EBA Draft Guidelines on the Definition of Default

Leasing providers are impacted by the application of the definition of default under the Capital Requirements Regulation (CRR). Due to the specific characteristics of leasing activities, the current approach risks generating artificially high Non-Performing Exposure (NPE) ratios, not driven by underlying credit risk but by technical aspects of payment counting and collection processes.

On 15 October 2025, Leaseurope submitted its response to the EBA consultation on the draft Guidelines on the application of the definition of default. In our response, we strongly advocated for a differentiated and more proportionate treatment of leasing, aligned with its unique nature.

Why leasing should not be treated like traditional loans

In our submission, Leaseurope explains in detail why leasing differs fundamentally from bank lending and why it should be treated in a similar way to factoring for the purposes of the definition of default:

• Leasing collection processes differs from loan which is invoice driven
• Lease obligations are often managed by procurement or operational departments of the lessee, rather than treasury functions
• Vendor leasing typically involves a tri-partite contractual structure between supplier, lessor and lessee

These features mean that payment timing in leasing does not necessarily reflect the financial condition of the obligor, making mechanical default triggers inappropriate.

Leaseurope’s engagement with the EBA

While the EBA considered extending the factoring exception to leasing in its draft Guidelines, it ultimately took the view that leasing institutions exercise full control over the dunning collection process due to the direct contractual relationship with the lessee.

Leaseurope has actively engaged with the EBA to explain why this assumption does not reflect market practice and why leasing is equally affected by operational constraints and payment structures similar to those in factoring.

In our response, we therefore formally requested that the factoring exception be extended to leasing, ensuring that the prudential framework better reflects the low-risk profile and specific nature of leasing activities.

Next steps

Leaseurope will continue to engage closely with the EBA and other European institutions to ensure that the final Guidelines deliver a proportionate, risk-sensitive outcome for the leasing sector.

We will keep members informed of further developments and opportunities for engagement as the process progresses.

For more information, please contact Rafael Alarcon Abeti at r.alarconabeti [at] leaseurope.org