Basel 3, the rest 0

Basel 3, the rest 0
Posted on November 11, 2012 |

The implementation of Basel 3 will commence on the 1st of January 2013. This auspicious start could well pass most of the population by without a care or a thought. However, to simply gloss this over as just another EU banking regulation that will not effect us, is far from correct.

Before I move on, let me explain the magical number Basel 3. This will be the new standard on global banking in regard to capital adequacy, stress testing and market liquidity for any bank. This will strengthen the capital balance sheet of every bank. But as we all know, for every upside, there will lurk a downside.  I will not bore you with all the ratios, but the simple downside is that Basel 3 will effect the amount of money that the banks are able to lend to us all. This is called deleveraging, and the latest estimates of the amount are in the region of €650bn yet to be carried out among the major European banks.

So what I hear you cry, how does this actually effect business, well last week, ING, the Dutch bank  decided to close  its UK equipment leasing operation, which has been funding over £1bn a year of equipment leasing into our businesses. By their withdrawal from the UK equipment leasing market, about  5% of that funding will simply disappear. This withdrawal from leasing also shows how banks across Europe are having to cut activities because of new rules forcing them to hold more capital in reserve, i.e.Basel 3. There could well be more banks announcing such cut backs in the next few months.

This year an amazing 31% of total investment in new machinery and equipment has been funded by equipment leasing, as the banks have cut back hard on loans and overdrafts. contracts. Or to put this in actual figures, just over £22 billion of equipment leasing funding. Equipment leasing helps  businesses grow, and as it is a new credit line, will free existing bank loans and overdrafts for day to day running of a business. The figures show that more and more companies are turning to equipment leasing as an answer to funding new equipment.

At Oak Leasing, we are funding more diverse equipment than ever, both in the UK as well as Europe. Our equipment leasing  funding lines are large, and we have recently increased our funding capacity. If it is refinance, business loans, or just good old fashioned equipment leasing, you know who to call!