RBNZ offers banks more help to encourage them to keep lending... but at a cost, as it restricts them from paying dividends until the economic outlook improves

RBNZ offers banks more help to encourage them to keep lending... but at a cost, as it restricts them from paying dividends until the economic outlook improves
Adrian Orr

Story updated by Gareth Vaughan

The Reserve Bank (RBNZ) is restricting all locally-incorporated banks from paying dividends on ordinary shares and preventing them from redeeming bond issues until “the economic outlook has sufficiently recovered”.

The restrictions take effect today, April 2, and will be in place “until further notice”.

“This initiative further supports the stability of the financial system by maintaining higher levels of capital during the period of falling economic activity resulting from the COVID-19 pandemic,” RBNZ Deputy Governor and General Manager for Financial Stability Geoff Bascand said.

An RBNZ spokesperson told interest.co.nz this is believed to be the first time the prudential regulator has put dividend restrictions on banks, while bond redemptions haven't been halted in a blanket manner before.

New Zealand's four Australian-owned banks - ANZ NZ, ASB, BNZ and Westpac NZ - paid $2.39 billion in dividends last year, down 30% from $3.39 billion in 2018.

The drop came as ANZ's dividend fell $1.23 billion, or 77%, to $375 million, as it retained earnings to prepare for the RBNZ's new bank capital requirements.

More support to encourage banks to lend to businesses

The RBNZ made the dividend/capital announcement as it offered banks further support to help them continue lending to businesses.

It’s offering them loans with three-year terms, to help them offer businesses loans through the Government’s Business Finance Guarantee Scheme.

The Government has committed to underwriting 80% of certain business loans to encourage banks to lend to businesses at a time they might otherwise have deemed this too risky. This means in the event of a default; taxpayers will bear 80% of the loss.

So in addition to this backstop, the RBNZ is saying it will lend to banks to help them lend to businesses.

For banks to take out these “Term Lending Facilities”, they will have to pay the RBNZ an interest rate higher than the Official Cash Rate (OCR). The facility will be available in May.

The RBNZ is willing to lend banks up to $6.25 billion under the scheme - the same value of the loans the Government has committed to underwriting.  

ANZ capital notes can't be redeemed

To expand on the dividend/capital part of the announcement, banks won’t be able to redeem non-Common Equity Tier 1 capital instruments, typically long-dated subordinated debt such as bonds and capital notes.

ANZ NZ Treasurer Paul Daley said this means ANZ NZ can't redeem $500 million of mandatory convertible perpetual subordinated securities, capital notes, when scheduled on May 25. The RBNZ’s decision doesn't affect ANZ NZ’s ability to pay interest on the capital notes. 

"The terms of the capital notes also provide for their conversion into ordinary shares of Australia and New Zealand Banking Group Limited (listed on the NZX and ASX) in May 2020 or May 2022 (conversion is subject to certain conditions as set out in the investment statement of the Capital Notes)," Daley said.

"ANZ NZ’s capital position remains strong, with total capital of $13.4 billion, or 13.6% of risk weighted assets at 31 December 2019. ANZ NZ’s total capital increased by approximately $1.6 billion between 1 October 2018 and 31 December 2019.

"ANZ NZ acknowledges the steps the RBNZ is taking to promote market liquidity and stability, the flow of funding to the economy and this measure to maintain the banking system’s capital position during the COVID-19 pandemic."

Kiwibank said it won't be able to exercise its early redemption option on May 27 for a $150 million perpetual bond issue which counts as Additional Tier 1 capital. And because this bond was the related bond for $150 million worth of perpetual capital notes, these cannot be redeemed on their first early repayment date of May 27 either. Nonetheless interest payments on both securities will continue.

"Kiwibank agrees that New Zealand banks need to remain well capitalised so that they can continue lending to customers and to provide protection in the uncertain times created by COVID-19," Kiwibank's head of funding Geoff Martin said.

BNZ highlighted a $550 million subordinated unsecured note issue.

"Under the terms of the BNZ Subordinated Notes, BNZ has the option, subject to certain conditions, including obtaining the approval of the RBNZ, to redeem all or some of the BNZ Subordinated Notes on any interest payment date on or after 17 December 2020. Holders of BNZ Subordinated Notes should not expect that RBNZ approval will be given should BNZ choose to exercise this option to redeem. The agreement with the RBNZ does not affect BNZ’s ability to pay interest on the BNZ Subordinated Notes," BNZ Treasurer Neil Bradley said.

ASB said its NZX-listed subordinated notes are not subject to the RBNZ’s restriction on the distribution of dividends.

"ASB is well capitalised and as at December 2019 had a Common Equity Tier 1 (CET1) capital ratio of 11.7% and Tier 1 capital ratio of 13.5%."

And the Westpac Banking Group, parent of Westpac NZ, said it's well capitalised and at 31 December 2019 "had a Level 2 Common Equity Tier 1 (CET1) capital ratio of 10.8% and a Level 1 CET1 capital ratio of 11.1%. Non-payment of dividends from WBC’s New Zealand banking subsidiary, Westpac New Zealand Limited, only affects WBC’s Level 1 CET1 capital ratio."

Heartland dividends to continue?

Meanwhile Heartland Group Holdings, listed parent of Heartland Bank, hinted that it may continue paying dividends.

"Importantly, the distribution [dividend] restriction applies to Heartland Bank, and not to Heartland. Heartland’s Board will consider the impact (if any) of the restriction on its own, separate, dividend policy, and when considering the dividends that it may wish to declare (if any) to its shareholders in due course," Heartland Group Holdings said.

Other steps the RBNZ has taken to support liquidity

In addition to offering banks loans to support the Government's Business Finance Guarantee Scheme, the RBNZ on March 20 started offering banks loans with three, six or 12-month terms. It is taking government bonds, residential mortgage-backed securities, and other bonds as collateral for these loans.

Banks from Tuesday were also able to swap their holdings of “Corporate Paper” (big business debt issuances typically with shorter maturities) and other “Asset Backed Securities” for the RBNZ’s cash.

The RBNZ has committed to buying up to $30 billion of New Zealand Government Bonds on the secondary market to make sure interest rates remain low and the market functions well.

It has also deferred the start of the seven year implementation of new bank capital requirements by a year until July 2021, which it says frees up $47 billion, which banks could lend.

And the RBNZ has reduced banks' Core Funding Ratio from 75% to 50%.

For a more detailed run-down of all the steps the RBNZ has taken to support financial market liquidity, see this story.

Here’s a statement from the RBNZ on its dividend/capital and three-year loan announcement:

The Reserve Bank is introducing a Term Lending Facility (TLF), a new longer-term funding scheme for the banking system, in support of the Government’s Business Finance Guarantee Scheme to help promote lending to businesses.

The TLF is similar to the recently announced, Term Auction Facility (TAF), and both provide liquidity to the banking system. The TLF aims to complement the Government’s Business Finance Guarantee Scheme, announced last week, by ensuring access to funding for banks at low interest rates for up to 3 years duration, which is longer than the Bank’s other liquidity facilities.

“We are working in-step with the Government and the country’s banks to provide the economic support that is crucially needed during this uncertain time,” Reserve Bank Governor Adrian Orr says.

“New Zealand’s financial system remains sound, with strong capital and liquidity buffers. We are confident that the financial system is well placed to respond to the impacts of coronavirus.”

“The facility is designed to support bank lending under the Business Finance Guarantee Scheme,” Assistant Governor and General Manager of Economics, Financial Markets and Banking Christian Hawkesby says.

“We are currently engaging with banks on the operational details of the scheme, with the intention of launching our first TLF operation in May.”

As previously announced, the Reserve Bank’s Monetary Policy Committee has worked to mitigate the severe economic effects of COVID-19 by reducing the Official Cash Rate and implementing a Large Scale Asset Purchase programme.  In addition, the Reserve Bank has deferred the start of increased capital requirements and is delaying planned regulatory initiatives, to allow banks to focus on lending to their clients during the disruption of COVID-19.

“To further support the stability of the financial system during this period of economic uncertainty, we have agreed with the banks that during this period there will be no payment of dividends on ordinary shares, and that they should not redeem non-CET1 capital instruments,” Deputy Governor and General Manager for Financial Stability Geoff Bascand says.

The restrictions take effect from today under revised Conditions of Registration issued to all locally-incorporated banks. They will remain in place until further notice, with the aim of relaxing them when the economic outlook has sufficiently recovered.

“This initiative further supports the stability of the financial system by maintaining higher levels of capital during the period of falling economic activity resulting from the COVID-19 pandemic,” Mr Bascand says.

More information:

Editors’ notes:

  • The Term Lending Facility (TLF) will offer loans for a term of three years to ensure a stable source of funding that aligns with the Government’s Business Finance Guarantee Scheme lending profile.
  • The TLF will be priced at a margin over the OCR, with similar collateral eligibility and haircuts to our existing OMO and TAF operations.
  • The Reserve Bank’s Term Lending Facility programme will link access to funds to banks’ lending under the Business Finance Guarantee Scheme.

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71 Comments

What's bank equity worth now?

21
up

Maybe some lessons after the GFC were learned after all? Bit late, but i guess better late than never.

29
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Good on you, Mr Orr.

19
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Still no deposit protection scheme? I have a substantial amount of cash in the bank right now, having sold up the majority of my share portfolio in December. I'm feeling increasingly anxious about them.

I wouldnt be concerned... banks are well cashed up and this announcement today should only give you more comfort. Cash deposited at the bank ranks well ahead of shareholders and capital note holders... who the RBNZ have reminded today of exactly where they sit in the capital structure.

That explains why the bank share prices are so low, I guess.

difference between being a share holder and depositor

Except that the Aust/NZ banks’ debt to equity ratios are generally about 3 times that of the major US banks now. ANZ a bit less than the other 3.

If banks were in such brilliant shape, the OBR wouldn't need to exist and the RB wouldn't be falling over itself bailing them in with taxpayer moneys.

Both are happening, which should tell you how much stress they are under, despite what they tell the public.

I am not sure you understand OBR correctly. It is to stop a systemic run on banks (all depositors removing depos). The RB isnt bailing out banks, it is incentivising them to keep lending to segments that would absolutely be turned off based on risk weighting. You are joining some pretty distant dots.

No, I don't think you understand the OBR. It's there in the first line of their wording: "Open Bank Resolution (OBR) is a long-standing Reserve Bank policy aimed at allowing a distressed bank to be kept open for business, while placing the cost of a bank failure primarily on the bank’s shareholders and creditors, rather than the taxpayer."

In this case, the creditors are people who hold bank deposits. It will be triggered when a bank is in distress. Once they call "we are in distress!", it is likely all depositors funds will be frozen to STOP the run on banks you describe.

If you think the RB is not bailing out banks by removing risk, then you don't understand how banks work. Everything that banks do involves a risk quotient in their calculations, which they and the RB have been saying for a long time can weather any storm. Suddenly a storm comes along and the banks start crying out that they can't weather the storm, so the RB comes along and lowers the risk quotient. They do this by backstopping lending to businesses the banks wouldn't normally lend to because the businesses are in bad shape.

The important piece here is that the banks won't need to assess whether those businesses have been in bad shape because of years of mismanagement and are just being propped up on debt (zombie companies - see Smiths City), or if it is just because the virus emergency has forced them to stop operating. The government has now put themselves in the role of propping up companies good/bad or otherwise as banks will lend as much as they can to whoever they want. Why? Because it's guaranteed by the government and they only carry 20% of the risk. Why the hell would they restrict lending in that scenario? That's not how a depression is supposed to work in a capitalist system - we are supposed to clear out the dead wood and be left with the productive companies.

It's possible the governments actions are going to make the situation worse in the long run for the taxpayer for the benefit of business owners and the banks. Sure it might delay a bank failure, but in the end we have a more fragile economy with lots of unproductive enterprises sucking up labour and capital that could have gone towards productive enterprises. Meanwhile we will have a list of failed companies whose bills the tax payer has to pay all with the potential for all those elderly savers to have their Term Deposits whipped out from under them with the threat of the OBR being triggered.

Exactly.

Banks are as safe as houses (as the old proverb says).

TTP

.

Keep an eye on them here;

https://bankdashboard.rbnz.govt.nz/summary

All the data is apparently updated in realtime.

20
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Dividend payment restrictions on banks - excellent policy move.

Maybe be like the mortgage holiday (deferral). Wait a few months and then you can pay a dividend. Mostly to remit to your oz parent. Also perhaps to forestall and OBR event.

OK... i have been pretty critical of Orr over recent weeks and months.. but given the uncertain outlook for the economy this does make sense.

This isn't Orr's idea, he is just following other Central Banks. More good news though, bonuses are scrapped and even claw-backs in the UK and I'm sure that will happen here. Read the letters sent by the BOE, the tone is cutting.

https://www.bankofengland.co.uk/prudential-regulation/letter/2020/letter...

Will this prop up the share price of the Aussie banks?

No, it's quite negative. The franked dividends are the reason most own them in Australia.

Correct. It's been an investment wet dream, particularly for the boomers. Effectively guaranteed by the govt and allowed to 'lend into existence'. It's all been part of the Antipdoean wealth generation miracle.

If you are retired in Australia and own bank stock's, most will get a tax refund as their marginal tax rate is lower than the corporate tax rate banks paid. So it's juiced up even more, they entire system forces you to own bank shares.

If you are retired in Australia and own bank stock's, most will get a tax refund as their marginal tax rate is lower than the corporate tax rate banks paid. So it's juiced up even more, they entire system forces you to own bank shares.

Yes TK. It's part of the 'engineering' so to speak. As far as I'm concerned, the Aussie banking industry is the economy. All four plus the large miners and Woolies / Coles make up 50% of total share market cap.

It's not just bank shares where this happens - any company paying tax in Australia (or NZ) can claim the franking (imputation) credits to avoid their shareholders being double taxed. It would be pretty brutal if a company I own paid 28% tax on profits and then I was required to pay an additional 33% tax when they pass the remains on to me.

Agree with the comments about the extreme size of the Aussie banks. I voted with my feet and bank mostly with Kiwibank and Heartland.

It's not just bank shares where this happens

But I think you get my point.

dp

But TK, it is the Kiwi banks not the Aussie banks this has been imposed on. So I can see investors buying up their shares in preference to the Kiwi ones? So why would this be negative for the Aussie ones?

That's correct, see my previous post as to why bank dividends are so important there. I can't see them paying dividends though, it's just a matter of time. Also, if the Kiwi banks can't pay a dividend to the parent, that's even less revenue available to pay a dividend - 20% in the case of ANZ.

'New Zealand's four Australian-owned banks - ANZ NZ, ASB, BNZ and Westpac NZ - paid $2.39 billion in dividends last year, down 30% from $3.39 billion in 2018'.

I think what is meant here is repatriation of profits to Australia and that is going to be stopped now.

a silver lining.

Now I get where you're coming from (moment of personal thickness!). I agree that it is a good move and will have a significant impact on the parents, but what will happen if the Aussie Government leans on ours? Will they cave? I suspect they will try to find other ways around this.

Hmmmm.....

While the fed funds rate continues to drop and GC repo right down to zero already, the key 3-month LIBOR [1.45%] tenor once more perpetuates that same queasy positive spread just like it did in the middle of 2008. Sure, Jay, and all those other experts, go ahead and squawk about how resilient the banking system is meanwhile that same banking system continues to sound the alarm about the dollar system (collateral being a big part of this). Link

In Groundbreaking Move, Fed Excludes Treasurys From Leverage Ratio Rule: Here's What That Means

Perhaps because the market took one look at the recent usage of the Fed's repo facilities where any ongoing SLR stresses would have emerged, as Dealers would be forced to pledge more Treasurys to the Fed in exchange for reserves. Instead... crickets: not only have Dealers virtually stopped parking Treasuries at either the overnight or term repo facility...

Checkout latest US TOMO+POMO actions

And yet : Fed Panics As Foreigners Dump A Record $109 Billion In US Treasuries"

Any word on pay reductions within the banks? Or are they 'above' all that? If a shareholder and no longer receive an dividend, yet the CEO is still getting paid $5-10 million a year - I'd be pushing the question of significant pay cuts.

Typically the 'at risk' components of executives pay is tied to several financial metrics (share price, dividend etc) and with those all likely to be taking a hammering one might expect bonuses to be non existent or radically slashed. Hard to see the bankers voluntarily taking a cut on base salary like other companies but let's wait and see.

They could try and pay performance based remuneration, it would probably be their last acts as private company's.

Heartland bank's release to market this morning suggests they are considering continuing dividends (paid by the parent company Heartland Group Holdings which is the listed company, rather than the subsidiary which these restrictions apply to - Heartland Bank).

As a shareholder I hope they will play by the spirit of the rules and hold off on the next couple of dividend payments to avoid negative PR.

Don't be silly! There's some pretty important people tied up in this Group who are relying on these dividends for all sorts of reasons.

I agree mfd. The Heartland release reads as if they want to socialise losses but continue privatising profits. 

We will soon find out if Heartland acts as it should if it considers itself a true 'registered bank'.

Any word on the media dropping bank reps as go-to's for copy/sound bytes?

Someone will know...
Do the banks take 'the first 20%' hit if there's a default, then The Government comes in for any amount after that, or is it 20/80 from the first defaulted dollar?

You'll forgive me for not being enthusiastic about forcing banks to favour one group of stakeholders over another. After all many New Zealanders will be shareholders or beneficiaries through Kiwisaver, pension funds, NZ Superannuation fund etc. who will now be disadvantaged. It is on form for RBNZ to protect the housing bubble however and this will ensure banks keep lending.

RBNZ offers banks more help to encourage them to keep lending... but at a cost, as it restricts them from paying dividends until the economic outlook improves

"When America Sneezes, the World Catches Cold" - The UST two year yield closed down at 21bps.

A major part of any yield curve is inflation expectations. Nominal growth particularly toward the longer end of curves sets the agenda for trading. But further out there are several confluences that may cause distortions. For Economists, these are conundrums.

There are times, however, when curve dynamics remain pretty simple. These are not usually the best of times. As my colleague Joe Calhoun points out, it’s backward in convention. In other words, what Wall Street may call a bull steepener case for the bond market is actually bullish only for those bonds contained within the curve. For everyone else, particularly the macro economy, this change works out over time decidedly bearish.
This bear steepener in reality (bull steepener in bond trading) is perfectly clear. The short end drops quickly with the long end following if at a slower rate. Nominally, the whole curve shifts lower but because the short end is moving fast the curve steepens while it shrinks. Traditionally, this is the recession signal. Link

10
up

Hallelujah. The state taking back some control. Just the beginning. We could go further of course and demand the shareholders recapitalise their entity with some of the dividends distributed in the past 10 years but it doesn't work like that does it? Alternatively, we could just nationalise the whole lot. Who said socialism was dead. What does the free market look like when there's a full blown financial crisis? That's right, let's run to Mummy and get some help because we've blown the inheritance.
Reminds me of the George Best anecdote when in financial strife, he was asked what he did with all his money - "I spent a lot on booze, women and gambling but the rest I just squandered".

Peak to now, approx decline in share prices of banks on ASX

ANZ down 54%
Westpac down 57%
NAB down 58%

NAB where in trouble long before Coronavirus due to lower efficiency than competitors.

Underwriting and placement (lending) will be a low return business going forwards as rate cuts destroy margins. It will be the banks that can profitably grow other higher margin activities (e.g. insurance, payment mechanisms, advisory services, portfolio management etc.) to fill that gap. All banks will have to let go of staff and automate processes as they restructure towards managing lower margin lending portfolios.

In every bank office, in hushed tones: Bonuses are still safe thought right? Right? I just bought a fu**ing yacht and I'm getting married in the Bahamas in June!

Look at what happened to banks in Europe, forget bonuses this year if you hold onto your job in banking you'll be lucky. Times have changed.

I'm confused. There is only Heartland listed in NZ.

So, for the unlisted. Does this mean e.g. BNZ will not be allowed to ship it's annual approx $1b 'dividend' to it's parent NAB - if it takes up RBNZ scheme? (Same for other 3 big banks, ASB to Commonwealth, ANZ NZ to ANZ AUs .... etc etc)?

And Kiwibank not allowed to pay a dividend to NZ Post / Govt or whoever owns it now?

I know private banks are owned by private individuals who benefit from its profit. But as a mechanism, banks are simple extension of the RBNZ. With money being sovereign debt with absolutely no backing, the RBNZ can and does issue as much of NZD as it wants. Most of this NZD is issued by banks offcourse (their loans), but it is RBNZ who is the god and these banks are just his/her angles.
I know that when it comes to "capitalism" banks are right there on top in people's minds. But with money supply entirely in control of the government, no one affects "capitalism" more than the central bank

Wonderfully expressed B1980.

Does anyone think about the unintended consequences? You've now got banks who can't make money because of zero interest rates, who can't raise capital by issuing bonds because no one will buy them except the central bank, and who now can't even keep their stock prices up by paying dividends.

The central bank keeps "fixing" problems it has caused, creating more problems.

I have been quoted 3.09% for an investment property loan today. So they aren't charging 0%.

Banks have costs, just like other businesses. At 3.09% their margin is diddly squat.

Poor banks. All those billions in profit they were making annually certainly suggests they're struggling.

At least they quoted.

I'M a bit confused.
If i own shares in ANZ i'm not going to get a divie.....is that correct.
What if i sell them and buy them back on the ASX what happens then.

That's unknown as yet. Local banks will not pay dividends to the parents, so the cash stays in NZ. Whether parent can/will pay is yet to be determined but I would suggest either no or heavily slashed.

As far as I'm aware it makes no difference whether you buy on the NZX or ASX - you end up owning a share of the same entity. What I think is happening is, e.g., Westpac NZ won't be able to pay out to the parent company (which you may have shares in), but the parent company may still be able to pay out. The parent company would not be able to pay dividends only to Australian residents and not to NZ residents - all shareholders must be treated equally.

So presumably, if Australia don't act similarly, the parents companies will still be paying dividends to NZ shareholders, but very likely at a reduced rate. Can anyone confirm/disagree?

Yes, although not paying dividends might still leave door open to continue dividend payments at the same level because dividends are not the only mechanism by which value may be conferred to Australian parent groups.

FSPs themselves have some painful days ahead as they start to reduce their workforce in line with the margins on revenue. Many have expensive "digital transformation" programs and projects that will be first to be scaled back because they don't actually generate revenue, similar much compliance work can be kicked down the road thanks to RBNZ. Even more than the financial crisis you will see banks return to the core services they offer that generate revenue and remain valuable to customers. However that will mean major resizing and restructuring of organisations. What will emerge will be leaner organisations more focused on customers.

Well the fed is currently buying the stock and bond market. It's buying all the usually safe bonds because people are running for the exits. The fed is keeping the price from dropping with unlimited keyboard currency.

It has instructed all central banks to do the same using US dollars in their respective countries and markets. If this is not a coordinated central bank global takeover with a global dollarisation process i don't know what is.

People will get destroyed. Small businesses will get wiped out but govts will pick winners. Global corporates and to big to fail will all get bailed out including entire industries.

This is going to be horrible as we entire a new system. Physical cash will be eliminated and a new central bank digital currency will replace it. Freedoms gone..
.

I agree with most of that, but you go too far with the last paragraph I reckon.

Inevitable. Freedom is an expression of the past.

The banks worry me, they've been so irresponsible & may get caught with their pants down. Mortgage holidays etc will only last so long & if the work isn't there, at what point do the number of defaults tip the scale into a full blown banking crises. Not just here but Australia too, they may be the catalyst. A deposit guarantee should be next & perhaps full privatization of kiwibank.

Yes deposit guarantees is about the only thing not being mentioned. The OBR is still up the sleeve.

I imagine these will be the first of many companies to cut their dividends for the immediate future. On the plus side bank stocks are trading at much nicer valuations at the moment.

If the government gave a deposit guarantee on bank deposits TDs would fall 0.75% to 1.5% as per Australia.
They could then cut fixed home loan rates to about 2.25%. This would make a HUGE difference to stressed mortgages. It is not difficult to do, unless they know there are a couple of cowboys that snuck into the 'registered bank' club.
I see the first finance company has just fallen.

Poor retirees who depend on bank dividends. The unintended consequences.

Dividens? from their share market capitalisation? - akh, it's okay it's about look good PR job right now. Matters.

Presumably there will be a stop put on trading banks shares. A central bank that has treated regulation like a dirty word, and a banking industry that has acted with little regard for "structural integrity ".
One minute the RBNZ receives global adulation for not lowering interest rates, as one of the few that seem to understand such an action cannot cure a virus, then the next minute, cuts rates from 1% to 0.25 % ? Sounds like the Fed kidnapped somebodies children.
Then, taking control of the regulatory wheel, in such a strong, and unprecedented manner? Should a central bank issue a digital currency, it can do so directly to it's citizens, and as such, the banks simply become a service centre of the now highly powerful central bank. ( this gets more interesting when the question gets put as to who are the RBNZ, yet that's another story).
The big banks have been seeing continued drops in their profits, and the use of AI, and blockchain, eliminates a massive % of possible revenue streams.
Many people see there is a "global reset" of the worlds financial system coming, so what would it look like? The schizophrenic actions of our reserve bank seem to be the result of a central bank caught in the crossfire of a global financial war, capitalism ( or at least crony capialism) or socialism ( at least that part which is under communist control)
Can the west preserve some vestige of what it's citizens believe it is about, ie freedom, or are the branksters going to lose the lot?
Don't think there is global financial war? Then what's the oil war all about? Think the USD is still the global reserve currency? When did the petro dolar end?
Does the fed like deflation? How does the fed stop deflation? It has been exporting it's inflation to the world for sometime. What happens when that is all sent back to them? Fiat currencies and irresponsible central banks will be faced with telling everyone that they tried their best, but we may not be bringing the cup home this time. Think about it.

As a small business owner, we have asked our bank about the government backed loan option, we would like to take out the maximum of 500k for two of our businesses, the bank has agreed in principle (ie the numbers stack up for it to be feasible) however it is subject to personal guarantee.
Has anybody encountered the same thing??
I am struggling to understand why the bank would require a personal guarantee when the government is underwriting the loan at 80 percent. My business partner and I would be ok to give a personal guarantee for the 20 percent the bank has to cover, but the bank is saying no deal. Essentially if our business goes under owing this to the bank, they will be able to come after my assets first, if after they sell my assets etc there is still not enough to cover it over then will they go to the government for the rest. Small Business owners are being burdened with big risk in a very uncertain environment.
In my business there are two main reasons why I would take out a loan;
1) to fund cashflow, ie the business is growing and I don't have the funds myself to support that growth, so I need some kind of overdraft or trade finance assistance
2) to upgrade plant or machinery to improve efficiency and production

both of these are future based on numbers into an environment where the loan would easily be paid off.

In the current environment the government/bank requires me to put my house on the line to invest to pay wages rent and ongoing expenses in order to survive into an environment where there is no certainty at all and i have no idea when the business and the economic environment might pay off the loan.

My question is, how is the government really supporting here small business??

I can see they area making a great headline for their next election