On April 6, in a bid to inject liquidity into the market amid the coronavirus outbreak, the Central Bank regulated loan conditions for financial institutions through bills of exchange. Loans will cost banks an annual 0.6% and will be issued in monthly instalments. For more information, click here. In addition, the National Monetary Council (CMN, for its acronym in Spanish) made debt renegotiation by financial institutions more flexible given the COVID-19 emergency.
The Central Bank indicated that loans will be available from April 20 and banks may apply for them as of April 13. Under the new rules, loans to banks, which will cost 0.6% per year and be made in monthly payments, can be for amounts up to 50% of the value of the bank’s assets and may reach 100% by the end of the year.
Bills of exchange are fixed-income securities issued by banks to raise long-term funds. In practice, the investment will allow for the securitisation of banks’ credit portfolios in the form of bills of exchange, which will be financed by the Central Bank. With this, banks are expected to gain resources to be better able to finance their clients.
Furthermore, in order to avoid accumulating losses on economically viable credits which have been delayed by the crisis, the CMN is allowing allowed financial institutions to reclassify renegotiated operations in the period from March 1 to September 30, 2020, to the risk level classified in February 2020, before the full extent of the economic effects of the COVID-19 became clear.