C.D. Howe makes recommendations to encourage investing
It’s up to governments and regulators to formulate guidelines and innovative approaches that will allow for creativity in encouraging investments in light of COVID-19, says a report by the C.D. Howe Institute.
In its report, the working group on Monetary and Financial Measures says such measures would increase the confidence of lenders and investors when engaging with businesses.
Working group comes up with ways to encourage support measures
The group, co-chaired by David Dodge, the former Governor of the Bank of Canada, and Mark Zelmer, former Deputy Superintendent of OSFI, also tackled issues such as the “underwhelming uptake” of certain support measures offered by governments, uncertainty on future policy responses to the pandemic, strategies to tap large savings pools among both institutional and retail investors, as well as principles guiding future government support.
Among the recommendations:
Governments should provide a clear, state-contingent roadmap for how they will react to the evolution of the pandemic from an integrated health and economic standpoint;
Governments should provide clarity on the plan for a return to fiscal sustainability;
Governments and regulators should set guidelines for a “sandbox” that allows experimentation between businesses looking for capital and lenders and investors looking to provide it;
Policymakers should also look for ways to tap into retail investor savings pools through, for example, collective investment plans;
Programs should recognize that longer repayment terms on loans may be appropriate for some borrowers but that longer terms for repayment should compensate the taxpayer for the associated additional risk;
The taxpayer, through the government, should rank on equal footing with other senior unsecured creditors in the creditor stack or should be compensated accordingly for supporting more subordinated exposures, and
Government should consider the broad range of financial institutions that might appropriately have access to these facilities and make clear the rationale for including or excluding any type of institution for a particular type of facility.