A review of UK financial services trade associations has delivered a report that imagines the positives and negatives of a merger between the Finance and Leasing Association (FLA) and the Asset Based Finance Association (ABFA).
Assembled by nine UK commercial and retail banks and one building society in October 2014, the 90 page financial services trade association report was published last week, and presents four models where the cost and services benefits to merging trade associations across the banking landscape would be met.
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The report suggests that the FLA and ABFA could fit into its third model: "an integrated largely retail and commercial focused trade association with a capability for representation of wealth and asset management and a UK focus for investment/wholesale banking."
"A trade association with increased scale and scope could present important opportunities for the sector" said the report.
"It is important to note that should benefits that relate to greater effectiveness for members be realised, these are also likely to improve the experience of key stakeholders as well. This would result in a virtuous circle of greater favourability and sense of partnership with the trade association, and with members and industry in general."
But the report identified some risks to a merger "…After a certain point the value to members of the trade association may diminish as it increases in scale or scope. These dis-benefits would primarily be experienced in terms of reduced quality of output or effectiveness, rather than increased costs, given the relatively small scale of trade associations collectively."
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By GlobalDataAdditionally, the report noted that;
- The ABFA and FLA would add an additional 146 members and that many of the FLA’s and ABFAs additional these members were not retail commercial banks and may have limited common interests with the core membership base.
- [A merger] was not an insurmountable challenge as some the ABFA and FLA members could choose to be ‘Focused’ or ‘Subscriber’ members rather than ‘General’ members and only access the services relevant to them.
- The FLA, which contains a consumer finance arm, could be integrated into the new trade association with the remainder of the FLA continuing to operate independently but that may well be sub-optimal and some retail and commercial banks are also members of the Asset Finance and Motor Finance arms of the FLA.
Current costs for FLA basic membership subscription for a company with an asset finance book of £75m stands at £7,434.25 + VAT. The FLA takes a basic subscription of £6,370 +VAT, which covers basic subscription (£3,185) and finance division membership (£3,185 per division; asset finance, motor, or consumer), with a variable subscription for the loan book size (1 x £14.19), which in the case of the £75m loan book, leads to £1,064.25).
A spokeswoman for the FLA said: "The report rightly recognises that the FLA represents a diverse and specialised membership, whose interests are different from those of many of the other trade bodies mentioned in the report, and that this has important implications when considering possible changes to the current trade association landscape. Consistent with this, the FLA will continue to provide all its members, and the distinctive markets in which they operate, with responsive and tailored representation.
"But we will of course consider the report very carefully, including the many ways in which cooperation and coordination between trade bodies might be enhanced and developed, and respond in due course."
A source at ABFA sketched a fee range of around £6k for the smallest company to around £40k for the very largest member, which was arranged on the principles of turnover and staff numbers as multiples of a basic rate, although specific details were not available at the time of going to press.
A spokesman for ABFA said: "The review team have produced a very interesting and reasoned report. As the review team have recognised, the UK’s financial services landscape is diverse in terms of both institutions and products, and this diversity is a key benefit. As the Next Steps document notes, the Asset Based Finance Association represents a specialised membership and industry. Different sectors will have distinct perspectives and these need to be properly represented through the trade associations. However clearly any opportunities to further enhance coordination and cooperation should be properly considered. The ABFA has been pleased to contribute to the Review process so far and will continue to do so."
