Financial Times 08Apr2020

(Amelia) #1

16 ★ FINANCIAL TIMES Wednesday8 April 2020


Please don’t run selfishly —
we walkers have rights too
Runners aren’t the only people who
“have chosen putting one foot in front
of the other as our way of keeping some
semblance of normal in this most
abnormal of worlds” (“FT readers:
why running is a lifeline during the
coronavirus crisis”, FT.com, April 3).
The rest of us are doing so too: we’re
called walkers. We have the same
rights to access parks, paths and
pavements as runners, and the
same obligations.
Much of the time, both groups
utilise those spaces with courtesy and
consideration to our fellow humans.
Sadly, there’s always some who won’t
follow the rules. During my permitted
one local walk per day (in London) I
am routinely passed, sometimes only
inches away, by runners unwilling to
give others a safe 2m berth. When
they approach from behind, obviously
I can’t get out of their way because I
can’t see them until they’re already
far too close!
On social media, walkers report
being “bullied” off paths trying to get
2m away from approaching runners.
Many walkers can’t avoid unswerving
runners due to mobility issues, or
because they have small children in
tow. Yet some runners must, it seems,
run as they please, at all costs.
Run for exercise by all means, but
don’t run selfishly. As a former runner
myself, who appreciates the value of
getting outside for exercise, I urge all
runners: please be extra vigilant in
these uncertain times. A life, yours or
someone else’s, may depend upon it.
Erica Wells
London SE11, UK

Lenders have high levels


of quality resources
Jonathan Ford (April 6) points to
banks’ low price-to-book ratios and
argues that if one uses market rather
than accounting values for banks’
equity they are undercapitalised
(“ Pandemic exposes ‘bulletproof’
banks to real-life stress tests”, Inside
Business, April 6). He recognises that
low price-to-book ratios can reflect
two things: concern over long-term
profitability or worries over the stated
value of banks’ assets and ultimately
their equity. While acknowledging the
considerable uncertainties right now,
I would tend to the former. According
to data from the European Banking
Authority, European banks’ average
post-tax return on equity in the years
following the crisis has ranged from
0.3 per cent to 6.6 per cent. At the same

time their highest quality capital
has risen by about €1.2tn, hardly
suggesting a massive shortage. This
excludes several billion euros more
of loss-absorbing resolution capital.
Low price-to-book ratios have been
around for several years now and long
before the recent elevated concerns
over bank credit quality emerged. To
date, these depressed ratios have
primarily reflected the struggle that
banks have had to earn their cost of
capital with, more recently, dividend
cuts further lowering valuations.
It is impossible to be certain that
banks across Europe have enough
capital to weather the current storms,
but they enter these challenging times
with high levels of quality resources.
Before the last financial crisis many
banks were trading at significant
premiums to book value. On Mr Ford’s
arguments, this would have suggested
that they were underleveraged. We
know how that story ended.
Michael Lever
Head of Prudential Regulation,
AFME — the Association for Financial
Markets in Europe

Buy the planes!


Instead of simply giving money to
Boeing and the airlines, the US should
buy planes that the airlines have
grounded and the unsold planes
coming off Boeing’s production lines,
and pay the airlines and Boeing to
maintain them until demand for
aircraft recovers. This would provide
an eventual benefit to the American
taxpayer, the companies and the
maintenance workers who would
work on the planes.
Peter Brooke
Brooklyn, NY, US

ESG data already take
account of employees
TheMoral Money ewsletter onn
FT.com is a brilliant contribution to the
sustainable investment industry. It is
equally brilliant to see FT journalists
now citing sustainability reports and
carbon performance in company
articles. However, the repeated
suggestion that an extra “E” for
employees should be added to ESG
(environmental, social and
governance) is not helpful.
Social performance is widely
understood by ESG investors, and has
been for several decades, to include
company data on employees. The
majority of social standards set by
the Global Reporting Initiative are
employee-related; for example,
health and safety, training provision,
diversity and labour rights. There is
vast scope to improve the breadth
and quality of social data points but
no need for new buckets, particularly
in an industry already scoffed at for
its “alphabet soup”!
Jessica J Cassey
London W10, UK

Indian government must


support the apparel sector
Please refer to the gut-wrenching
commentary of Arundhati Roy,
“The pandemic is a portal” (Life &
Arts, April 4).
With the lockdown in India, millions
of workers, not sure if the lockdown
will be extended and whether they will
have jobs later, are trying to get back to
their villages. Whenever the lockdown
is lifted, many of the workers may not
return immediately to the cities and
their jobs. This will cripple
manufacturing units. It is therefore
critical that governments across
countries take proactive steps to ease
the pain of manufacturing units, to
ensure growth in 2020-21.
The year 2020-21 is likely to be one
of the most challenging in recent
decades in human and financial terms.
However, governments can minimise
the impact of Covid-19 and the possible
recession by being proactive and
micromanaging situations. For
instance, the Indian apparel sector is in
deep trouble, as large global retailers
are cancelling current and future
orders, since the retail outlets in their
own countries are shut due to
lockdowns. India apparel exporters
have large inventories of finished
products, raw materials and so on,
which will have to written off.
Garments are almost a “perishable”
product, for they are made against

specific orders, dictated by prevailing
fashion trends. Production in many of
the apparel factories is grinding to a
halt. However, the units are required to
pay full salaries to all employees. Now
salaries constitute 25-30 per cent of the
cost of a garment, as compared to
about 7-8 per cent of the cost of a
product in any other industry.
Many of the units are in danger of
having to shut down completely. The
apparel sector needs the active support
of the government. For instance, the
wages of the staff can be paid from the
employees insurance funds, which the
units have been paying into. The
government could also pay the salaries
of the staff for about three months.
Banks can contribute by increasing
the working capital limits of
manufacturing units by 25 per cent,
without additional collaterals. Tax
payments should be deferred for a
period of three months, without any
penalties. These steps may help the
garment manufacturers to survive the
current crisis. It will also help them to
keep their workers during this lean
period and provide them with food,
accommodation and so on during this
grim patch.
Tough times come and go. However,
we can never lose our humaneness and
hope. It is heart-rending that global
leaders and scientists are not prepared
for this type of virus contingency.
Rajendra Aneja
Aneja Management Consultants,
Mumbai, India

Long-forgotten classics, new gems to
be discovered, poetry to be shared,
that tottering bedside pile of would-be
reads to be enjoyed at leisure — if only
there was the time. Now, of course,
there is — in abundance. TheCovid-
pandemic s proving something of ai
fillip for books. This is reflected in the
profusion of lists of appropriate
lockdown reads, with online book
events and discussion groups to keep
us stimulated, amused or distracted in
our homebound states. All in all, a
rare slither of a silver lining in an
otherwise utterly miserable and
frightening situation.
Yet there is a nasty sting in this tale.
While readers may be enjoying the
boundless perspectives and delights
to be found between the covers of a
book, the business itself — from
publishers to distributors, booksellers
and, of course, authors — is having a
tougher time. The book world, like the
news media, is a beneficiary of a vast
global story that will also come with a
huge economic cost.
Coronavirus-induced lockdowns
have shuttered bookshops; pared
back, if not halted, distribution
networks; forced the cancellation of
the festivals and launch events that
are a mainstay for the marketing of
many new titles. The almost total
cessation of physical book retailing in
many countries — there are a few
notable exceptions where bookshops
have been deemed an essential
service, including Belgium, the
Netherlands and the city of Berlin —
has been matched by a perhaps

unexpected complication in the online
world. Amazon, the commanding
power of online book retailing, is
prioritising sales of medicines nda
other vital items. Books — unless they
are educational or for kids — have
been dispatched to the slow lane.
So at a time ofgreatly increased
appetite, it has become ifficult ford
publishers and retailers to get
physical books to the readers.
There are some valiant attempts
by high street book chainsand
independent stores to expand their
online operations. But these remain a
fraction of what was available before
the crisis struck. “Most of our sales
have evaporated,” says James Daunt,
who runs theWaterstones and Barnes
& Noble chains n the UK and USi
respectively, as well as a small group
of independent shops.
Also, such alternative channels
are being affected by bottlenecks
elsewhere, such as in warehouses and
distribution centres where operations
have been scaled back to allow for
social distancing or staff absences.
The grim reality is that many books
that have just been publishedwill go
unsold. “We may well get all the
stock sent back,” says one London
publisher, adding that the copies will
most likely be “pulped or given to
charity”. If this is a bitter — possibly
terminal — commercial prospect for
publishers and retailers, it is a horror
of a different nature for those ultimate
creators, the authors, many of whom
will have worked for years on a book.
To limit the impact, many

publishers are scrambling to postpone
launch dates. Before Covid-19 struck,
a familiar topic of industry chit-chat
was how publishers had carefully
planned to keep books away from the
autumn to avoid the overbearing din
and publicity-draining force of the US
presidential election, but now it is all
about how much one can clear the
spring list and shift into the autumn.
“There’s going to be one hell of a
pile-up,” sighs one chief executive.
Publishing has been here before.
It has witnessed past crises and
survived. The Great Depression
spurred the practice of sale-or-return,
which allowedbooksellers to take a
punt on titles that could be sent back
if they didn’t sell. Or as the great New
York publisher Alfred Knopf dubbed
it: “Gone today, here tomorrow.”
It is not yet clear what innovation
this crisis may deliver. There is
inevitably a lot of chatter about an
increasing shift to digital, though
readers have proved to be very
attached to physical books, despite all
the energy and attention showered on
tablet and audio formats. Online
events are also generating a buzz.
“Three hundred people dialled in. If
we had done it as live event we would
have been thrilled to get 30,” gushes
one translator friend after a virtual
author event.
Perhaps a more enduring lesson of
the crisis is the reminder that books
are as relevant and essential as ever —
as long as you can get hold of them.

[email protected]

Lockdown


literature comes


with a sting


in its tale


Notebook


by Frederick Studemann


Governments and central banks have
announced massive Covid-19 business
support programmes, including
hundreds of billions in loan guarantees.
But current guarantee programmes
require banks to share the risk, and
this in turn requires that banks
conduct a credit assessment.
That is penny wise but pound
foolish. It delays disbursement and
creates the risk that companies will lay
off workers and possibly fail before
assistance arrives.
To avoid this, make banks a conduit
for government credit. Make the
guarantee 100 per cent, make such
debt senior to existing debt, and make

such loans eligible as collateral for
central bank lending facilities. That
way banks face neither credit nor
liquidity risk. That will simplify and
shorten the loan process. In particular,
it removes the need for banks to
conduct a credit assessment of the
company and charge a rate that reflects
the probability that the company will
default. That will accelerate
disbursement.
For small to medium-sized
enterprises such guaranteed loans
could take the form of a one-year
revolving line of credit at their “house”
bank for up to six months’ revenue (as
evidenced by their income tax or VAT

returns) at a rate of interest of 1 per
cent a year. The SME could draw on
this line to pay qualified expenses
(wages, rent, utilities, suppliers,
insurance and interest). Prior to
maturity the bank would transfer the
loans to the government at a value
equal to the amount outstanding plus
accrued interest.
The government would then be the
lender of record and have recourse to
the borrower. For any amount
outstanding at maturity, the
government will offer the borrower the
opportunity to refinance on
commercial terms,providedthe
borrower can demonstrate that the

original loan financed qualified
expenses. Any other amount would be
immediately due and payable, subject
to the same enforcement procedures
and penalties as unpaid and overdue
tax.
Such a programme will get money to
companies while it can still do some
good. That will sustain suppliers and
extend employment. This will make
the recession shorter and shallower, as
well as help bring about a steeper
recovery sooner.
Thomas F Huertas
Senior Fellow,
Center for Financial Studies and SAFE,
Goethe University, Frankfurt, Germany

Use the banks to shorten and simplify the loan process


Letters


W E D N E S DAY8 A P R I L 2 0 2 0

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Corrections


cMarriott chief executive Arne
Sorenson will not take a salary for the
remainder of the year. The salary
suspension is not “for the duration” of
the crisis, as wrongly reported in an
article on April 7.

cThe British government finally paid
off the £1,200,000 loan that created
the Bank of England in 1694 in 1994. An
editorial on April 7 mistakenly stated
that it had never been repaid.

‘Are you quite sure your pilgrimage
is essential?’

Throughout history, diseases have
emerged at intervals with the capacity
to kill millions. Perhaps the biggest dif-
ference between the Covid-19 pan-
demic and any before it is the volume
of information available to the authori-
ties trying to fight it. Smartphones col-
lect millions of data points which can
help to shape public policy. But with
this tremendous potential for public
health comes a serious risk of misuse
and erosion of democratic norms.
Governments in Asia have been par-
ticularly adept in this field. InSinga-
pore, an app that uses Bluetooth to
establish when individuals are close to
each other has almost certainly con-
tributed to the country’s low death
rate. ASouth Koreanself-quarantine
app is part of the country’s strategy to
flatten its infection curve. It allows
users to input their conditions, while
ensuring quarantine is observed by giv-
ing authorities their location via satel-
lite positioning.
Faced with a pandemic, many mem-
bers of the public will be willing to
trade some measure of privacy to help
efforts to protect them. Data sharing
may in fact have long-term benefits.
Access to wide-ranging information on
Covid-19 could allow health services to
prepare themselves better for future
epidemics, and determine how best to
deploy resources before they happen.
In the rush to expand data collection,
however, provisions such as the Gen-
eral Data Protection Regulation, the
EU’s gold-standard regulatory frame-
work, have been left by the wayside.
Data collected haphazardly may lack
the accuracy needed to underpin good
decision-making. Researchers might
be unwilling to work with content col-
lected without proper consent. Focus-
ing too much on the speed of collection
also risks a proliferation of insecure
databases — prize targets for hackers.
Questions around user privacy will


not disappear with the end of the pan-
demic. Data collected by contact-trac-
ing apps could include sensitive details,
even if they are anonymised.
Care must be taken to avoid re-iden-
tification of potentially personal infor-
mation, especially in countries where
standards of democracy and rule of law
are weaker. Where users have — wit-
tingly or not — agreed to looser privacy
standards for virus-related apps,
they should be given a clear option
to revoke those permissions once
the virus passes.
For democratic governments that
are using these technologies, transpar-
ency both in the kind of data being col-
lected and in how it is used is vital. Tai-
wan, which has relied heavily on Big
Data to fight the pandemic, has shown
thatcomplete transparencyis vital to
maintain trust in public authorities.
Also important is a “sunset” clause
on behaviour that has potential to
morph into mass surveillance. Govern-
ment bodies will have to allow for
regular, independent reviews of the
actual uses of data collection. The prin-
ciple of data minimisation is key: if sen-
sitive information is not being put to
good use, it should probably not be
collected at all.
There are, of course, limitations to
data. Vulnerable groups such as the
elderly are less likely to use a smart-
phone and authorities have to work
around this gap.
Much of the discussion around
human rights and coronavirus has cen-
tred on autocratic states using the pan-
demic as cover for anti-democratic
steps. It is just as important to recog-
nise that civil liberties can be eroded
through well-intentioned decisions by
democracies. Governments must be
as vigilant in restoring personal
freedoms and privacy once the crisis is
over as they are in tracking and com-
bating its spread.

But privacy should remain a priority for democratic governments


Data can be a powerful


tool against the virus


As with anyone struck down by the
Covid-19 virus, Boris Johnson’s admis-
sion tointensive care s, at its heart, thei
story of an individual’s fight with a
frightening disease, a time of intense
anxiety for him and for his family and
friends. This news organisation joins
many other well-wishers in expressing
its hope that the prime minister makes
a swift and full recovery. That the virus
can lay low the leader of one of the
world’s largest economies, one known
for his vigour, is a salutary reminder of
its indiscriminate nature.
The emergency hospitalisation of a
prime minister is a challenge for any
government. For a relatively new and
inexperienced administration strug-
gling to manage a global pandemic, it
constitutes an extremely grave situa-
tion. No UK government for decades
has dealt with a lengthy, unplanned
absence of its leader — let alone in the
glare of 24-hour media scrutiny. It is a
blow to national morale that Mr John-
son has seen as his personal duty to
maintain. The public will be seeking
rapid reassurance that the government
can grapple effectively with the out-
break and the dilemmas it poses.
The prime minister’s absence comes,
moreover, as the government is under
fire for failures to provide equipment
such as ventilators and protective gear
to the NHS fast enough, and to ramp up
crucial virus testing to promised levels.
The earlier strategy of allowing the
virus to spread in the hope of achieving
“herd immunity” backfired and was
dropped, but valuable time was lost.
The government faces the first
review, next Monday, of its lockdown
measures, with the virus expected to
peak in coming days. Even now, it must
start planning Britain’s exit strategy
and the phased restart of the economy.
The government needs constantly to
preserve a fine balance between over-
reaction that would deepen the eco-


nomic harm, and under-reaction that
would cost further lives.
The first duty of those now holding
the reins of government is, therefore, to
provide reassurance. A starting point
should be greater clarity and openness,
while respecting personal privacy,
from Downing Street. Dominic Raab,
the foreign secretary who is nowdepu-
tising, seemed taken aback on Monday
by the speed of the prime minister’s
deterioration, and had to admit he had
not spoken to him since Saturday.
Even more important is for the lead-
ing cabinet figures to put aside rivalries
and forge a unity that goes beyond a
mere facade. Mr Raab lacks the experi-
ence and finely honed political skills of
some counterparts. But he has to be
accepted, for now, as chair and arbiter
by the remaining members of the C-
committee coordinating the govern-
ment’s virus response.
The existence of that committee,
which also includes chancellor Rishi
Sunak, health secretary Matt Hancock,
and Michael Gove, the cabinet office
minister, provides continuity of gov-
ernment. Its immediate priorities have
already been established. Tensions
between the Treasury and health
department over the length and depth
of the lockdown must be set aside.
Even were Mr Johnson still in place,
the government should urgently be
looking to bring in further expertise,
including from the private sector, to
manage critical tasks. After admissions
that 17.5m antibody tests the govern-
ment ordereddo not work well enough
to be used, naming a testing “tsar”
appears overdue.
Should the prime minister’s absence
prove lengthy, existing structures will
need to be reviewed. In the meantime,
it falls to the four committee members
and the rest of cabinet to close ranks
and provide competent government.
Too much is at stake for them to fail.

PM’s health emergency is an anxious moment for family and the UK


Johnson’s illness makes


government unity vital


Clarification


cFormer Italian prime minister Silvio
Berlusconi strongly denied making
alleged disparaging remarks about
German chancellor Angela Merkel
widely reported during the eurozone
crisis and referred to in the Big Read on
April 7. No record of the bugged phone
calls in which the remarks were alleged
to have been made has ever been
publicly revealed.

APRIL 8 2020 Section:Features Time: 4/20207/ - 18:53 User: alistair.hayes Page Name:LEADER USA, Part,Page,Edition:EUR , 16, 1

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