Wherever it aches

12 March 2020 By Swaha Pattanaik Follow @swahapattanaik

President Christine Lagarde left interest rates unchanged but used other tricks to support the euro zone economy through Covid-19. Lenders can borrow at sub-zero rates and dip into capital and cash buffers. They have every incentive to help her limit the damage from the slowdown.

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The European Central Bank on March 12 left its deposit rate unchanged at minus 0.5% but announced new stimulus measures to help the euro zone economy cope with the growing cost of the coronavirus.

The ECB said it would offer new loans to banks and temporarily increase asset purchases. It also said banks would be able to tap existing longer-term lending facilities at more favourable terms than in the past.

The ECB also said it would let euro zone banks that it directly supervises fall short of some key capital and cash requirements so that lenders could continue to provide funding to the economy while it was being disrupted by the coronavirus.

"The ECB will allow banks to operate temporarily below the level of capital defined by the Pillar 2 Guidance (P2G), the capital conservation buffer (CCB) and the liquidity coverage ratio (LCR)," the ECB said in a statement.

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