation with you all.
Impact of COVID-19/Economic Recovery
The COVID-19 pandemic will have serious short and long-term consequences on the global economy and on trade, besides its immediate major consequences for health.
At this stage, it is difficult to draw firm conclusions about the impact on international trade, but we have been doing some analysis and we will soon share with the Trade Policy Committee a short background paper with the estimated impact of the crisis on EU exports and imports.
An open trade policy will need to be part of any future economic recovery plan.
The full benefits can be reaped only if there is a suitable international environment, which limits protectionism and encourages openness, cooperation and coordination, all in a stable legal environment. We need open and rules-based trade and to lead by example, urging our international partners to commit to the same.
Rules-based trade is essential for business. It provides a stable and predictable framework and our efforts to modernise the WTO therefore remain essential. The leadership we display in restoring global dialogue will be closely watched by others.
In terms of drawing conclusions from the crisis, we need to think about how to ensure the EU’s strategic autonomy. Strategic autonomy does not mean that we should aim for self-sufficiency. Given the complexity of supply chains, this would be an unattainable goal. We need an evidence-based discussion on what it means to be strategically autonomous. For example, we need to look at how to build resilient supply chains, based on diversification, acknowledging the simple fact that we will not be able to manufacture everything locally. We need to explore how to address strategic stockpiling. We need to factor in the European dimension, as it is patently clear that these goals can only be achieved if we act together.
Export Authorisation Scheme
But, let me turn to some of the initiatives that we have taken.
Last month we adopted an emergency measure requiring export authorisations for certain items of personal protective equipment (PPE).
This measure will expire on 25th April. Earlier this week, the Commission consulted the safeguard committee on a draft implementing act with the new export authorisation scheme which is more focused in terms of products and limited in time. It meets the test of being targeted, proportionate, transparent, and time-limited. It upholds the principle of international solidarity, by fully exempting humanitarian aid and by recognising the dependency of our closely integrated Western Balkans neighbours, who will be exempted from the scheme along with the EFTA countries, among others.
While the measure will be considered in the appropriate Comitology Committee, I look forward to hearing your initial political response to the Commission’s proposal this morning.
Notwithstanding some misrepresentations of the existing scheme, it is worth repeating that it is not an export ban.
FDI screening Guidance
The Commission has also adopted guidelines on foreign direct investment, free movement of capital and the protection of Europe’s strategic assets, before the EU’s FDI Screening Regulation fully applies.
This Guidance focuses on two main concerns:
• The first and immediate one is about protecting the EU’s strategic assets. This should also include its healthcare capacities – such as production of medical or protective equipment – or related industries such as research establishments, for instance developing vaccines. These are critical in the current health crisis.
• The second and broader concern relates to the current volatility and undervaluation of European stock markets. This economic vulnerability could result in a sell-off of critical infrastructure or technologies, which should be avoided.
FDI screening mechanisms play a role in addressing concerns on maintaining our strategic assets. Today more than ever, the EU’s openness to foreign investment needs to be balanced by appropriate screening tools. 
Those Member States that have screening mechanisms should make full use of them and those that do not have screening mechanisms should set-up such mechanisms.
Leaders welcomed the Commission’s guidelines in the European Council. They called on the Member States “to take all necessary measures to protect strategic assets and technology from foreign investments that could threaten legitimate public policy objectives”. They underlined that “this will contribute to the EU’s strategic autonomy, during the crisis and afterwards.”
As a follow up to those clear indications, and in anticipation of the EU rules entering into force in October 2020, we should use all available options to identify and address risks for security or public order brought by foreign acquisitions of particular businesses, infrastructures or technology.
Given the interdependencies that exist in an integrated market like ours, I invite you to coordinate your efforts and to share information ahead of the entry into force of the new rules. Remember, the acquisition of a company in your country may have a security effect in other Member States or it may negatively affect a project of Union interest.
The Commission is ready to help in the sharing of information and coordination already. We have already reached out to your authorities and we are ready to work together to discuss possible risks and solutions.
My services will present practical ways to do so in the near future but, in the meantime, I would be grateful for a political indication of your readiness to work together.
In light of the current extraordinary circumstances, the Commission is ready to start an informal cooperation with Member States on FDI screening. This cooperation could consist of two elements:
• 1) Monitoring of ongoing and planned foreign acquisitions and sharing the relevant information among Member States. The Commission would be ready coordinate and to feed into this process. At the same time, we would also expect Member States to share with us relevant information to which they may have access.
• 2) Voluntary exchanges on pending FDI screening cases among Member States. The Commission would be ready to be part of these exchanges and to provide relevant information it may have.
In parallel, I cannot but insist on the fact that for a security screening mechanism to be effective, we need the involvement and cooperation of all Member States, including by having in place the required tools and access to information in your respective territories.
While I am conscious of and fully respect Member States’ competence in this area, I believe that we can and should do more. I would appreciate your views as to how, working together, we can find ways to strengthen existing rules. It would be a matter of Member States doing more and of how could the Commission help, to address together the challenges and vulnerabilities that this crisis may uncover and which may affect the Union as a whole.
Tariff liberalisation
In the course of my discussions with a number of you, the idea arose of a collective response from the international community and reinforced global preparedness for future crises.
In preparing such a collective response, the EU will play and its part, which could include consideration of such actions as
• temporarily suspending the tariffs on most needed medical equipment to provide access to affordable healthcare products;
• calling for an international undertaking to suspend tariffs on the COVID-19 related products and facilitate access of medicines to their countries, as some of our partners have already done; and
• launching a more comprehensive negotiation of a plurilateral agreement that would lead to a level playing field, including the possible permanent liberalisation of tariffs on medical equipment and help to ensure that global supply chains can operate freely in this critical sector, and that our healthcare manufacturers could benefit from new market opportunities.
Of course, such a course of action would require some further analysis and careful calibration in terms of ensuring that it has the intended effect but that is something that I would be prepared to undertake and discuss with colleagues in the Commission.
G20 Trade Ministerial
As I mentioned initially, finding a path out of the crisis requires not only that we act together as European Union but also as part of the global community.
At the extraordinary G20 Trade Ministerial meeting on 30th March, I proposed seven concrete proposals for immediate action, which targeted both trade facilitation and trade liberalisation. Our “seven-course menu” also included export finance.
While the EU left its imprint on the final G20 statement and many supported our proposals, I regret that the final statement was not as ambitious as we had proposed or as we would have liked.
WTO Dispute Settlement
Before concluding, I would like to update you on steps taken to protect the rules-based system of dispute settlement in the WTO.
Working with like-minded WTO members since the effective collapse of the Appellate Body last December, we have developed the Multi Party Interim Arbitration Arrangement as a stop-gap to maintain an independent, two step dispute settlement function.
There are 15 co-signatories alongside the EU, including some of the biggest users of the system, such as Brazil and China.  I have also extended a broad invite to the entire membership to join, underlining the inclusive nature of the arrangement.
There will be 10 arbitrators on the MPIA roster.  The EU has the option of nominating a candidate.  The nominee will need to be submitted by the end of May.  We will notify the TPC of work on this in due course, respecting best practices used for the nomination of members of the Appellate Body heretofore.
Conclusion – on-going work in EU trade agenda
Had there been more time, there was a lot more I could have said about our continuing efforts to ensure that our trade policy delivers – whether the agreement reached on Public Procurement at sub-central level with Mexico, our ongoing negotiations with New Zealand, Australia Chile or China, ongoing TDI investigations or the enforcement of our rights vis-à-vis third countries.
However, I would make two concluding remarks
• rules-based trade is essential, especially in times of crisis and as part of our strategy to exit the crisis and
• equally, the EU must respect our Single Market and ensure that there are no internal barriers to intra-EU trade.
Compliments of the European Commission.

April 15, 2020
Tax and fiscal policy responses are playing a critical role in limiting the hardship caused by containment measures, and should continue to do so as governments seek to support households and businesses, protect employment and pursue economic recovery from the global pandemic, according to new OECD analysis.
Tax and Fiscal Policy in Response to the Coronavirus Crisis, a report requested of the OECD by the Saudi G20 Presidency, was presented today during a virtual meeting of G20 Finance Ministers and Central Bank Governors. The report takes stock of the emergency tax and fiscal policy measures introduced by countries worldwide. It discusses how tax and fiscal policy can cushion the impact of continued containment and mitigation policies and subsequently support economic recovery. It also outlines the major policy reforms that will be needed to prepare for restoration of public finances.
The report shows that while many governments have taken rapid, extensive and often unprecedented action, getting the support to the most vulnerable households and firms still poses significant challenges. It underlines that developing countries will need specific support – notably significant financial support – for helping health and fiscal systems withstand the current shocks.
“Tax policy responses have been strong and rightly focused to date on providing liquidity,” said OECD Secretary-General Angel Gurría. “This has helped maintain confidence through an unprecedented shock. These efforts will need to continue as containment is relaxed gradually, to ensure a strong recovery. We should meanwhile map out the trajectory to a tax system that can help restore public finances while sharing the burden evenly.”
Maintaining business cash-flow has been a core goal of the fiscal policy measures. Measures include extending deadlines for tax filing, deferral of tax payments, faster tax refunds, more generous loss offset provisions, and some tax exemptions.
Governments have also helped businesses retain their workers through short-time work schemes or wage subsidies, and have extended income support to households, eased access to and expanded eligibility for sick-leave benefits, and sometimes broadened the coverage of unemployment benefits to self-employed workers.
The report points out that as containment is gradually relaxed, expansionary fiscal policy may be needed for a sustained period to stimulate broader household consumption and business investment where recovery is anaemic. Stimulus could foster resilience to health risks and encourage decarbonisation, while policy coordination will make stimulus more effective. 
Tax policy can contribute to covering the costs of the crisis, according to the report. The unprecedented nature of the crisis should prompt debate on how wide-ranging tax reforms, including solidarity levies, carbon taxes and supporting greater progressivity across the tax system, can help governments better restore public finances. Low-income countries could benefit from new international efforts to address the challenges they face in taxing cross-border activity and offshore assets.
Addressing the tax challenges posed by digitalisation of the economy, and ensuring that Multinational Enterprises pay a minimum level of tax, will become more prominent issues after the crisis. The increased use of digital services and the need to collect more revenues could provide new impetus to efforts to reach agreement internationally, the report said.
Compliments of the OECD.

April 16, 2020
The Federal Reserve on Thursday announced that its Paycheck Protection Program Liquidity Facility is fully operational and available to provide liquidity to eligible financial institutions, which will help support small businesses.
The Small Business Administration’s Paycheck Protection Program, or PPP, guarantees loans extended by qualified lenders to small businesses so that those businesses can keep workers employed. The Federal Reserve’s facility will support the effectiveness of the PPP by extending credit to financial institutions that make PPP loans, using such loans as collateral. Supplying financial institutions with additional liquidity will help increase their capacity to make PPP loans.
Additional information on the facility, which is managed by the Federal Reserve Bank of Minneapolis on behalf of the Federal Reserve System, can be found here.
Compliments of the Federal Reserve. 

April 15, 2020
Today, the Commission, in cooperation with the President of the European Council, has put forward a European roadmap to phase-out the containment measures due to the coronavirus outbreak.
While we are still in firefighting mode, the necessary extraordinary measures taken by Member States and the EU are working. They have slowed down the spread of the virus and saved thousands of lives. However, these measures and the corresponding uncertainty come at a dramatic cost to people, society and the economy, and cannot last indefinitely.
President of the European Commission Ursula von der Leyen said: “Saving lives and protecting Europeans from the coronavirus is our number one priority. At the same time, it is time to look ahead and to focus on protecting livelihoods. Even though conditions in the Member States still vary widely, all Europeans rightly ask themselves when and in what order the confinement measures can be lifted. Responsible planning on the ground, wisely balancing the interests of protection of public health with those of the functioning of our societies, needs a solid foundation. That’s why the Commission has drawn up a catalogue of guidelines, criteria and measures that provide a basis for thoughtful action. The strength of Europe lies in its social and economic balance. Together we learn from each other and help our European Union out of this crisis.”
Commissioner for Health and Food safety Stella Kyriakides said: “Returning to normality after the corona lockdowns will require a carefully coordinated and European approach between Member States, based on science and in the spirit of solidarity. It is crucial that our healthcare systems have the capacity to treat increases in new cases, that essential medicines and equipment are available and that we have large-scale testing and tracing capacity in place. We know that this road will be long and gradual and that the consequences of this unprecedented health crisis will be long lasting. Until effective treatments and a vaccine are found, we will have to learn to live with this virus. But Europe will be back on its feet, together and united. This is the only way.”
While recognising the specificities of each country, the European roadmap establishes the following key principles:
• Timing is essential. Deciding that the time has come to begin to relax confinement should be based on these criteria:
o Epidemiological criteria showing that the spread of the disease has significantly decreased and stabilised for a sustained period.
o Sufficient health system capacity, for example taking into account the occupation rate for intensive care units, the availability of health care workers and medical material.
o Appropriate monitoring capacity, including large-scale testing capacity to quickly detect and isolate infected individuals, as well as tracking and tracing capacity.
• We need a European approach. While timing and modalities for lifting containment measures differ between Member States, we need a common framework that is based on:
o Science with public health at its centre, while acknowledging that ending restrictive measures involves balancing public health benefits with social and economic impacts.
o Coordination between Member States, to avoid negative effects. This is a matter of common European interest.
o Respect and solidarity. This is essential for both health and socio-economic aspects. At a minimum, Member States should notify each other and the Commission in due time before they lift measures and take into account their views.
• Phasing-out confinement requires accompanying measures, including:o Gathering harmonised data and developing a robust system of reporting and contact tracing, including with digital tools that fully respect data privacy;
o Expanding testing capacity and harmonising testing methodologies. The Commission – in consultation with the European Centre for Disease Prevention and Control – has adopted Guidelines today on different coronavirus tests and their performance;
o Increasing the capacity and resilience of national health care systems, in particular to address the predicted rise in infections after lifting restrictive measures;
o Continuing to reinforce medical and personal protective equipment capacities.
o Developing safe and effective treatments and medicines, as well as developing and fast-tracking the introduction of a vaccine to put an end to the coronavirus.
NEXT STEPS
The Commission’s roadmap lists concrete recommendations Member States should consider when planning to lift containment measures:
• Action should be gradual: measures should be lifted in different steps, with sufficient time left between them to measure the impact.
• General measures should progressively be replaced by targeted ones. For example, protecting the most vulnerable groups for longer; facilitating the gradual return of necessary economic activities; intensifying regular cleaning and disinfection of transport hubs, shops and workplaces; replacing general states of emergencies with targeted government interventions to ensure transparency and democratic accountability.
• Internal border controls should be lifted in a coordinated manner. Travel restrictions and border controls should be removed once the border regions’ epidemiological situation converges sufficiently. External border should be reopened in a second stage and take account of the spread of the virus outside the EU.
• The re-start of economic activity should be phased-in: there are several models that can be implemented, e.g. jobs suitable for teleworking, economic importance, shifts of workers, etc. The entire population should not return to the workplace at the same time.
• Gatherings of people should be progressively permitted, taking into account the specificities of different categories of activity, such as:
1. Schools and universities;
2. Commercial activity (retail) with possible gradation;
3. Social activity measures (restaurants, cafes) with possible gradation;
4. Mass gatherings
• Efforts to prevent the spread of the virus should be sustained, with awareness campaigns to encourage the population to keep up the strong hygiene practices and social distancing.
• Action should be continuously monitored and preparedness developed for returning to stricter containment measures as necessary.
While confinement measures are gradually lifted, there is a need to strategically plan the recovery, revitalising the economy and getting back on a path of sustainable growth. This includes enabling the twin transition towards a greener and digital society, and drawing all lessons from the current crisis for the EU’s preparedness and resilience. The Commission will develop a Recovery plan, based on a revamped proposal for the next long-term EU budget (Multiannual Financial Framework) and the updated Commission Work Programme for 2020.
Compliments of the European Commission.

April 14, 2020
The COVID-19 pandemic has caused an unprecedented human and health crisis. The measures necessary to contain the virus have triggered an economic downturn. At this point, there is great uncertainty about its severity and length. The latest Global Financial Stability Report shows that the financial system has already felt a dramatic impact, and a further intensification of the crisis could affect global financial stability.
Since the pandemic’s outbreak, prices of risk assets have fallen sharply. At the worst point of the recent selloff, risk assets suffered half or more of the declines they experienced in 2008 and 2009. For example, many equity markets—in economies large and small—have endured declines of 30 percent or more at the trough. Credit spreads have jumped, especially for lower-rated firms. Signs of stress have also emerged in major short-term funding markets, including the global market for U.S. dollars.
CONTINUE READING…
Compliments of the International Monetary Fund.

With daily updates about the economic impact of the Coronavirus (COVID-19) on businesses and questions about the relief offered by the U.S. Government agencies, EACC has put together an overview of state and federal relief available to offset economic losses. American & European small and medium size businesses are facing an unprecedented economic disruption due to the COVID-19 outbreak Congress has put together various loan programs to help those businesses.
Concrete as a first step the U.S. President signed into law the CARES Act, which offers up to $376 billion in relief for American workers and small businesses.
Programs available for relief funding are:
1. The CARES Act for Small Businesses, by the U.S. Department of Treasury: The Paycheck Protection Program (under the CARES Act) is providing small businesses with the resources they need to maintain their payroll, hire back employees who may have been laid off, and cover applicable overhead. This resource also includes the necessary application forms. 
2. Economic Injury Disaster Loan Emergency Advance, by the U.S. Small Business Administration: This loan advance will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties.
3. Paycheck Protection Program by the U.S. Small Business Administration: An SBA loan that helps businesses keep their workforce employed during the Coronavirus (COVID-19) crisis.
NEED MORE HELP:If you have questions or need assistance applying for the above relief programs, we encourage you to reach out to the EACC. We are here to help you connect you with the right resources to help you through the process and manage the labyrinth of paperwork. You can reach us by email at ybr[at]eaccny.com.

April 8, 2020 |
Today, the European Union is launching its “Team Europe” package to support partner countries in the fight against the coronavirus pandemic and its consequences. The objective of the “Team Europe” approach is to combine resources from the EU, its Member States, and financial institutions, in particular the European Investment Bank and the European Bank for Reconstruction and Development.
The European Commission and the European Investment Bank have already pledged financial support amounting to more than €15.6 billion from existing programmes. EU Member States underlined today their commitment to contribute to this joint endeavour and to make similar contributions, as well as and the European Bank for Reconstruction and Development. The overall figure of the “Team Europe” package reaches more than 20 billion euros.
The EU will help the most vulnerable countries in Africa, the EU’s neighbourhood – the Western Balkans, the Eastern Partner countries, the Middle East and North Africa, parts of Asia and the Pacific, Latin America and the Caribbean. It will focus also on the people most at risk, including children, women, the elderly, and disabled people, as well as migrants, refugees, internally displaced persons and their host communities.
The support of the European Union will focus on:
• Responding to the immediate health crisis and the resulting humanitarian needs. This will include supporting the response plans of the World Health Organisation and the United Nations, and providing humanitarian support in affected countries;
• Strengthening health, water and sanitation systems, as well as partner countries’ capacities and preparedness to deal with the pandemic; and
• Mitigating the immediate social and economic consequences, including support to the private sector with a focus on Small and Medium-sized Enterprises, and government reforms to reduce poverty.
The EU, as global actor and major contributor to the international aid system, will promote a coordinated multilateral response, in partnership with the United Nations, International Financial Institutions, as well as the G7 and the G20.
The “Team Europe” package was launched in the context of a videoconference of the EU Development ministers, chaired by High Representative Josep Borrell. Commissioner for International Partnerships, Jutta Urpilainen and Olivér Várhelyi, Commissioner for Neighbourhood and Enlargement, presented the proposal for the approach as described in the Joint Communication by the Commission and the High Representative on a global response to fight the pandemic, adopted on 8 April 2020.
Compliments of European External Action Service (EEAS).

April 9, 2020 |
The Federal Reserve on Thursday took additional actions to provide up to $2.3 trillion in loans to support the economy. This funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.
“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” said Federal Reserve Board Chair Jerome H. Powell. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
The Federal Reserve’s role is guided by its mandate from Congress to promote maximum employment and stable prices, along with its responsibilities to promote the stability of the financial system. In support of these goals, the Federal Reserve is using its full range of authorities to provide powerful support for the flow of credit in the economy.
The actions the Federal Reserve is taking today to support employers of all sizes and communities across the country will:
• Bolster the effectiveness of the Small Business Administration’s Paycheck Protection Program (PPP) by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses. The PPP provides loans to small businesses so that they can keep their workers on the payroll. The Paycheck Protection Program Liquidity Facility (PPPLF) will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value;
• Ensure credit flows to small and mid-sized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program. The Department of the Treasury, using funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will provide $75 billion in equity to the facility;
• Increase the flow of credit to households and businesses through capital markets, by expanding the size and scope of the Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) as well as the Term Asset-Backed Securities Loan Facility (TALF). These three programs will now support up to $850 billion in credit backed by $85 billion in credit protection provided by the Treasury; and
• Help state and local governments manage cash flow stresses caused by the coronavirus pandemic by establishing a Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities. The Treasury will provide $35 billion of credit protection to the Federal Reserve for the Municipal Liquidity Facility using funds appropriated by the CARES Act.
The Main Street Lending Program will enhance support for small and mid-sized businesses that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. Principal and interest payments will be deferred for one year. Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses. Banks will retain a 5 percent share, selling the remaining 95 percent to the Main Street facility, which will purchase up to $600 billion of loans. Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act. Firms that have taken advantage of the PPP may also take out Main Street loans.
The Federal Reserve and the Treasury recognize that businesses vary widely in their financing needs, particularly at this time, and, as the program is being finalized, will continue to seek input from lenders, borrowers, and other stakeholders to make sure the program supports the economy as effectively and efficiently as possible while also safeguarding taxpayer funds. Comments may be sent to the feedback form until April 16.
To support further credit flow to households and businesses, the Federal Reserve will broaden the range of assets that are eligible collateral for TALF. As detailed in an updated term sheet, TALF-eligible collateral will now include the triple-A rated tranches of both outstanding commercial mortgage-backed securities and newly issued collateralized loan obligations. The size of the facility will remain $100 billion, and TALF will continue to support the issuance of asset-backed securities that fund a wide range of lending, including student loans, auto loans, and credit card loans.
The Municipal Liquidity Facility will help state and local governments better manage cash flow pressures in order to continue to serve households and businesses in their communities. The facility will purchase up to $500 billion of short term notes directly from U.S. states (including the District of Columbia), U.S. counties with a population of at least two million residents, and U.S. cities with a population of at least one million residents. Eligible state-level issuers may use the proceeds to support additional counties and cities. In addition to the actions described above, the Federal Reserve will continue to closely monitor conditions in the primary and secondary markets for municipal securities and will evaluate whether additional measures are needed to support the flow of credit and liquidity to state and local governments.
All of the facilities mentioned above are established by the Federal Reserve under the authority of Section 13(3) of the Federal Reserve Act, with approval of the Treasury Secretary.
The Federal Reserve remains committed to using its full range of tools to support the flow of credit to households and businesses to counter the economic impact of the coronavirus pandemic and promote a swift recovery once the disruptions abate.
Term Sheet: Term Asset-Backed Securities Loan Facility (PDF)
Term Sheet: Primary Market Corporate Credit Facility (PDF)
Term Sheet: Secondary Market Corporate Credit Facility (PDF)
Term Sheet: Municipal Liquidity Facility (PDF)
Term Sheet: Paycheck Protection Program Lending Facility (PDF)
Main Street Lending ProgramTerm Sheet: Main Street New Loan Facility (PDF)Term Sheet: Main Street Expanded Loan Facility (PDF)
Compliments of the Federal Reserve Board.