The Swiss government has agreed to support the economy with additional liquidity to offset the problems created by the pandemic. It has drafted in the help of Swiss banks to provide the money swiftly to companies in need.
Swiss firms will be able to apply for emergency loans at their principal bank starting next Thursday, according to Swiss Finance Minister Ueli Maurer. The government will vouch for all loans up until half a million Swiss francs ($509,000), he told a press conference in Bern (click here for press release in German).
Principal Banks in Key Role
Banks will assume a 15 percent share of the guarantee for amounts between half a million francs and 20 million francs. They have already agreed to the government’s proposal.
«We welcome the decisive action by the government and appreciate the good cooperation between the Swiss federation and the participating banks,» said André Helfenstein, CEO of Credit Suisse Switzerland, in a statement. «We will work with our clients to reach a swift and unbureaucratic implementation of the program.»
Repayment of Loans by the Government
The firms that apply for the liquidity will have to pay a «very modest» interest rate for the loans. The difference between the rate paid by loan-takers and the negative rate applied by the central bank is going to compensate the banks for their work, Maurer said.
Applications from companies for even bigger loans will be evaluated separately by the government. Maurer is taking the 20 billion francs available for companies in need from a special fund that currently contains less than this amount. The government will therefore have to repay the money at a later stage to remain within the legal framework of the so-called debt brake.
A Total of 42 Billion Francs
Switzerland is able to help quickly with such a substantial sum because the central government is financially extremely sound, having generated surpluses for years and paid off billions of francs in debt. Also, the financial market is both liquid and robust and can assume the role assigned to it by the government.
Finma, the banking regulator, and the Swiss National Bank agreed to the proposals of the government, but will have to give their formal assent. On Wednesday next week, the government will formally approve the bill and companies can then demand for emergency loans starting Thursday, Maurer said.
The government expects that the Swiss economy will lose about 30 billion francs in revenue this year as a consequence of the pandemic. It has now agreed to measures helping business and citizens worth a total of 42 billion francs. Maurer is aware that the money maybe won’t suffice and is ready to provide more money to keep the economy going if need be at a later stage.
