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UK banks announce lending support for coronavirus-hit firms

Some of the UK’s biggest banks have announced measures to help businesses and customers to cope with the economic impact of the coronavirus outbreak.

Britain’s largest high-street lender Lloyds said it would offer £2bn of loans without fees to small firms hit by the virus, and said some of the worst-affected businesses would be offered payment holidays.

In a similar vein, Barclays has informed business customers affected by the virus that they can have a 12-month repayment holiday – a period when loan repayments are waived – on existing loans over £25,000.

State-backed RBS has said borrows who have been affected by the virus can defer mortgage and loan repayments by up to three months, and will also waive various other fees.

None of the banks laid out how badly its customers would have to be affected to qualify for the lending support, however.

An RBS spokesperson said: “We will look to understand each customer’s situation on a case-by-case basis and can offer a number of options to help them manage their finances.”

The measures from lenders come as coronavirus spreads quickly throughout Europe and the UK, having broken out in China in December. The virus has killed five people in Britain, from 319 confirmed cases.

Businesses across the country have told staff to work from home, while restaurants and other businesses have reported lower footfall as people stay at home.

Chancellor Rishi Sunak is expected to unveil spending measures to support the economy during the outbreak when he gives his Budget tomorrow.

Incoming Bank of England governor Andrew Bailey has said that some kind of “supply-chain finance” for businesses from the government and Threadneedle Street is likely.

David Oldfield, group director of commercial banking at Lloyds, said firm-owners are “worried what the outbreak might mean for their business and with no knowledge of how or when they might be affected”.

He said Lloyds was making extra lending available to help firms manage “temporary interruptions to their business and to their cashflow”.

By Harry Robertson

Source: City AM

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UK banks capable of surviving a “no-deal” Brexit

The Bank of England (BoE) insists the UK’s high street banks are capable of withstanding a disorderly “no-deal” Brexit, despite the fact that a no-deal situation could leave the UK economy worse off than the 2008 recession.

Following the BoE’s recent financial sector health check, it was confirmed that none of the mainstream lenders was encouraged to raise more capital to strengthen their finances in the midst of the Brexit uncertainty.

There is a growing belief that UK Prime Minister Theresa May will see her proposed Brexit deal with the European Union (EU) rejected by members of Parliament. This would leave the UK in a state of limbo, heading towards a no-deal Brexit scenario as it prepares to leave the EU at the end of March 2019.

Despite this confusion and unrest, seven of the UK’s leading high street lenders – Barclays, HSBC, Lloyds, RBS, Nationwide Building Society, Standard Chartered and Santander – were tested in a “crisis” scenario involving a 4.7% decline in UK GDP, a 33% fall in house prices and a 27% decline in the value of pound sterling. They all passed this stress test, with the Bank stating that the results showed the UK banking system was “resilient to deep simultaneous recessions in the UK and global economies”.

However, uncertainty remains in Italian politics which could yet have a major impact on the ongoing Eurozone debt crisis. The new Italian government has been at loggerheads with EU officials regarding spending proposals and any further decline in Italy’s financial outlook could spill over into the EUR/USD rates.It has been a difficult last month or so for the pound. It has fallen from £1.15 to the euro to £1.12 to the euro since the UK’s MPs have taken such a dim view of Theresa May’s Brexit agreement with the EU. The pound has also steadily weakened against the US dollar in recent weeks, with President Trump questioning the UK’s ability to arrange a future trade deal with America based on the Prime Minister’s draft agreement. The euro has managed to hold firm against the dollar in light of the recent G20 summit in Argentina, which proved fairly positive for all concerned.

The EU recently conducted its own stress tests of banks within the EU member states. Lloyds and Barclays were some of the worst performers across the 48 European lenders assessed based on declining GDP, a no-deal Brexit and a sell-off of government bonds. Both Barclays and Lloyds actually came close to failing the BoE’s recent stress tests based on core capital levels alone. However, the fact that some of the banks’ assets could be easily converted into equity in such dire straits meant that they would have more headroom.

Aside from the continued financial risks related to Brexit, the BoE reiterated that risks at a domestic level “remain at a standard level overall”. It added that risk appetite between the leading banks was strong, but that borrowing levels had fallen somewhat amid the Brexit uncertainty and the fallout from the UK/EU divorce.

Source: Banking Tech