downward pressure on the real economy. i would like to elaborate on this later. ii. conduct of monetary policy a. enhancement of monetary easing in light of the impact of covid - 19 let me now turn to the bank's policy conduct. global financial and capital markets were unstable from late february through march 2020 due to the spread of covid - 19. investors'risk sentiment deteriorated sharply, stock prices declined significantly, and credit spreads on cp and corporate bonds widened, while the costs of funding u. s. dollars as a safe asset rose rapidly. in addition, financial conditions have become less accommodative in terms of corporate financing, as seen in the deterioration in firms'financial positions due to declining sales and profits. given these developments, at the regular monetary policy meetings ( mpms ) held in march and april and at an unscheduled mpm held in may, the bank decided to take measures to enhance monetary easing with a view to doing its utmost to ensure smooth financing, such as of financial institutions and firms, and to maintaining stability in financial markets. these consist of three monetary easing measures, namely, ( 1 ) the special program to support financing in response to the novel coronavirus ( covid - 19 ) ( the special program ), ( 2 ) an ample provision of yen and foreign currency funds, and ( 3 ) active purchases of exchange - traded funds ( etfs ) and japan real estate investment trusts ( j - reits ) ( chart 7 ). i will next explain each of these measures. the first is the special program to support financing. the program consists of the bank's purchases of cp and corporate bonds within about 20 trillion yen and introduction of funding measures of about 100 trillion yen to encourage lending by financial institutions. the latter includes a scheme in which the government takes the credit risk of lending by financial institutions to small and medium - sized firms and the bank provides funds to those financial institutions on favorable terms. the second measure is an ample provision of yen and foreign currency funds. the bank decided to purchase a necessary amount of japanese government bonds ( jgbs ) without limit, with a view to maintaining stability in the bond market and stabilizing the entire yield curve at a low level. it has also decided to provide a large amount of u. s. dollar funds based on cooperation with five other major central banks. the third measure is active purchases of etfs and j - reits. the aim is to prevent firms'and

, as they have been actively supporting their client firms with various measures taken by the bank and the government to support financing. nevertheless, financial institutions themselves are also facing a severe situation. according to the international monetary fund ( imf ), in 2018 the proportion of global systematically important banks that had a return on equity ( roe ) below 4 percent was less than 10 percent, but this is projected to increase to around 50 percent by the end of 2020. 2 furthermore, the imf points out that, if the impact of covid - 19 persists, many banks in advanced economies may fail to generate profits above their cost of equity ( coe ) in 2025. if roe does not exceed coe, financial institutions'profitability will gradually decline. this may be attributed to three factors : a narrowing of loan spreads ; a decrease in investment income ; and an increase in credit costs. i will now explain the situation surrounding these three factors in japan. let me first touch on the narrowing of loan spreads. japan has been confronted with both limited demand for new loans, due to a decline in population and the number of firms across regions, and with prolonged low interest rates. in this situation, financial institutions'average contract interest rates on new loans and discounts have reached extremely low levels, owing in part to intensified competition among institutions. as a result, there has been a narrowing of net profit margins - - calculated by deducting overhead cost ratios from the interest rates. imf, global financial stability report, april 2020. for example, the average net profit margin for regional banks - - specifically, member banks of the regional banks association of japan - - was around minus 2 basis points for fiscal 2019 ( chart 9 ). 3 when considering the net profits of financial institutions, it is also necessary to deduct credit cost ratios - - the amount set aside for potential loan losses ( chart 10 ). in this situation, if lending rates decline further from the current level, financial institutions will not be able to generate profits unless they procure funds at negative interest rates. it is difficult, however, for deposit rates - - which account for the majority of financial institutions'funding costs - - to fall into negative territory. for this reason, we may be approaching a situation in which, even if market interest rates decline, lending rates do not fall, or the provision of loans does not increase. in addition, the amount of effectively interest - free loans expected to be provided to small and medium - sized firms