Leasing market falls below 2005 level, to €1.07 bln

According to data provided by the Association of Financial Enterprises in Romania (ALB), vehicle financing plunged 76 percent in the first three quarters, to €685.6 million, while the decline on the equipment segment was of 77 percent, to €210 mln.

“I hope that the decline on the market will stagnate in 2010. For this to happen, the government must propose anti-crisis measures and admit the deadlock in terms of the value-added tax. At the same time, provision-related costs must become more flexible. BNR [National Bank of Romania] said it will consider raising the provision deductibility ratio to 50 percent from a present 25 percent, but the Ministry of Finance refused this option, indicating that the fiscal impact will be negative,” said Adriana Ahciarliu, ALB’s Secretary General.

According to the official, the level of financing registered by the leasing market in 2008 will not be reached before 2012.

“The level of provisions is very high according to Romanian accounting standards and we ask for BNR’s permission to calculate provisions based on the International Financing Reporting Standards (IFRS),” said Jean-Claude Boloux, ALB’s President. According to ALB estimates, the Romanian leasing market will end 2009 with total financing worth €1.25 bln, 38 percent less than four years ago.

The structure of financing offered by leasing companies in the first nine months of this year indicates that cars make up 63.6 percent of the total, equipment 19.5 percent, while real estate properties accounted for 17 percent. In over 90 percent of the cases, the beneficiaries of leased goods are companies, while individuals make up for eight percent, and the public sector, for 0.67 percent.

ALB officials said they are concerned because Parliament did not reject the legislative draft to amend the leasing law. They said that, if the law is approved by the President, there will be negative effects on competition. Ahciarliu added that the project for amending the leasing law “imposes an unlimited period of leasing and thus, practically speaking, the buy option is eliminated.”

When contacted by Business Standard, one of the draft law’s initiators, Deputy Mircia Giurgiu, said that the only amendments requested targeted the transparency of leasing contracts. “We did not request an unlimited period of the leasing contract. The amendments we proposed are intended to help customers. Leasing companies are taking advantage of the vague terms in the contracts,” Giurgiu told Business Standard.