Banking protocols before the COVID-19

The bank has loans for 100,000 million for freelance and SMEs affected by the coronavirus crisis. The outbreak of the virus has caused massive disruption in all areas (travel, health, supply chains), which has wreaked havoc on the global financial markets.

In this context, not only have the health authorities established protocols to deal with the coronavirus, but also the banks have announced the activation of a “protocol to help SMEs and the freelance in Spain”. 

The freelance and SMEs, key to the Spanish business fabric, have been directly affected by the state of alert and the consequences of the global pandemic. In order to try to mitigate the impact on their activity due to the forced shutdown and to help them continue their business by guaranteeing liquidity, the Spanish banks have implemented this “protocol”. 

The Spanish Banking Association (AEB) states that the institutions are demonstrating their support for SMEs and the freelance. In total, Spanish entities guarantee loans worth 100,000 million. 

Santander Spain was the first to initiate this movement. To guarantee the continuity of SMEs, it launched a line of pre-granted loans of 20,000 million for a period of one year, guaranteeing short-term liquidity. CaixaBank and BBVA, for their part, have 25,000 million. While Banco Sabadell and Bankia offer 15,000 and 14,500 million respectively. Other entities, such as Unicaja, clarify that they are analyzing possible credit solutions in flexible conditions that would be aimed at customers who present temporary liquidity difficulties due to the coronavirus. 

At the same time that they guarantee the financing, they ask the authorities to soften the barriers that slow down the loans. The banking associations of the main European countries, which form the European Banking Federation (FBE), are asking the European authorities to be “flexible in the barriers imposed by regulation” in order to “be able to work constructively with the borrowers”. They demand measures such as reducing capital requirements and the availability of a new ECB liquidity line, called TLTRO, which rewards banks that lend to SMEs in order to speed up the arrival of money and avoid the closure of companies. 

The European banking system recalls that “it is fully committed to maintaining its support for the European economy in times of economic difficulty” and that they are already applying the Code of Good Practice for the viable restructuring of debts with mortgage guarantees on housing (recently renewed by the Government) which is being extended to other sectors that now need it. 

“This is not the right time to block capital that could otherwise be used to sustain the real economy,” the entities conclude. They also ask the Single Board of Resolution (JUR) to be flexible in terms of deadlines. They require that the deadline be extended until 2024. 

In addition, the European Central Bank (ECB) has launched measures to avoid a credit crunch.  Among these, a program of refinancing operations for loans to SMEs that enter into default stands out. The banks are asking for guarantees as in Germany or a moratorium on provisions. 

For its part, the European Investment Bank (EIB) has offered up to 40,000 million Euros in order to help SMEs and mid-cap companies to fight the crisis caused by the coronavirus. The EIB has also announced in a communiqué that “additional resources will be destined to the health sector to support emergency infrastructures and the development of treatments and vaccines”. 

The agency’s vice-president, Emma Navarro, stated that “SMEs, the great engine of the Spanish economy, are and have always been one of the main priorities of the EIB Group’s activity in Spain“. And that, therefore, they are going to support them again in this decisive moment. 

Sources: El País, El Confidencial. 

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