FAS and the Bank of Russia had a meeting with journalists on the reforms of the leasing market

01-09-2017 | 11:11

Mass media learned about a draft federal law reforming the leasing sector and how it can influence development competition on the market

The meeting took place on 25 August. The Bank of Russia was represented by an advisor to First Deputy Chairman of the Bank of Russia, Sergey Moiseev, FAS – by Acting Head of FAS Department for Financial Markets Control, Lilia Belyaeva, and Head of the Unit of Stock Market, Private Pension Funds and Other Financial Services, at the Department for Financial Markets Control, Kirill Pruntov.

Journalists were given detailed information about studies the accompanied drafting the law and determined its content, as well as studies designed to evaluate possible consequences of adopting it, particularly for the state of competition on the market of leasing service.

In particular, FAS study was based on information about legal entities, registered by Rosfinmonitoring as of 2016 due to completing leasing deals at some point, as well as information submitted by market participants in questioning conducted by the Antimonopoly Service.

An analysis of the information collected by FAS showed that currently the market of leasing services is low-concentrated, which can indicate a relatively high level of competition. FAS also revealed that a considerable part of the market (around 30%) is taken by leasing companies controlled by the state, some of whom form the three market leaders.

The draft law specifies the own capital of a leasing company as the main barrier, Based on the minimum own capital values in the transitional period as highlighted by the draft law, FAS, therefore, analyzed operations of all companies, breaking them down into tentative segments.

Using the findings, the Antimonopoly Service determined the characteristics of each segment. Concluding, in particular, that some companies in one of the segment, that currently do not meet the draft law requirement about own funds in the size specified for the first time to the transitional period (10 million RUB), do not carry out regular leasing operations or are formed to service isolated customers.

At the same time there are findings that the third segment – companies with own capital exceeding 30 million RUB, i.e., the companies that at the moment do not meet the above requirement – has high-volume, regular leasing business.

To evaluate the consequences of adopting the draft law for the state of competition, FAS analyzed two scenarios based on assumptions about more adverse consequences after adopting the draft law.

Both hypothetical scenarios come down to the point that some leasing companies (maximum 315 out of 686 legal entities that according to the survey exercised leasing operations in the past 1.5 years with the market share approximately 7.7%) due to failure to meet own capital requirements will be forced to leave the market. The total payments obtained by them under the leasing contracts will be allocated to the market leader.

The estimates shows that neither scenario will bring any significant changes for the state of competition on the analyzed market, particularly, its will not lead to its transition from low concentration to moderate concentration.

In view of this and some other factors, FAS approved the draft federal law because overall it sets low market entry barriers, transitional period and alternative strategies for adapting to new conditions, for instance, due to re-profiling company’s operations to non-financial lease or installment sale.

Acting Head of FAS Department for Financial Markets Control, Lilia Belyaeva pointed out that “adopting the draft law, in particular, putting leasing companies in the State Register and establishing detailed reporting, will also enhance market transparency, create conditions for elaborating tools to develop competition, suppress and prevent violations of the law, particular, the antimonopoly law”.

Finally, FAS representatives highlighted the main areas of work to develop competition on the market of leasing services, including efforts to ensure unified and competitive conditions for the state subsidizing leasing companies that give discounts to some categories of customers under leasing contracts.

First Deputy Chairman of the Bank of Russia, Sergey Moiseev emphasized the importance of such work of the antimonopoly authority not only to create favourable conditions for developing competition on the market of leasing services but also to achieve financial stability on the market, therefore, supporting FAS initiatives.

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