Is the European leasing industry able to adequately control and
regulate itself?
Perhaps not – at least according to the European Commission,
which is considering forming a so-called ‘European System of
Financial Supervisors’ to oversee financial institutions, and also
a ‘European Systemic Risk Council’, which will monitor the
stability of the financial system (see Fresh scrutiny of
lessors). Both of these might well be tasked with inspecting
leasing companies, as well as other branches of the financial
services industry.
Go deeper with GlobalData
The UK’s Finance & Leasing
Association – the representative body for Britain’s largely
unregulated leasing sector – does not think inspecting leasing
companies should form the remit of these bodies’ activities.
This was made clear last month by
an FLA spokesperson, who remarked: “The whole debate about
restructuring the financial services is something leasing should be
left out of.”
So, who is right – the EC or the
FLA?
Before this million-euro question
is answered, let’s briefly consider three stories.
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By GlobalDataAround five years ago, a host of
top European leasing companies came across a company called IT
Factory, run by a man called Stein Bagger.
According to witnesses, these
lessors were desperate to lend to this Danish company. Bagger
himself recently testified in court that banks “threw money” at
him.
Last month, Bagger was sentenced
to seven years in jail for a string of frauds he had committed
against these lessors, as well as other companies (see The
leasing crime of the century?), worth €160 million in
total.
Consider also this story. Over
recent months this magazine has uncovered evidence that a number of
European suppliers have been behind deals involving so-called
‘services and revenue for leases’.
As is revealed in the cover
story, these have stirred up a huge controversy in European leasing
– even worse, it has led to considerable writedowns and increases
in bad debt.
It is understood that, in
response to this, one UK lessor has stopped receiving telecoms
business from all suppliers except British Telecom – while another
now only deals with suppliers which have been in business for five
years.
The third story relates directly
to the FLA itself. For years, lessors have been the victims of
multiple financings. This has cost them, in total, tens of millions
of pounds in writedowns and bad debt.
All this could have been avoided
– by the creation of an asset register. Spain and France have each
got one – and lessors in these countries sign each year
considerably fewer leases than those in the UK. Sadly, however, the
FLA only got around to launching one last month.
These three stories show that
lessors do need outside help; that many are now suffering the
consequences of having been driven by increasing volume; and that
they have had their fingers burnt by doing business with
questionable suppliers.
Perhaps, after all, the EC does
have a point.
