The COVID-19 pandemic has generated an unprecedented economic contraction, hitting SMEs first due to their structurally limited solvency.
Banks, even when backed up by State guarantee, are unable to provide new credit lines. SMEs and their personnel are the first victims.
States are expected to facilitate the economic recovery. However State budgets and sovereign debts are hard hit by the economic slump and post COVID19 taken measures.
So, is there a sustainable solution?
- Taxpayers do not want to pay the bill.
- States cannot afford to fund all companies throughout the ‘L shaped’ recovery period.
- Professional investor's liquidity from quantitative easing now sits at banks, fragilized. They are looking for safe and alternative deposit placements and solutions for the diversification of liquidity.
More liquidity, no State burden
With the economic slowdown and fragilized bank sector, liquidity is king. To be highly effective in the current COVID-19 pandemic economic contraction, the solution should
- ensure liquidity to enterprises most in need (primarily SMEs)
- attract existing private sector funding (from investors)
- remain robust in case of a bank systemic crisis
- boost the State’s economy
- be easily scalable
- be fast, simple and affordable to implement
Their is a need for new, resilient and effective liquidity solutions. Solutions that effectively channels existing liquidity directly into the real economy, making it safe for investors and financially neutral for States.
Investors > diversify their liquidity in innovative sovereign risk equivalent deposits
Enterprises > immediate access to liquidity, strengthening their balance sheet
State > profitably underwrite innovative, highly senior credit risk schemes
Banks > improve ratios at no risk
Central banks > inject liquidity into the real economy with no money supply and no risk
Genuine Enterprise Notes (GEN) are the future: the scheme is faster, cheaper, more scalable and more liquid than securitization.