Leasing Life caught up with Simon Goldie, head of asset finance at the Finance and Leasing Association (FLA), to find out what industry issues the organisation is expecting to tackle in the coming months.
It has been a busy year for the FLA so far. On the consumer side, it engaged with the Financial Conduct Authority (FCA) on multiple fronts, from the watchdog’s review of the motor finance landscape to its decision to devolve regulation of credit card lending to the FLA itself.
On the business finance side, it is looking closely at what direction the FCA wants to take over SMEs’ access to the Financial Ombudsman Service. “It could be quite a shake-up for the way things are done at the moment,” says FLA head of asset finance Simon Goldie.
The regulator’s reviews are still ongoing. In the meantime, the FLA is focusing on two main areas, which will also take centre stage at future member gatherings: technology finance and public sector finance.
Technology is transforming the leasing industry at all levels – in the back office, at the point of financing and, naturally, in the types of asset that can be financed. This is reflected in the multi-pronged approach taken by the FLA, as described by Goldie.
On one hand, there is “how members are using technology to interact with customers, and how to make their systems run productively and efficiently”. On the other hand, there is refining the financing process for technology assets, “particularly the more intangible element of it – software, the cloud and so on,” Goldie says.
“I think those things will carry on being opportunities – also perhaps challenges – and things to explore and embrace”. “Over time, we will see more funding of technology, inevitably. If you look at, say, a car that is full of tech – are you funding the tech? Are you funding the car? Those are the sort of issues, I think, members will be facing.”
The other big theme the FLA is working on is how financing for the public sector is going to be impacted by shifting regulation, particularly when it comes to IFRS 16, the new accountancy standards set to shake up how entities account for leases. The UK Treasury is currently consulting on whether public sector institutions should follow with the alignment, and adopt IFRS 16 just like any other private sector company.
“In an ideal world, we would not want them to,” says Goldie. “In the past we have raised various issues around the new international accounting standard, due to its complexity for businesses.”
Indeed, organisations like Leaseurope have also warned against saddling smaller companies with the standard, and the UK Financial Reporting Council is also taking the issue into account.
“You have to recalculate every lease that you have, [and] if there are changes to the lease. So it is much more of a system than previously,” says Goldie. While Goldie says the FLA understands why the shift is happening, it does not think it would be suited to all types of lessee.
“The real problem in the public sector – and specifically for schools – is that they can only use an operating lease, not a finance lease. “If the school only has the option of a lease, [but under IFRS 16] operating leases go, what do they do? That is the kind of issue that we have with it.
“In an ideal world, if the government was not aligning, I think it would make life much simpler. As they are looking to align, then we want to make sure that we find a way to make it workable.”
Goldie continues: “The other issue with it is that they are planning to implement it in April 2019. We just think that is a bit of a rush: they should take a little bit more time with it. The IASB [International Accounting Standards Board] took three years [to write IFRS 16] and the government is taking a matter of months.”