Nearly six months after the Bank of
England announced it would start buying secured commercial paper
backed by equipment leases, figures reveal that no money has yet
been invested.
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Much to the chagrin of the industry, November
statistics from the Bank of England’s £175 billion (€195 billion)
asset purchase facility (which was recently increased to £200
billion), showed that while over £160 billion has been spent on
gilts, £1.3 billion on corporate bonds, and £0.7 billion on
ordinary commercial paper, secured commercial paper (SCP) had
received nothing.
After several calls to the Bank of England
press office, a spokesperson claimed that this could be interpreted
in two ways: “One reason could be that there is no demand, and the
other might be that organisations are just not ready, or stepping
up, to participate. The point is that we are ready and waiting –
any institution that wants to join in and that meets our
eligibility criteria is more than welcome.”
While admitting that the Bank had expected the
SCP would take some time – “we have never embarked on this
beforehand, and it has been a steep learning curve for us too” –
the spokesperson nevertheless put the ball firmly in lessors’
courts: the Bank is open for business.
But Philip White, chief executive of Syscap,
is now speaking out against what he views as the “disconnect”
between the Bank of England’s conditions for lease-backed
securities and those for other kinds of asset-backed
securities.
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By GlobalData“Look at the mechanics of the scheme,” he
said. “They will purchase leases with fewer than nine months to
run, but in a five-year deal, you are about 85 percent into the
maturity of the contract by then.”
He added: “All that is potentially left is a
small amount of capital and interest, and the rest is margin –
there is much less desire for people to sell at that point. The
majority of lease-backed securities would be excluded from the
scheme.”
Figures from the Finance & Leasing
Association show that over the last year asset finance has fallen
continuously, overlapping Office of National Statistics figures
that also show a fall in business investment.
Polls and surveys by consultants such as
Invigors, Gartner and Forrester also consistently show that SMEs
attribute the fall in investment to a lack of funding and available
credit. Why is this?
We all need a degree of confidence to start
investing and kick-start the economy in 2010.
What will you do next year to put pressure on
the Bank of England to do more?
