It never rains but it pours when it comes to regulation says Grant Collinson
As I sit in the harsh glare of an electric-lit office – made all the more dazzling and obviously artificial by its stark contrast to the other-worldly gloom and grey of February rain clouds in London – an ominous pall hangs over this issue of Leasing Life.
The darkening cumulonimbus of regulation has sprinkled its first few heavy droplets on 2014, but at this early stage of the year it is hard to see whether it will spoil the leasing industry’s whole year.
In Germany, where new business volumes have been static if reasonably strong in 2013, leasing firms are leaving the market as a result of the increasing cost of doing business which the regulatory burden – both state and continent-wide – has imposed.
As the leaders of the German leasing association and the heads of various lessors in the country explain in this month’s country focus, the level of administration and control imposed by financial market regulators on Germany’s leasing industry is disproportionate to the relatively low level of risk in the market.
This over-cautious approach has forced some companies out of the market, but the industry is working together with legislators to try and encourage more investment and help Germany’s SMEs access credit through leasing. A silver lining perhaps.
In the UK, the number of days until substantial regulatory change for the finance industry is counting down with time’s usual rapidity.
From 1 April this year the Financial Conduct Authority takes over from the Financial Services Authority and, while the change is not designed to impact leasing directly, the additional cost to credit companies of complying with the new body’s stricter regime has some in the leasing market predicting consolidation.
In the legal section, Joanne Davis of DWF explains how the FCA system will alter the working relationship between brokers and lenders and urges lenders to review their partnerships and look particularly at how they incentivise intermediaries.
It means more work, but in conversations I’ve had with those in the UK industry over the previous weeks and months, tighter control, and the consumer confidence it may bring, could well prove advantageous to lenders in the long run.
And, hard as it may be to believe from the sodden wastes of a winter flooded with exposure draft criticism, the torrent of potential regulatory difficulty that is the proposed lease accounting changes may yet offer a ray of bright sunshine this year.
As you can read here, the International Accounting Standards Board is set to review its plans in response to the deluge of condemnation from the leasing and accounting industry alike.
It’s too early to see what the end result will be, however. Best to keep an umbrella handy.