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June 24, 2011updated 12 Apr 2017 4:13pm

Independent lessors to get Basel III boost

Basel III rules on the amount of capital banks must hold to withstand shocks may give independent leasing companies an opportunity to win new business if banks scale back their leasing businesses, a leasing expert has said. George Tonks, partner at asset finance consultancy Invigors, said banks may reduce lending in their asset finance arms in preparation for the capital requirements of Basel III, due to introduced by the end of 2012.

By Nick Huber

Basel III rules on the amount of capital banks must hold to withstand shocks may give independent leasing companies an opportunity to win new business if banks scale back their leasing businesses, a leasing expert has said.

George Tonks, partner at asset finance consultancy Invigors, said banks may reduce lending in their asset finance arms in preparation for the capital requirements of Basel III, due to introduced by the end of 2012.

Many banks will prioritise more high-profile lending, such as unsecured bank loans, Tonks believes.

If banks scale back their asset finance businesses, cash-rich manufacturers and conglomerates such as Siemens and General Electric, who have leasing arms, could have an opportunity to fill gaps in the market and increase their market share.

“If you are independent leasing company, for example in a manufacturing group, and have access to finance other than bank loans, then Basel III is potentially good news,” Tonks said.

Leasing Life contacted a number of the big banks and leasing providers for comment about Basel III. All declined to comment, or did not respond to requests for comment.

It is unclear what impact Basel III will have on different parts of the asset finance industry.

Tonks said that, although leasing typically produces a higher return on equity than more risky unsecured bank loans, asset finance “is not particularly well understood at a senior level at some banks”.

This could mean asset finance businesses become targets for cuts if banks need to ration some areas of lending in order to build a capital cushion for Basel III, Tonks said.

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