The CRR III was approved in Q4 2023 by the European co-legislators. Credit: Futurity / Shutterstock.

Leaseurope, the European trade body for the leasing and automotive rental industry, has successfully advocated for prudential provisions for leasing in the newly approved Capital Requirements Regulation (CRR III), according to a press release.

This is the first time that European prudential law includes specific leasing clauses. 

The CRR III, part of the banking package that also includes the Capital Requirements Directive (CRD VI), was approved in Q4 2023 by the European co-legislators.  

The legislation is currently undergoing final administrative steps and is expected to be published in the EU Official Journal soon, coming into effect on the 20th day post-publication and applying from 1 January 2025. 

For the first time, the CRR III explicitly recognises the high level of expertise and risk management cultivated by leasing companies in the EU.  

It introduces a specific clause for leasing exposures, mandating the European Banking Authority (EBA) to produce a report on leasing calibrations within 36 months of the regulation’s enactment.  

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Leaseurope said it is actively engaging with the EBA to support the drafting of this report. 

The new provisions include a five-year phasing-in period for new risk parameters for leasing when using internal models for risk weight calculations.  

This clause allows leasing companies to consider a larger portion of the exposure as secure compared to regular loans, acknowledging the role of physical collateral in leasing. 

Additionally, the European small and medium enterprise (SME) supporting factor remains intact, offering reductions in risk-weighted exposure amounts for SME exposures, which is vital for the leasing industry’s continued support of European SMEs. 

Leaseurope said it has also ensured that real estate leasing is recognised as exposure secured by immovable property, reducing risk weights for this type of leasing.  

Furthermore, CRR III acknowledges the low risk of non-CRR regulated and supervised leasing companies, leading to reduced capital requirements for banks that finance leasing companies, thus making it more attractive for banks to provide funding.