The EU Commission is looking
to introduce swingeing reforms for the financial services sector,
with lessors likely to be at the heart of the changes
The EU Commission last month
proposed the creation of financial agencies with rule-making powers
to oversee banks and insurers. Under current proposals, this will
include the creation of a European Systemic Risk Council to monitor
the stability of the financial system as a whole and also a
European System of Financial Supervisors to oversee individual
financial institutions.
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If this takes place, it will show that
the Commission recognises what has been discussed in the leasing
industry for years – its dire lack of proper regulation.
The proposals are broadly aimed at
creating better cross-border supervisory structures in the
financial services industry, although, if they ever become
legislation, they are likely to be far wider in scope, according
to
Oliver Drewes, a spokesperson for the Internal Market Commissioner
Charlie McCreevy. They are also expected to encompass leasing if
they reach legislation stage, he added.
Because leasing activities have
“exploded” in the past few years, according to Michael Jürgen
Werner, a Norton Rose partner in the competition, regulatory and EC
practice, leasing activities have become a core sector for many
banking groups. With huge amounts of business volumes written, and,
consequently, potentially higher risks involved, these activities
are in greater need of regulation.
The leasing industry in many countries
is simply not governed by any regulation at present, another cause
for concern, according to Werner.
“What I’ve heard from Commission
officials is that, in principle, they are keen to also have leasing
companies involved. I believe that they will definitely look into
this and might extend financial regulations to them,” said
Werner.
According to Werner, regulation would
be similar to what is in place for banking institutions. This could
include the introduction of a so-called European passport for
leasing companies, similar to the one in place for banks.
Under this system, a bank chartered in
one EU country is entitled to establish branches in any other EU
country under the authority and supervision of its home country
rules. It will also mean the introduction of capital requirements,
which, it is presumed, will sit alongside the capital adequacy
directive rules.
Many leasing companies, however, are
not in favour of this legislation. A spokesman for the UK’s Finance
& Leasing Association said that leasing companies already have
a good level of self-regulation and, therefore, there is no need
for further regulation.
“The whole debate about restructuring
the financial services is something leasing should be left out of,”
the spokesman said. “The industry has a strong self-regulatory
track record and, therefore, we wouldn’t want any further market
intervention. We are proposing that bank-owned leasing subsidiaries
are not included.”
The Commission has invited interested
parties to submit their reactions to its proposal before 15 July.
It will be an opportunity for those in favour and those against
regulation within the asset finance sector to have their voices
heard.
