The Ministry of Finance and the Central Bank reform threatens the financial stability of leasing


Thursday, June 9, the Ministry of Finance and the Bank of Russia presented to representatives of leasing companies the concept of reforming of the market. They invited more than 30 leaders of leasing companies, which represent about 80% of this market.

To prepare a draft reform of the leasing industry, the Ministry of Finance together with the Central Bank instructed the first Deputy Prime Minister Igor Shuvalov at the Council on ensuring financial stability in April.

The authorities drew attention to the problem of leasing for two reasons, said Director of financial stability Department of the Central Bank Sergey Moiseev: “firstly, the leasing market in recent years has become a giant in Russia’s credit requirements it is the second, after the Bank”. The volume of leasing portfolio at the beginning of 2016, according to the rating Agency RAEX, was about 3 trillion rubles. In the world of the Russian leasing market is the 11th largest portfolio, added Moiseev. “Secondly, the leasing companies began to show the problems, although they are not of a systemic nature,” he said, noting that the credit quality of the portfolio of leasing companies of the banking twice as good: the overdue more than 90 days is only 5% of the total debt.

The problem of a number of leasing companies as a result of bankruptcy of the company “Transaero”, the deterioration of the situation in other companies show that potential source of systemic risk may be the leasing market are listed in the latest “financial stability Review”. The main creditor in the bankruptcy case of “Transaero” was “VEB-leasing”, the airline amounted to 67 billion rubles, Another negative signal to default on the bonds of the leasing company “URALSIB”, which she made in early 2016.

Now the leasing market is not regulated, the law on leasing defines only the basic concepts. An interdepartmental working group of the Ministry of Finance with participation of Bank of Russia proposes to hold a few fundamental changes. First, to prohibit companies involved in leasing, to conduct other business. “It is impossible to produce equipment and simultaneous lease”, — said Moiseev.

In addition, the developers of the package of proposals offered to transfer the lease to international financial reporting standards (IFRS) in 2018 or 2019, said Moses. Now companies are reporting only for, the company.

The third area is risk reduction, says Moses. “The reform involves a set of measures aimed at protecting the property rights of leasing companies”, — he added. Also, the working group believed in the need to reduce the cost of leasing in Russia. “You need to reduce the cost of financing, developing standards for securitization of a portfolio,” said Moses, adding that the leasing companies are financed by funds raised in the bond market, through Bank loans, etc. because of the problems some companies, the value of money rose by approximately 200 b.p. he added.

According to Moses, the developers care about reducing risks and for the other side of the transaction — the clients of leasing companies. “We want to protect the rights of customers by requiring the leasing company to disclose information. For example, banks are required to disclose the full cost of the loan. The full cost of leasing should also be disclosed. Now the client sometimes does not know what the redemption value of the leased asset on each payment date,” says Moses.

An important step in the development of the industry the authors of the reform believe the introduction of electronic technologies. Moses called it “the cornerstone of all changes. “From other financial services leasing far behind. In my phone, like many others, there is a mobile Bank and I can make payments without leaving home. I think that the introduction of electronic technology will seriously reduce the costs of leasing,” he says. According to Moses, it is necessary to transfer the leasing company to electronic documents and electronic interaction with the authorities, to create an electronic register and to allow them to sign contracts online.

In addition, the Central Bank and the Finance Ministry plan to encourage companies to improve corporate governance and internal audit, as well as to create a self-regulatory organization (SRO) on the leasing market.

Reform can take several years, involves Moses. The working group raises several KPI, which the sector needs to achieve after the reform. “The cost of leasing should be reduced, it needs to start competing with Bank loans the price. In addition, leasing companies must have a long time horizon. And last, the credit quality of the leasing companies should be close to the sovereign rating,” he listed Moses.