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Swedish central bank draws up $51 billion loan package for companies

imageEconomy2 hours ago (Mar 13, 2020 06:00AM ET)

Swedish central bank draws up $51 billion loan package for companies


By Johan Ahlander

STOCKHOLM (Reuters) – Sweden’s central bank said on Friday it would lend up to 500 billion Swedish crowns ($51 billion) to Swedish companies via banks, moving to shore up credit flows as the coronavirus epidemic wreaks havoc on global financial markets.

The Riksbank said the loans would be granted at its repo rate, at present zero percent, with a maturity of two years.

“The measures taken in this situation should be regarded as a form of insurance that enables Swedish companies, particularly small and medium-sized enterprises, to feel secure that the credit supply will not fail,” Governor Stefan Ingves said in a statement.

Swedbank economist Knut Hallberg welcomed the move.

“I expect later on that the Riksbank will expand its quantitative easing programme and purchase more bonds… but I think the Riksbank will try and avoid a rate cut,” he said

The Riksbank held its benchmark rate unchanged at zero in February after ending nearly five years of negative rates at the end of 2019.

In neighbouring Norway, the central bank on Friday cut its key policy rate to 1.0% from 1.5% and offered extraordinary loans to the banking industry.

The Riksbank said it was prepared to take further measures and to supply necessary liquidity, and that it would follow up on the banks’ lending to non-financial companies to ensure that the loans allocated to the banks were used to benefit the companies.

Also on Friday, Sweden’s Financial Supervisory Authority (FSA) said that while it had not seen any direct effects of the coronavirus to financial markets, it had lowered the so called counter cyclical capital buffers for the country’s banks to allow them to maintain credit supply.

The European Central Bank rolled out a modest stimulus package on Thursday, offering a range of liquidity facilities aimed at businesses likely to be hit hard by the coronavirus.

Swedish central bank draws up $51 billion loan package for companies

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