luljeta minxhozi : covid - 19 - the impact on the economy and central bank policies welcome address by ms luljeta minxhozi, first deputy governor of the bank of albania, to the virtual conference of the bank of albania “ covid - 19 : the impact on the economy and central bank policies ”, 29 october 2020. * * * dear guests, ladies and gentlemen, for a few years now, the bank of albania and the institute of global affairs ( iga ) of the lse have been co - organizing a series of joint conferences. these annual events are aimed at encouraging an open discussion amongst academics and policymakers, in order to promote new thinking and policy - based approaches to the most pressing challenges we face. the bank of albania is proud to associate itself with the institute of global affairs, an institute which is positioned as a leading academic center for exploring research - based strategic approaches to policy challenges. on its behalf, the bank of albania strives to adopt the emerging academic consensus, while tailoring it to the idiosyncrasies of the albanian economy and its financial markets. being said that, it is a special my pleasure to address this conference, focused on “ covid - 19 : the impact on the economy and central bank policies ”. the ongoing pandemic has the undoubted potential to re - shape our way of life for the foreseeable future. as the health emergency is still unfolding, its implications might have far - reaching impacts in our social and economic fabric. for policy - making institutions, particularly in emerging economies, the challenge to fulfill key objectives like price stability, sustainable growth and financial stability, is driving them into uncharted operational territory. i take this opportunity to touch upon some of the most pressing issues at stake. * * * dear guests, life with the sars - cov2 virus continues to be an unprecedented health and social challenge. fortunately, health institutions today know more about the virus and which policies serve best to contain it. unfortunately, we are still far from a definite and practical epidemiological solution. against this background, the economic fallout from the pandemic is still unfolding. the strict lockdown in the second quarter paved the way towards a synchronized global recession ; the economic activity in most emerging and advanced economies shrunk rapidly while unemployment jumped sharply. however, the easing of lockdown measures in the third quarter and the quick deployment of both fiscal

would have the government share the cost when the servicer reduces the borrower's monthly payment. the second category of foreclosure prevention plans takes a less streamlined but more deliberate approach, with the goal of increasing the proportion of loan modifications that borrowers will be able to sustain over the longer term. the tradeoff is that the more deliberate approach would likely result in relatively fewer mortgages being modified. one example of a plan that puts greater emphasis on achieving sustainability would have the treasury use tarp funds as working capital to buy delinquent mortgages from lenders and investors at steep discounts to their remaining balances, through negotiations or through reverse auctions. the acquired mortgages would then be re - underwritten and modified as appropriate to meet the criteria for refinancing into hope for homeowners ( h4h ) or other government programs. especially if the congress moves forward on a plan of this type, it should examine the possibility of enhancing the h4h program to make it a more effective vehicle for this effort. a second broad use of new tarp funding, besides foreclosure mitigation, would be to support programs to help restart key credit markets. the treasury and the federal reserve recently announced such a program, the term asset - backed securities loan facility, which is designed to stimulate securitization activity in the market for asset - backed securities collateralized by a range of consumer and small business loans. 2 under this program, which is expected to begin operation next month, the federal reserve will lend for up to three years on a nonrecourse basis against asset - backed securities. by providing this financing, the program should increase the availability of credit to households and small businesses. the federal reserve will be protected from credit losses by lending amounts less than the market value of the financed security – that is, by applying a " haircut " – and by the $ 20 billion of capital provided by the tarp. if the program is successful, the program could be see board of governors of the federal reserve system, fdic, office of the comptroller of the currency, office of thrift supervision ( 2008 ), " interagency statement on meeting the needs of creditworthy borrowers, " joint press release, november 12. see board of governors of the federal reserve system ( 2008 ), " federal reserve announces the creation of the term asset - backed securities loan facility ( talf ), " press release, november 25