Sector developments and company hires

Canadian purchase programme
The Canadian government has launched a revised Insured Mortgage Purchase Program (IMPP), under which it will purchase up to US$50bn of insured mortgage pools through the Canada Mortgage and Housing Corporation. The move aims to provide stable funding to banks and mortgage lenders in order to ensure continued lending to Canadian consumers and businesses. The first purchase operation will be conducted on 24 March up to a total of US$5bn. In addition to the access to liquidity provided through the IMPP, CMHC is also ready to expand the issuance of Canada Mortgage Bonds, depending on market conditions and investor demand. Eligibility rules for portfolio insurance are also being temporarily relaxed to assist mortgage lenders with access to the IMPP.

NPL treatment reviewed
The ECB has introduced supervisory flexibility regarding the treatment of non-performing loans; in particular, to allow banks to fully benefit from guarantees and moratoriums put in place by public authorities to tackle current distress caused by the coronavirus. First, within their remit and on a temporary basis, supervisors will exercise flexibility regarding the classification of debtors as unlikely to pay when banks call on public guarantees granted in the context of coronavirus. The supervisor will also exercise certain flexibilities regarding loans under Covid-19 related public moratoriums. Second, loans which become non-performing and are under public guarantees will benefit from preferential prudential treatment in terms of supervisory expectations about loss provisioning. Finally, supervisors will deploy full flexibility when discussing with banks the implementation of NPL reduction strategies, taking into account the extraordinary nature of current market conditions. In addition, the bank notes that excessive volatility of loan loss provisioning should be tackled at this juncture to avoid excessive procyclicality of regulatory capital and published financial statements. Within its prudential remit, the ECB recommends that all banks avoid procyclical assumptions in their models to determine provisions and that those banks that have not done this so far opt for the IFRS 9 transitional rules.