The implementation of Basel IV could have a severe effect on the aircraft leasing industry in the Republic of Ireland, according to Fitch.
Ireland is home to many global aircraft lessors, such as Avolon, which acquired CIT Leasing in October 2016.
Speaking to the Irish Times, the credit ratings agency stated that the reforms will increase the amount of cash banks are required to hold in case the airline defaults on its payments to aircraft lessors.
The agency said these requirements would increase the cost of purchase for aircraft lessors, and may cause fewer banks to lend money for the purchase of aircraft for leasing.
Howard Miller, former head of finance at Ryan Air, told the Irish Times: “Banks are going to need to have so much more set aside to cover their risk assets that it is going to be very expensive for them to lend to aircraft lessors.”
A source told Irish Times that Basel IV may find aircraft lessors turning to capital markets for funds, which he warned could be risky.
The source said: “As long as you have the capital markets, then everything is fine, but if you were to have a situation like the crisis in 2008 where capital markets stopped functioning, then you could have a problem.”
