Financial Times 08Apr2020

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.

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