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Swiss government, central bank throw money at virus shutdown

Kitco News

ZURICH (Reuters) - The Swiss government and Swiss National Bank (SNB) will begin pouring money from Thursday into a sharply slowing economy hit hard by the coronavirus epidemic.

The country’s financial watchdog also urged banks for restraint on dividend payments and share buybacks as the government attempts to increase the supply of credit to prevent industry grinding to a halt.

The moves came as Switzerland, which has close to 100 deaths and more than 9,765 cases, tightened entry restrictions to all countries in the Schengen free-movement area.

The country also introduced temporary restrictions on the export of protective medical equipment to head off a shortage among medical workers and others fighting the epidemic.

“Our society and the Swiss economy are confronted with enormous challenges,” Swiss National Bank Chairman Thomas Jordan told a news conference with Finance Minister Ueli Maurer in Bern.

“To combat this crisis, it is essential that companies have access to credit and the banking system has access to liquidity,” the SNB said in a separate statement.

The cabinet on Wednesday launched a 20 billion Swiss franc ($20.4 billion) emergency scheme under which companies can get state-backed loans of up to 500,000 Swiss francs via their banks without interest from Thursday.

Companies suffering “substantial reductions in revenue” can also apply for bridging credit representing up to 10% of their annual sales, to a maximum of 20 million francs.

Loans larger than 500,000 francs will be 85% secured by the government and have an interest rate of 0.5%.

The SNB set up a COVID-19 refinancing facility to boost the supply of credit to the banking system and to prevent liquidity from drying up. The facility will have no upper limits on the amounts available and be available from March 26.

The facility lets banks obtain liquidity from the central bank, secured by the government-guaranteed loans. The interest rate on the refinancing transactions is the same as the SNB’s policy rate of -0.75%.

The SNB also asked the government to reduce banks’ counter-cyclical capital buffer to 0% with immediate effect to increase the amount of cash available for loans.

Market supervisor FINMA said it welcomed the decision of all Swiss financial institutions to suspend share buybacks and called on them to be prudent with dividends. “Acting to preserve strength is not a sign of weakness,” it said.

FINMA CEO Mark Branson told reporters: “It is not a ban, it is an appeal. We are asking the boards to decide who needs the money more - Swiss clients or international and institutional investors.”

The government tightened border controls to include all countries in the Schengen area to protect people from coronavirus.

The move comes after Switzerland last week introduced controls at its borders with Italy, France, Germany, Austria and Spain and all countries not in the Schengen zone.

“Since midnight, the tightened entry requirements have also been applied to flights from all remaining Schengen states with the exception of the Principality of Liechtenstein,” the government said in a statement.

Additional reporting by Silke Koltrowitz and Michelle Martin; Editing by Andrew Cawthorne

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