Captive lessors to be subject to more
EC regulation
With work still very much in
progress in Brussels about how to regulate Europe’s financial
institutions, a question mark remains over what the EU Commission
will propose for automotive captives – which, by their very nature,
in terms of their goals and market strategy, differ significantly
from banks.
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According to Michael Jürgen Werner, a partner
in the competition, regulatory and EC practice at Norton Rose, the
leasing institutions of commercial vehicle and automotive producers
could very likely be an area which EU regulators will look into in
the future.
Werner, who heads the law firm’s Brussels
office, explained: “If that is the case, the commercial vehicle and
automotive industries could be hit because, in the case of the big
manufacturers, the structure they operate means that they have a
relatively small banking part – and those are leasing and financial
institutions which are not run in the same ways as the banks.”
“So manufacturers could have to reshuffle the
whole structure, if they are regulated like banking institutions –
either they would have to decide to do it properly and have a bank
for that, or a bank with a production line aside, or they could
give it entirely up, separate it and source it out,” Werner
added.
The current uncertainty over this issue has
meant that, understandably, even most captives haven’t got a clear
idea of how this could affect them.
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By GlobalDataAt Daimler Financial Services, for instance,
nobody was able to comment as this, according to a spokesperson, is
recognised as being a “political” issue and therefore addressed by
a separate department, rather than something that could affect the
German captive’s business model.
According to another key player in the captive
market, Scania Finance, regulation as such wouldn’t cause any
issues, as long as it was done properly.
Alan Rhodes, sales and marketing director at
Scania Finance in the UK, said: “We operate our businesses with a
very straightforward and prudent approach, so if we had to comply
with new banking regulations, I don’t think that would cause us any
real concerns.”
However, he added that customers would not
benefit from anything which could negatively affect the captive
business model, because “manufacturers are able to put in place
financing solutions for customers, which banks might not want to
do”.
He added: “In today’s environment, there are
lots of banks that are much stricter in granting credit, whereas
manufacturers might take a different view, because ultimately they
have got a different type of relationship with the customer, and a
slightly different agenda in providing finance.”
As a consequence, a regulatory regime which
dissuades manufacturers from operating captives, would effectively
take away a main source of credit for customers to invest in their
businesses, Rhodes said.
Therefore, for him it is important that if the
EU Commission drafts regulations which include captives, it should
provide a “level playing field” for all types of financial
institutions, not penalising one sector or country over
another.
According to Werner, it could take a while
before some of this uncertainty is finally cleared up because, due
to the Commission’s timetable, no draft should be expected before
the first quarter of next year.
But after all, being a little far-sighted and
starting to monitor it wouldn’t be a bad idea.
Antonio Fabrizio
