Leaseurope has identified 10 reasons to invest in leasing in the third and final part of its Basel III research project.

Undertaken by Deloitte Consiel France and financed by the Leaseurope Research Fund, the project includes multiple reports, and is aimed at providing regulators and policymakers with evidence of the low-risk nature of leasing as a transaction.

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This latest report, ‘European Leasing: An Industry Prospectus’, builds on the findings of the two previous papers and investigates the advantages of leasing in terms of both value proposition and capital allocation.

The report leveraged findings from the Risk Management Roundtable, which involved chief risk officers from among the largest leasing companies operating throughout Europe, and measured the leasing industry against key performance indices from the LeaseuropeIndex, a quarterly survey of European leasing and automotive rental businesses.

The report also outlined 10 reasons to invest in leasing:

  • Unique business models based on asset ownership
  • Resilience and stability in times of economic crisis
  • Low cost/income levels
  • Low cost of risk, in line with provisions
  • Consistently profitable business
  • Flexibility to manage changes in funding & liquidity costs
  • Leasing is extremely capital efficient
  • Strong internal controls tailored to deal with asset specificity
  • Asset ownership ensures few defaults and low losses
  • Asset expertise and management are the core of leasing

Each of the points are individually analysed in the report to assess the possible benefits they foster for businesses active in the European market, with a particular focus on low-risk investment.

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Two other reports, entitled ‘Implicit Risk Weights for SME Leasing in Europe’ and ‘The Risk Profile of Leasing in Europe: The Role of the Leased Asset’ have already been released by Leaseurope since it announced the kick-off of the research project in September 2012.

The research project was set up in the wake of fears of the negative effects of the Basel III regulatory standards’ implementation on SME’s access to credit.

Following a debate on the regulation in February 2012, the European Association of Craft, Small and Medium-Sized Enterprises (UEAPME), the Association of Chartered Certified Accountants (ACCA) and Leaseurope jointly issued a recommendation for the development of alternative methods of funding, such as leasing.