MADRID, 31 (EUROPA PRESS)
Funcas considers it necessary to adopt a kind of ‘pandemic insurance’ in viable companies to maintain financial stability and to make it possible to return to a scenario of normalized interest rates without there being a risk that the profitability and credit activity of the banks will fall. erode further.
In his latest Economic Information Notebook, Funcas advocates offering a solution to viable companies affected by the Covid-19 crisis, which would be temporarily financed through actions and recapitalizations and even with public funds.
“It could be argued that if interest rates are raised when the recovery is too incipient, non-performing loans will increase rapidly,” the institution explains in the document.
In this way, it calls for the adoption of this ‘pandemic insurance’ in companies in order to prevent their financial position from being too weak at the moment when there is an improvement in the situation.
Even Funcas believes that, in order to continue supporting a safe financial environment and a natural adjustment of interest rates, loans to companies during and immediately after the pandemic could be supported by a community-wide financing plan that complements the plans. national and European Union (EU) tax incentives
In any case, given the prospects of the possible coexistence of low official interest rates and inflation, the institution emphasizes that central banks must guarantee adequate monetary conditions for banks.
Along these lines, they referred to the need to act more decisively on the multilevel interest rate system, which could provide greater flexibility in Europe. One of the options that it raises would be to raise the rate of the deposit facilities.
Also, following the experience of the United States Federal Reserve (Fed), the body chaired by Christine Lagarde could reduce the minimum reserve requirements.
CONTRARY EFFECT OF ULTRA-REDUCED RATES?
In the same way, Funcas warns about the convenience of studying more specifically if the ultra-reduced types are achieving their objectives or, on the contrary, making things more and more complicated. “We have to see if there is (or will be soon) the dreaded effect contrary to the expected,” he remarked.
In practice, the document notes that negative rates have been shown to have had “very limited” effects in stimulating inflation and credit.
In fact, empirical studies have found that in certain circumstances negative interest rates may even have the opposite effect, generating exactly the opposite reaction, that is, less credit and expectations of downward inflation.
For banks, it points to evidence that the impact of unconventional monetary policy, including negative official rates, on margins and profitability is considerably adverse.
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