We have objections to the proposal for leasing in question 1 as the ownership of leasing is a very effective and strong form of physical collateral. We advocate for the deletion of the explicit requirements specified in article 210 of the CRR for leased physical collateral.
The EBA proposes in paragraphs 20 and 21 to assess the legal effectiveness and enforceability regarding the jurisdictions that the leased asset could be moved according to the documentation and also depending on the country of establishment of lessee.
We think that in the case of leased physical assets article181(1)(f) of the CRR provides enough guidance on legal certainty, and leaves room for each institution to make their own internal assessment on the quality of ownership and the legal documentation overall. Applying the same rules for legal certainty for a truck and an aircraft is not necessary. The explicit list of requirements is quite burdensome for leasing, especially when dealing with SMEs and retail customers and will not contribute to a better estimation of the risks under the A-IRB, as any losses due to the risk of legal uncertainty should be reflected in the LGD estimation. To provide legal certainty is not enough in order to recover an asset in certain countries that have a less reliable judicial system. In particular, this is quite challenging for smaller assets.