Switzerland will double emergency loans for small businesses hit by the pandemic. Three-quarters of the facility were exhausted in its first week. 

The government is lifting the program, which enlisted Swiss banks to lend to small businesses at no or very low interest, to 40 billion francs ($41 billion), from 20 billion francs, it said in a statement on Friday. The move requires parliamentary approval, beginning with a finance delegation on Tuesday.

Banks dispersed 14.3 billion francs via more than 76,000 loans in the first week of the program. The scramble appears to have revealed abuse of the government backstops.

Trust, But Check

Bern said it wants a rapid response from the finance department about how to prevent the scheme, which aims to get loans approved by banks in as little as 30 minutes, from being hoodwinked. It deployed the axion of «trust, but verify,» popular in Switzerland, on the loans.

«The federal council is generally assuming that the aid credits are not being abused,» the government said. «Nevertheless, there is a certain potential for abuse with the unbureaucratic granting of credit» which the government is «determined to counteract.»

Tightening Loan Terms

Specifically, it proposes checking for multiple loan applications, cross-checking company metrics like revenue, and pursuing misbehavior through criminal charges. The lending represents relatively risk-free business for banks: the five-year loans are fully guaranteed by the government up until 500,000 francs, with larger ones backstopped to 85 percent.

They form the backbone of a «bazooka» response to the economic fallout of the coronavirus pandemic. Switzerland's central bank has tapped a special liquidity facility for lenders. 

Banks as Foot Soldiers

For banks, enlisted as foot soldiers of the effort, the program represents an opportunity to present themselves as crisis helpers, not sources as in 2008/09. UBS and Credit Suisse have pledged to donate any proceeds from their lending efforts to charity.

The emergency lending has had unusual offshoots including Sunday shifts for Swiss bankers while the rest of the country's non-essential workers are effectively in lockdown. Bankers face at times illegible loan applications, as finews.com reported.