The outbreak of COVID-19 has been a major impact to the economies of different countries all over the world. The financial institutions and regulators are supposed to play a critical role of ensuring that the Canadians are assisted to access affordable credits easily. The impositions of tough restrictions and lockdowns which are supposed to contain the spread of COVID-19 has made to the slowdown of economic activities, hence have to rely of credits to run their operations like settling the employees’ wages. On the other side there are several companies and firms which have not been able to attain credits due to the imposition of strict credit regulations which they cannot be able to meet.
The chief financial regulator which is the central bank of Canada has to come up with reliable regulations that are favorable and also intervene in order to hinder some contraction of credits when they are most needed by the companies. Canadians should be in a position of accessing credits easily so that they can be able to withstand the worst economic scenarios that have been caused by the pandemic (Dey and Loewenstein, 2020). The productive level of Canada will be felt for a long period of time if the companies are not in a position of accessing viable credits which will help them support the economy at this particular time of the pandemic. The central bank should make sure that a conducive environment is set for every company in accessing credits, hence ensuring that creditors use favorable rules in giving credits as being guided by the bank so that the country can revamp its economy in a short time.
Creditors and Borrowers relations
The financial institutions and regulators must also ensure that they achieve their mandate of containing inflation rates closer to the required targets of stabilizing employment and the economy first. Normal operations cannot apply in this case since the country is being faced by the hit of the pandemic with requires a different approach which will help in building the economy. The financial markets are always being disrupted once there is a case of a pandemic like COVID-19 which affects the economy. The regulators are supposed to put in place comprehensive measures which will make sure that all financial system is always playing its mandate of providing credit to companies that need it most (Aaron and Ariel, 2020). The responsibility of the central bank of Canada is to ensure that both companies and individuals are at a position of ensuring enjoying the lending services despite the hard economic period of COVID-19. The banks support the well-being of the economy and other financial systems where it provides a conducive avenue for Canadians in accessing favorable environment of acquiring credits. The responsibility of regulators is to ensure that there is favorable environment of acquiring credit by all companies through the regulations outlined by the bank on how credits are to be accessed.
The financial institutions and regulators have also played a vital role in the case of US economy which has also been hit hard by COVID-19. The federal financial institution regulatory agency in consultation with other regulators resulted that the banks must work with the borrowers. This will enable the creditors to come up with a consensus on the modification of loans and how they will be able to be settled in the pandemic period. The borrowers have been affected badly through the outbreak of the pandemic hence making it hard for them to settle their loan obligation due to bad economic conditions which the creditors should evaluate in claiming their loans. The same mechanism used in Canada in the same approach used in the US which requires that people are able to access credits that are well structured and approved by the regulators. Regulators both in the US and Canada have a mandate of ensuring that the economy and financial markets are not worsened more in this particular time of the pandemic. There have been extraordinary disruptions which have been made by the outbreak of the pandemic and the regulators both in the US and Canada gave regulations that would enable the access of credit to small businesses which play an essential role in the growth of the economy (Dey and Loewenstein, 2020). The Federal Reserve Board in the US announced that they will temporarily and narrowly modify the growth restriction on Wels Fargo for it to provide more support for the small companies. The small business will have to access loans from Wels Fargo through the supervision of the Federal Reserve Board which is being considered by the firm as the paycheck protection program. This type of regulations will enable both countries to be able to revamp the economy back to normalcy since there is access of credit with is favorable in the pandemic period. In May 2020, the federal financial institution regulatory agency came up with the principle of giving small-dollar loans in a manner which is favorable and conducive in meeting financial institutions’ customers’ short- term credit requirements.
The bank of Canada lowered the interest rates to ¼ % in order to support the economy activities which are supposed to counter the effects of COVID-19 pandemic. Regulators ideas on this matter is to ensure that consumers and businesses are supported through the lowering of payments of existing and the new loans which are allocated throughout the economy. The regulator also came up with several liquidity options and purchase procedures which will enable the markets to be functioning, the allowance of interest cuts and credit flowing to access their way to the economy. The bank has done this so that it can support the recovery of the economy which is at a worrying state at this particular period of the pandemic. The commitment of the bank has to the purchasing of long-term debt from large-scale assets has created room for a favorable and workable monetary policy which is essential in the reviving of the economy.
In the case of the US monetary policy during the month of December 2020, the federal funds rates were enhanced in order to a progressive asset purchases which will ensure that the economy of the country is sustained despite the outbreak of the pandemic. The federal reserve is combining with other regulators in order to ensure that they are attaining and moving towards enabling maximum employment and stability of prices in the economy through lending capital to businesses (Castles, 2020). The demand for cash in March 2020, forced the federal reserve to deploy its old tricks of liquidity which encourages depository institutions to go for the discount window which encourages demand for credits from small business and households. The board lowered the credit rates to 0.25 percent from 150 basis points which was subjected to be effective as from March 16, 2020. The monetary policy in the US has allowed the federal reserve to stand for the small businesses in sustaining and reserving their loans in the pandemic period till they are able to revamp themselves. The policy also has allowed the federal reserves to increase its liquidity ratios as from March 2020, and this will streamline the challenges faced by the small businesses in access capital.
Support of key financial markets
The financial institution and regulators in Canada have the mandate of ensuring that they have supported fully the financial markets in the country so that they can run their operations properly. The financial markets are badly affected when the prices are fluctuating since the bonds cannot be able be sold or bought due to the restrictions of the central bank of Canada on the prospects of those bonds. The selling and buying of finance bonds is so risky when there are cases of unstable economy or when the economy is fluctuating due the results of COVID-19. The bonds in the Canada financial markets have to be maintained in a manner in which investors can easily sell their bonds and obtain cash despite the hard economic period. The Canada regulators resulted to support the key financial markets that strained during the period through the establishment of large-scale asset purchase options which are supposed to increase the rate of liquidity which are essential in funding the markets. The bank will be able to attain liquidity through funding the core finance markets which at the end will be able to support in the recovery of the economy in the period of COVID.
The US case on support of key financial markets the federal reserve resulted to also increase its purchase of long-term assets by 15 percent which will enable the market to tackle the effects of COVID-19 (Aaron and Ariel, 2020). The federal reserve will have to use its dollar currency in making sure it has attained maximum capital which will help companies and small businesses to run their operations easily. The US dollar is largely transacted all over the world and this makes it among the key financial market that the federal reserve should increase its liquidity with high rates. Companies depend on the stable financial market of the US dollar which helps them to facilitate their operations and once the markets have fluctuated the companies will be faced with a series of liquidity challenges in the long-run. It’s the mandate of the federal reserve to ensure that it has attained the required amount of liquidity that is required through the purchase of long-term assets. The Federal Reserve Board, through the powers of the Secretary of the Treasury, started a process of ensuring that relative measures are taken in supporting the access of liquidity to companies and small businesses in the US. In March 2020, the Treasury provided a sum of $200 billion which was supposed to ensure that companies have bounced back to normalcy in the economy from its financial markets through liquidity. The federal bond has fluctuated due to the outbreak of COVID-19 which has affected the key US operational finance markets which sustain the economy. The federal reserve has the mandate of ensuring that it regulates the selling and acquiring of bonds since they depend on the economic constraints that they are exposed to. However, the federal reserve resulted in purchasing of long-term assets which will be able to ensure that there are high levels of liquidity in the market.
Risk mitigation and reporting
The financial institutions and regulators are structured in a manner that they are able to prudently manage the financial risks that the business are prone to in the pandemic period. The risk mitigation has been caused by the bad economic period which has been caused by the pandemic and the remittance of taxes has become a problem (Castles, 2020). The bank of Canada should be able to come up with a workable solution on how the government should be able to changes the tax rates in this pandemic period. Limits involve counterparty challenges which in most times is caused by the conflict-of-interest in the case where external managers are involved. There is a responsibility when a company over services to another party where legal services have been rendered then this implies that there has been a collaboration between the two parties hence causing risky aspects of remitting the taxes. The Bank of Canada Act has that rule captured and it is the responsibility of the bank to ensure that every risk aspect is mitigated well to avoid any act of financial risks in this pandemic period.
The comparison done from the US federal reserve indicates scenarios where they have represented different groups in and in different capacities business wise and in legal matters. The federal reserve board act provides purchases legal authority on how collaborate the government should secure major deals in the purchase sector. The federal reserve will also make a documented report on the outcomes of its large-scale asset purchase options. The aim of reporting is to ensure that there are high standards of transparency during this pandemic period where commercial information is protected for the purpose of having a relative fair market value of the Bank’s purchases. The reporting in both US and Canada the banks and regulators always ensures that there is a certain specific time limit involved on how the programs are winded up to avoid any case of financial impacts.
Comparison of Canada and US financial market regulators
The financial regulators for both Canada and US have the mandate of ensuring that they maintain the economy in manner that will not let the citizens to suffer economically. The regulators for both countries have laid conducive environment for attaining credit from the creditors, where the creditor and the business must come into an agreement on how to handle the credits in this COVID-19 pandemic. Canada and US are focusing on coming up with policies which will enable small businesses to attain maximum profits which will be improve the economy. The regulators for both countries have structured the maximum rate of interest that will be charged by the creditors hence this will ensure that there is no creditor who will charge interests more than the allowed one in this pandemic. The core aim of both countries has been attained in this COVID-19 period since some small business have contributed to the GDP of each respective company.
The monetary policy for both countries has been able to contribute so much to the economy. The US government have resulted in the buying of long-term assets which will help in generating capital to the economy. On the other side also the regulators in Canada have ensured that the monetary policy applied is the one that can be able to revive the economy in the long-run. The responsibility for both countries is that they have adopted a policy that will ensure that they are stable during the COVID-19 period. Lastly, both countries have ensured that they must support their financial markets since they are the ones that support the growth of the economy. The regulators for both countries have facilitated financial markets to be able to sustain the economy which is essential in this COVID-19 period.
The bank will always ensure that Canadians are able to access to the up-to-date information on its intentions and actions to promote the economy and enable a well sound financial environment in the midst of the COVID-19 pandemic. In the US case it’s also the same scenario where the essential role of the federal reserve is to ensure that the US citizens are safeguarded from the negative impact of the COVID-19 which will impact the living and economic standards of them. There will be massive job losses and struggling economic period if the financial institution and regulators are not able to come up with mechanisms of tackling the challenges involved. The banks and other financial regulators have played a major role in ensuring that the two countries are not subjected to massive challenges in their financial markets. The evaluation of lending from the creditors has been enabled by the banks and other regulators making a conducive environment majorly for small business and households in accessing workable loans. The banks and regulators have been critically in control of the economic state of the US and Canada hence enabling their citizens not to suffer economically despite the outbreak of COVID-19.
Aaron K. and Ariel G. S. (2020). The COVID-19 recession hit Latino workers hard. Here is what is needed to do.
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