Positive provisions for leasing included in proposal to implement Basel IV in Europe

April 2022

Leaseurope’s feedback to the European Commission is on the whole supportive of their proposal on leasing, as it incorporates a number of positive aspects for our industry and recognises the low-risk nature of the sector. However, we also stress that further adjustments are necessary.

EU flag next to building

Potentially good news for leasing

First among these positive aspects is the explicit recognition of the high level of expertise and risk management developed by leasing entities within the EU, which is a first for our industry. The proposal also provides new provisions to mitigate the negative impact of the Basel IV agreement on leasing companies using internal models for the calculation of risk weights.

Furthermore, our feedback raises some of the remaining issues that may unfairly penalise our industry. This includes the prudential treatment of leasing under the standardised approach, which currently does not recognise the low risk of leasing, the impact of Basel IV on real estate leasing, and the negative impact of the new proposal on the financing of non-CRR regulated and supervised leasing companies.

EU legislators started negotiations

As this proposal makes its way through the European Parliament and Council, Leaseurope will focus on engaging with key MEPs and the European Members States to highlight the importance of recognising the low-risk nature of leasing within the Capital Requirements Regulation (CRR). We expect that EU legislators will reach an agreement on a common legislative text during 2024.

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