March 18, 2020 / 1:00 PM / 10 days ago

BoE open to further lending measures as coronavirus challenge grows-Bailey

LONDON, March 18 (Reuters) - Bank of England Governor Andrew Bailey said the BoE is open to further lending measures after the economic challenge posed to Britain by the coronavirus has become starker, especially for larger firms, since the BoE cut interest rates last week.

Bailey also said he had taken note of sterling’s fall below $1.19, and that policymakers would discuss it when they next meet, though he did not have a single explanation for it.

“We will take it into account, consider it carefully what the effects of it will be, but I don’t have a view, and I don’t have a view on the level of sterling either,” Bailey said at a briefing for financial journalists.

Britain’s central bank is typically reluctant to comment on sterling, and does not target a specific level for the currency, which has fallen to its lowest level against the U.S. dollar since 2016 as the coronavirus impact has spread.

“The effect of this on big firms has become much starker in the last week,” Bailey said.

Last week the BoE, as well as cutting rates to a joint record low 0.25%, launched measures to encourage banks to keep lending to smaller firms.

On Tuesday, the BoE said it would buy a form of debt called commercial paper from investment-grade bigger companies, even if they had not issued this type of finance before.

Bailey said on Wednesday that he could not say how large the take-up for the scheme would be. The existing commercial paper market is small, but Bailey stressed the BoE could effectively buy new commercial paper direct from firms.

The central bank was also open to widening finance schemes further, looking at asset-backed commercial paper and the credit quality non-financial firms need to access its facilities.

Bailey dismissed calls for financial markets to shut due to the coronavirus crisis.

“As long as we are not seeing what I would call markets that are out of control then keeping markets open is important,” he said. “So far the financial system is standing up well to this.”

Additional reporting by William Schomberg

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