With respect to the dynamic course of events regarding the coronavirus disease 2019 (COVID-19) – commonly known as the “coronavirus” – we address the threat of insolvency and related liability of the statutory bodies (Directors), and provide a list of practical mitigating steps.

What is Coronavirus?

Coronaviruses are a large family of viruses that may cause respiratory illnesses in humans ranging from common colds to more severe conditions such as Severe Acute Respiratory Syndrome (SARS) and Middle Eastern Respiratory Syndrome (MERS).₁

'Novel coronavirus' is a new, previously unidentified strain of coronavirus. The novel coronavirus involved in the current outbreak has been named SARS-CoV-2 by the World Health Organization (WHO). ₃The disease it causes has been named “coronavirus disease 2019” (or “COVID-19”). _1,2

The Czech National Bank unexpectedly cut interest rates by 50bp at today’s meeting, with all seven board members voting in favour of the cut. We expect the key rate to remain unchanged for the rest of the year. However, the door remains open to other instruments. The governor admitted that the central bank is ready to react to any excessive fluctuations in the koruna. Although the CNB currently perceives no shortage of liquidity in the banking system, the board also, as a preventive measure, softened the rules of governing liquidity-providing operations.

The CNB delivered a 50bp emergency rate cut today. This makes the already under pressure CZK more vulnerable as the its key anchor (the yield advantage) is now being taken away. CNB FX interventions are now a question of when rather than if. Should CZK see another abrupt move lower, we expect the CNB to step in around the 28.00 level (the first pain threshold level, in our view). This could happen this week. Yet this will not be a firm ceiling on EUR/CZK, with intervention having a smoothing rather than firming function. This means the EUR/CZK could trade meaningfully above 28.00 should global risk assets remain under pressure.