conference
There were two main themes on the agenda of the recent
Leaseurope conference in Edinburgh, even if they were not
officially present in the descriptions of the talks on offer: the
current ‘credit crunch’, and the environment. Predictable, perhaps,
but no less interesting for it.
Go deeper with GlobalData
How will lessors and finance providers adapt to a world where
providing finance for, say, the expansion of an airport in Essex
could lead to protests outside a head office in Paris – and the
attendant bad publicity? This was the thrust of the speech by Leo
Johnson, co-founder of Sustainable Finance Ltd, a consultancy which
specialises in environmental and social risk analysis. It is not
sustainable in the long term for financiers to accept environmental
and social practices in the developing world connected with
projects they are funding or companies with which they are partners
which would be beyond the pale in the CSR-obsessed West, Johnson
argued. His well-delivered and well-received talk was a highlight
of the programme.
The green argument feeds into the credit crunch issue, Johnson
added, as they are both connected to the need for responsible
leadership in finance companies. Giving the example of “NINA” (no
income no asset) CDOs, which were gaily traded by investment banks
on the international markets until the US housing market started to
suffer, and the NINA customers began to default in large numbers,
Johnson inveighed against the short-term thinking which has been at
least partly responsible for the finance world’s current troubles.
Likewise, he said, fleet providers should start to think about the
long-term carbon profile of their vehicles, and how to minimise
environmental damage – before regulators take the issue out of
their hands.
There was reassurance from Centre for Economics and Business
Research chief executive Douglas McWilliams, who put forward his
view that the current credit squeeze – which has been called a
crisis by some commentators – is no more than a “blip”, which comes
at a time when the world economy is in the middle of its longest
ever period of growth. McWilliams said that the “megatrend” of
growing global prosperity, which he said was far more significant
in terms of numbers of people affected than the Industrial
Revolution, would not be “derailed” by the temporary lack of funds
for M&A activity, consumer credit and corporate finance –
although it would cause temporary pain for several countries’
economies, notably the US and the UK’s. He predicted negative
growth in the UK financial sector next year, as banks and other
financial services companies shed staff, restructured their
organisations and tightened their belts.
Chairman of HBOS, Lord Stephenson said at a well-received and
energetic lunchtime speech that he was pleased to say that HBOS had
divested itself of “loans we weren’t happy to hold” three years
ago. In a wider context he robustly defended his view that the “end
of the world is not nigh” and that the current situation is the
result of an interaction of several different credit market
trends.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataStephenson explained that banks have been left with tranches of
sub-prime debt that they cannot syndicate which have led to losses,
although as a proportion of global debt these are very low; that
the “so-called run on a bank” was nothing of the kind, as a run on
a bank happens when a bank does not have sufficient funds to pay
back its depositors – not the case at Northern Rock, which was a
victim of feverish media reporting and dramatic imagery; and that
as former Federal Reserve chairman Alan Greenspan said in a recent
interview with the Financial Times, ‘bubbles’ in a market are
inevitable and will eventually be corrected, while the current case
of overlending is well within the capability of the world economy
to absorb. He noted in conclusion that he hoped governments would
resist the urge to overreact in ‘fixing’ the turmoil, although
adding that the tripartite regulation of the City would have to be
examined.
He also put forward his view that smaller institutions might
find it harder to borrow, as investors will flee to what they see
as “safe capital” – namely large, stable institutions such as HBOS.
“It would be a great pity if there were not a reward for prudence,”
he noted.
A full report will appear in the next edition of Motor
Finance
