Leaseurope outlines credit and regulatory positions for European authorities

European leasing trade association Leaseurope has responded to calls for evidence and positions on a series of papers and consultations regarding a slew of regulatory and procedural research requests by European authorities.

It has been a busy 2016 for director general Leon Dhaene, as a raft of positions and responses have been authored by the new Leaseurope chief, including;

The association responded to the European Banking Authority (EBA) on the definition of credit default, agreeing with the EBA that a technical default occurs when an institution identifies that a defaulted status was due to a data or system error. Leaseurope said it was important that errors could be made by the provider as well as the customer.
Leaseurope told the European Central Bank that ‘proportionality is key’ when allowing national central banks to grant derogations to small reporting agents, providing these reporting issuances did not go beyond 2% of the total reporting, and that it was key to avoid ‘double transmissions’ in reporting.
The association warned that it was ‘particularly concerned’ that the European Commission was not accommodating asset-backed securities in the definition of transparent, simple and standardised (STS) securitisation, to build a sustainable EU market for securitisations.
Leaseurope advised the European Commission, at length, on the EU regulatory framework for financial services, stating that the right balance between a sound prudential framework and an efficient financing of the economy, should see regulation adjusted in line with the ‘proportionality principle’. This principle see smaller organisations being recognised as different to large systemically important financial institutions via their treatment from the regulator. Leaseurope strongly advocated for a better recognition of physical collateral.
Leaseurope argued that lease finance, lending facilities secured by durable goods, and loans secured on salaries and pensions should all be differentiated between when assessing banks capital requirements. "This should be done by introducing a specific risk weigh category that reflects the reality of our specialised business model and low risk profile," said the association.
Leaseurope advised the Basel Committee on banking supervision about risk weighting for securitisations. It asked that for loan or lease products which depended on the realisation of the financed asset, to be included in redemptive cash flows; as repayment of the holders of the securitisation could depend to a certain extent on the sale of the asset. "’Given that the risk attached to the residual value is very low and to avoid the exclusion of these loan or lease products, on the basis of the current wording, we ask for the revision of this paragraph to avoid the exclusion of these loan or lease products,"’ said Leaseurope.