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| - After the US Federal Reserve and the Bank of England announced big-bang interventions to support economies facing coronavirus disruption, European Central bank policymakers unveiled their crisis plan Thursday. Here are the tools the ECB hopes will cushion blows to financial markets and economic activity resulting from the epidemic and measures to slow its spread. As part of its broader push to stoke growth and inflation by boosting lending, the ECB has for years offered banks the chance to borrow hundreds of billions of euros in quarterly so-called "Targeted Long-Term Refinancing Operations" or TLTROs. Under the latest TLTRO scheme, banks pay a lower interest rate the more they lend on to the real economy. The ECB on Thursday announced that it would sink the lowest possible rate on the loans to -0.75 percent, especially for banks lending to smaller companies. As it is lower than the -0.5 percent rate on banks' deposits in Frankfurt, the scheme represents an effective subsidy to the financial system. "We are making available to all enterprises, with a focus on small- and medium-sized firms, massive refinancing means at very preferential rates and in significant amounts," ECB chief Christine Lagarde said. The Frankfurt institution also added a fresh series of Long-Term Refinancing Operations (LTROs) for "immediate liquidity support to the euro area financial system". One of the ECB's most powerful and most controversial tools, "quantitative easing" (QE) has seen it buy more than 2.7 trillion euros ($3.1 trillion) of government and corporate bonds since 2015. Despite political and legal challenges, notably from Germany where the constitutional court is to rule on the scheme on March 24, the ECB credits QE with helping boost growth by easing financial conditions in the eurozone. A decision to restart bond-buying at 20 billion euros per month sharply divided the governing council last September. Nevertheless, policymakers agreed Thursday an additional 120 billion euros of QE spread over the whole of 2020. This "temporary large envelope with no monthly predetermined allocation... helps us focus on how the risks develop, that is the most efficient tool we can use," Lagarde said. She added that governments will likely issue more debt to fuel any economic interventions. That could free the ECB's hand to buy more bonds after it approached self-imposed limits on how much of any one state's borrowings it can own. The ECB's banking supervision arm said it would allow lenders to have capital buffers that are "temporarily below" levels currently required under the so-called Pillar 2 requirements. In addition, they will be allowed to partially use equity or liability instruments that normally do not qualify as the highest quality category of capital known as Common Equity Tier 1, to meet the requirements. Separately, the European Banking Authority said it was postponing the 2020 stress tests on banks to 2021. "Banks need to be in a position to continue financing households and corporates experiencing temporary difficulties" stemming from the coronavirus shock, said Andrea Enria, Chair of the ECB Supervisory Board in a statement. Most observers had expected the ECB to lower slightly its already-negative interest rate on banks' deposits, although the move would have been largely symbolic compared with big-bang cuts of half a percentage point each from the US Federal Reserve and Bank of England. Asked if Frankfurt's dispensing with a rate cut meant interest rates could not go lower, Lagarde said "if in the future it is necessary for the purpose of dealing with the risks at the time... we will" cut rates. Neither did the ECB tweak a rule that exempts some of banks' deposits with the central bank from the negative deposit rate as many had predicted. tgb/mfp/jh
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