9 April 2020
UNEP Finance Initiative asked banks how they were responding to the needs of their customers and local communities during the COVID-19 crisis and more than forty of our members replied. We are collecting examples of the many different measures that our members are taking: UNEP FI Head, Eric Usher highlights just some of them here. We ask all our members to share their experiences with us so we can learn from each other in these unprecedented times.
In September 2019 one third of the global banking industry stepped up with UN Secretary General Antonio Guterres to sign the UN Principles for Responsible Banking. These principles committed banks to align their business strategy to be consistent with and contribute to individuals’ needs and society’s goals. The banks which drafted the Principles did not have the coronavirus in mind when establishing this framework for a sustainable banking system, but of course the current situation is putting it to the test. Can they keep companies and communities solvent during the crisis, deliver the financial services that society relies upon and even help address gaps in medical supplies upon which many lives will depend?
The health impact is growing by the day, with shortly 100,000 having perished, over 1.5 million confirmed and many times more probably carrying the virus. Looking beyond the terrible health and mortality figures, the economic impacts are almost inconceivable. According to the International Labour Organization, the full or partial lockdown measures are now affecting almost 2.7 billion workers, representing around 81 per cent of the world’s workforce (ILO Monitor, 2nd Edition, 7 April, 2020). As of 1 April, ILO estimates a decline in the working hours globally of 6.7 per cent for the current quarter (Q2), equivalent to 195 million full-time workers being idle for the period.
Governments have been responding quickly, much faster than during the global financial crisis of 2008/9. The US enacted on 27 March the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), one of several pieces of legislation aiming to address the health and economic consequences of the crisis and providing financial support for businesses small and large, and provide liquidity.
Meanwhile in China, the Ministry of Finance issued 1.08 trillion CNY (USD 150 billion) of new special bonds on 31 March to finance major infrastructure projects. In Europe, countries have rolled out a raft of measures and support for businesses, sometimes in partnership with the banks such as in Switzerland. In the UK, the Bank of England has announced it will extend its overdraft to the UK Government.
Not being the source of the crisis this time, and benefiting from much improved capital positions, the financial sector is more able to play its role in keeping businesses operating and communities served. For signatories to the Principles for Responsible Banking, this is their opportunity to show the positive role they can play by employing a wide range of measures to respond both to the direct health crises and to the wider economic impacts. At UNEP FI, we have been working with our members to communicate who is doing what – the following is only a subset of the many actions underway which is growing by the day. See our website which is being updated regularly.
Many bank actions centre on maintaining businesses’ liquidity and deferring payments as their revenues dry up, as well as suspending mortgage payments for households, particularly vulnerable families. Spain, one of the hardest-hit by the virus so far, has seen all its big banks stepping up with massive credit lines established for their SME and corporate clients with backing from the government’s Official Credit Institute. BBVA and Caixa Bank have each committed EUR 25 billion, while Santander has committed EUR 20 billion under the emergency programme.
An initiative started by Credit Suisse and the Swiss Government has seen an incredibly fast rollout of bridge loans for the country’s industry with over USD 20 billion already lent by 1 April via the state-backed programme. UBS, for instance, had financed 10,000 SMEs by that date, showing remarkable efficiency to process loans quickly. Meanwhile in Kenya, the support has gone micro and mobile with Kenya Commercial Bank establishing a USD30 million stimulus fund for onward lending via the M-PESA mobile banking system. At the other end of the spectrum, bridge loans are also being established at the state level. In Germany, UniCredit has helped the Free State of Bavaria raise a sovereign bond to deal with the crisis, the largest they’ve ever issued.
Besides bridge loans, the banks are also trying to help companies keep their employees on the payroll. Bankia in Spain is continuing to pay service providers to keep their employees on staff even when their services cannot be delivered during the crises. Banca Monte dei Paschi di Siena in Italy is advancing unemployment benefits to employees laid off during the crisis.
A somewhat controversial topic for all corporates around the crisis has been dividend policies and many banks are now taking decisions to either stop or reduce paying out dividends, including Caixa and Santander, KBC in Belgium, UniCredit, UBS and Credit Suisse, amongst others. Meanwhile some bank executives are foregoing compensation. Santander has established a EUR25 million fund for medical equipment funded by a reduction in the salaries of senior management and employees. UniCredit top management have redirected their entire 2020 bonus to UniCredit Foundation.
Many banks have also been helping source the medical equipment needed to shore up the health system. BBVA has donated 1000 ventilators and other medical supplies in Spain and announced a EUR35 million donation towards fighting the virus. BNP Paribas has provided 2.5 million masks from the bank’s emergency inventory to hospitals in the countries where it operates. In the US, Citibank has committed USD 15 million to COVID-19-related relief while in Canada, Vancity has established a community response fund and is offering a savings product to its customers where funds raised directly finance people and businesses who are struggling. In Latin America, many banks have stepped up, with Banco Itau in Brazil contributing USD 28 million, and Banco Pichincha in Equador, one of the first hard-hit countries on the continent, donating USD 10 million for the purchase of medical supplies.
Meanwhile in the UK, RBS/NatWest has turned its Edinburgh headquarters into a foodbank while on the other side of the world, IDLC in Bangladesh has established a food support programme for disadvantaged families. In Canada, Desjardins is offering loans of last resort and established a psychological and legal hotline for their clients under the age of 30.
The pandemic is global and the banking industry response must therefore be as well. This is only a quick overview of the long list of actions being taken and we will endeavor to continue sharing the latest developments and helping our members step up at a time when people’s health, their jobs and many needed services are relying on a responsible banking industry, for today and an uncertain future.
To our banking members, please share your COVID-19 responses with us by contacting Oualid Rokneddine and to find out about other opportunities to share experiences.
See the measures that UNEP FI banks have been taking in response to the pandemic on our COVID-19 page which is being updated on a regular basis.
Find out how banks can advance financial inclusion in the economic build back after the COVID-19 crisis here.
COVID-19 updates from the UN Environment Programme
The transmission of diseases, like the Novel Coronavirus COVID-19, between animals and humans (zoonoses) threatens economic development, animal and human well-being, and ecosystem integrity. The United Nations Environment Programme supports global efforts to protect biodiversity, to put an end to the illegal trade in wildlife, to safeguard the handling of chemicals and waste and to promote economic recovery plans that take nature and the climate emergency into account. Read the latest news and science from UN Environment Programme on these areas.