Companies will be able to obtain credits guaranteed by the Confederation from banks on Thursday. The Federal Council adopted the ordinance on Wednesday to help SMEs in terms of liquidity until at least April 19. The banks are ready.
An amount of 20 billion francs in aid is planned for the government program. Companies with more than 500 million turnover will not have access to it.
We had to find a balance between what the economy requires and the financial center. “But we have no choice.” Guaranteed loans will not solve all the problems of SMEs, but it is imperative to avoid tens of thousands of unemployed, explained the great financier Ueli Maurer.
10% of turnover
Companies can apply for transitional loans from their bank up to a maximum of 10% of their annual turnover, up to a ceiling of 20 million. To do this, they will have to meet certain criteria and declare in particular that they are suffering substantial loss of turnover due to the coronavirus pandemic.
For the general manager of the Zurich cantonal bank Martin Scholl, the risk of abuse is limited because the credit will be granted by bankers who know their customers. Banks are also not obliged to extend credit, noted Secretary of State for International Financial Affairs Daniela Stoffel.
Zero interest rate
Repayable within five or even seven years, the credits will be paid quickly and in an unbureaucratic way up to an amount of 500,000 francs. They will be 100% guaranteed by the Swiss Confederation with a zero interest rate. The credit application form will be available on the covid19.easygov.swiss website from Thursday.
Credits of more than 500,000 francs will be 85% guaranteed by the Confederation. The creditor bank will participate at a rate of 15%. As these credits can reach 20 million per company, they will require a more in-depth examination on the part of the banks and will therefore have an interest rate of 0.5%.
As many SMEs only have an account with PostFinance, the latter can also grant them up to 500,000 francs in a non-bureaucratic way. The Federal Council underlines that this is not an abolition of the credit ban on PostFinance, but a temporary measure under this program.
Banks ready
Banks have prepared for a large influx of demand. Several hundred customer advisers are ready, said Scholl and André Helfenstein, head of Swiss Universal Bank at Credit Suisse. The goal is for customers to get credit within 30 minutes, new customers for the day.
He may have difficulties starting up, but this should not be seen as unwillingness of the banks. The system should be run in a few days, assured Mr. Scholl.
SNB support
The banks will be supported by the Swiss National Bank (SNB). This will offer them refinancing facilities which will allow them to maintain their own cash positions by drawing on an unlimited fund to rapidly increase the volume of loans granted to companies at an interest rate equal to that of the Swiss central bank.
The Swiss National Bank will also step up its operations on the money markets. The goal is to protect the Swiss economy, announced its president Thomas Jordan.
Finally, the SNB proposes to the Federal Council to reduce the capital requirements of banks by eliminating the counter-cyclical steering wheel intended to offset the overheating of the mortgage market. The Swiss Financial Market Supervisory Authority (FINMA) is in favor, said its director Mark Branson.
This will free up billions to help the real economy. For the same reason, FINMA has decided to grant banks a temporary exception in the calculation of the debt ratio. The balance sheet positions will no longer all have to be covered by equity, regardless of the risks.
FINMA also calls on managers to exercise restraint in the payment of dividends. Strong establishments that limit or defer distributions will stay strong longer,
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