Serious concerns have been raised by
the French leasing industry over the implementation of the most
recent version of the capital requirements directive (CRD) in
French law.
Sources last month pointed to major
ambiguities in the new directive, which was adopted by the European
Commission (EC) on 22 July 2009 and consists of amendments to the
original CRD directives 2006/48/EC and 2006/49/EC.
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“The amendments, as originally adapted into a
French version by the Transposition Group at the Commission,
included some unclear phrasing and some ambiguities that the
Banking Commission in Parliament will have to clear up,” said Alain
Gautron, a partner at the Paris office of Norton Rose.
One of these ambiguities relates to the word
“leasing” itself.
“The English word ‘leasing’ covers all kinds
of business we consider under that activity,” said Vincent Rupied,
international director of corporate relations at Arval.
“In France, however, there are different words
for traditional leasing and operating leasing. The original
translation by the Transposition Group had used only the word for
traditional leasing, crédit-bail. We hope the Banking Commission
will find a way to separate the two terms.
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By GlobalData“Needless to say, if the distinction
disappeared in law it would have a serious impact on the
industry.”
‘Provision’ questioned
Concerns have also been raised over
the use of the word “provision” in respect of accounting issues in
the original directive.
Rupied said that what was really in question
was a progressive valuation of resale value.
According to the directive, the value of the
contract from an accounting point of view should be determined
starting at zero at the beginning of the lease, and then each month
progressively adding value until reaching 100 percent at the end of
the lease.
“This has nothing to do with provisioning,”
Rupied explained, “and again, the Banking Commission may resolve
the issue.”
There are also issues regarding the model for
how reserve provisions should be handled, about which the
Association Française des Sociétés Financières (ASF) has expressed
concern.
The ASF declined to comment, but Pascal
Pedretti, director of product development at SG Equipment Finance,
agreed to explain the points the organisation had made as his
company shared the position of the ASF.
“The issue is how much, and how often to
provision,” Pedretti said. “Will we follow the so-called ‘Spanish’
model, in which provisioning is quite regular for all industry
participants, or will we allow some of the larger companies more
flexibility for provisioning?”
Some in the industry have expressed concern
that excessive provisioning requirements will make the European
industry less competitive than the subsidiaries of American lessors
which operate in Europe, and which could use offshore locations to
avoid regulation, Pedretti said.
Then there is also concern about how the
system of International Financial Reporting Standards will be
used.
The directive requires the use of IFRS for
reporting, Pedretti says, but the French fiscal system does not use
IFRS yet.
The French might have to use a different
accounting system for reporting, and for taxes, Pedretti warns.
The transition to IFRS would also involve the
use of fair-value accounting techniques which could be difficult to
apply to the usual models in leasing, some observers said.
Altogether, the implementation of the
directive has raised some important issues, many of which may be
resolved by the work of the Banking Commission.
“It is not unusual for the implementation of a
directive to raise such issues, and it’s a healthy process,” said
Jacqueline Mills, who follows EC law at Leaseurope in Brussels.
Andrew Rosenbaum
