Private Cloud Leasing

March 2016 Vol 22 No 270 www.leasinglife.com

Private cloud leasing

NEWS: Polish and Estonian leasing market figures SPECIAL REPORT: Germany y www.leasinglife.comPLUS: IAA-Advisory & Leasing Foundation research March 2016 1

LL270March 1 final version.indd 1 01/03/2016 15:19:04 Headline Sponsor

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CONTENTS LEASING LIFE

n Cover Story n News 5 Rabobank considers 21-21 PRIVATE CLOUD LEASING €4.5bn DLL sale. Flexible finance products can boost the take-up of private cloud, while data 5 Leaseurope’s credit and protection regulatory agreement changes can influence the market.Sotiris regulatory positions for Kanaris investigates. European authorities. Leasing Life Conference & Awards 2016 5 Bank of Ireland loans €5.3bn to SMEs. 6 New leases in Estonia. 6 ING reports profit jump. Paris, France 6 LeasePlan profit up 19% 7 asset finance funds one- third of UK assets. 7 Five arrows rebrands. 7 Close Brothers acquire EARLY BIRD Finance for Industry. 8 1pm profit doubles. 8 BBB agrees deal with RATE AVAILABLE LDF. NOW 8 Hampshire Trust Bank’s loans up. 9-10 BLME acquires Renaissance. 9 – Hugh Sigrist, Renaissance 11-12 People moves. n Features 13 ABN Amro Lease. n Country Focus 16-17 Standards for UK brokers. 19-20 GERMANY 18 Fleet Logistics. The subdued nature of the German economy is reflected in the leasing sector, n Comment where the forecasts and predictions are for modest growth, reports Paul Golden. 24 Nick Gallop, IAA-Advisory/Leasing Foundation. 28 Rob van den Heuvel,DLL. 29 Kerry Huntley, Siemens Financial Services. 30 Adam Tyler, NACFB. n Legal Leasing Life Conference & Awards 2016 brings together asset Why Attend? 26 Ruth van Lare and Alexia Russell, Watson Farley finance professionals and industry disruptors in an active • Hear from senior industry figures on current challenges and & Williams. discussion of the key issues facing the leasing industry: 28 Anastasia Fowle, benchmark your success Shoosmiths 29 – Kerry Huntley, SFS • Reinventing leasing to meet customer needs • Network and share best practise with your peers in the asset finance community • Exploring alternative sources of funding • Discover high level content and case studies delivered over four • Increasing digital across your company comprehensive sessions • Managing risk and industry disruptors • Celebrate at our black tie awards dinner recognising those at the • Pioneering young talent and diversity top of their game COMPANIES IN THIS ISSUE 1pm 8 Finance for Industry 7 Raphaels Finance 12 Top industry movers and shakers will meet to debate the importance of new strategies, business practices and partnerships in ABN Amro Lease 13 Five Arrows Outsourcing Solutions 7 RateSetter 11 Aldermore 12 Fleet Logistics 18 Renaissance 9 the industry. We invite you to become an active voice in this discussion to shape the future of asset finance. Bank of Ireland 5 Fujitsu 21 Scania Financial Services 6 Bibby Financial Services 11 GE Capital Equipment Financing Germany 20 Shawbrook Asset Finance 12 BLME 9 Hampshire Trust Bank 8 For more details please contact Victoria Pennell on [email protected] or call +44 (0) 20 3096 2634. Siemens Financial Services 29 British Business Bank 8 Hitachi 11 Siemens Financial Services Germany 20 CHG Meridian 20 IAA-Advisory 24 Škoda 12 Event supported by Cisco Capital 21 ING 6 Shoosmiths 27 Close Brothers Asset Finance 7 International Data Corporation 21 Gold Sponsor Silver Sponsors Badge and Lanyard Sponsor Dell Financial Services 21 KPMG 22 Syscap 21 Deutsche Leasing Group 19 LeasePlan 6 TLT 12 DLL 28 Paragon Bank 7 United Trust Bank 12 ElasticHosts 22 Rabobank 5 Watson Farley & Williams 26

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LEASING LIFE EDITOR’S LETTER Brexit uncertainty is not the only issue

The chatter at the UK’s Finance & Leasing reflected in the 1,500 attendees at the FLA Association (FLA) annual dinner in Lon- dinner, as they were asked for their opin- don last month pointed to positivity and ions by the BBC’s Today show journalist confidence in the UK market. John Humphrys. The UK has strong financial results and The room was split 60/40, with the FLA chairman Nigel Clibbens reasoned majority wishing to stay in the EU. there was a good chance that it would But when Humphrys asked if anyone continue. might change their position between now “In 2015, we provided a record level of and then, roughly half the room put their new finance – £110bn – 9% more than in hands up. 2014,” said Clibbens. Whatever the outcome, it’s hard to say “Within that total, asset finance new at this juncture what’s best for asset fi- business grew by 12%, and FLA mem- nance. Would a separate UK/EU bother the bers in the asset finance markets, through pan-European bank-backed lessors that leasing and hire purchase, financed almost operate in the UK? one-third of UK investment in machinery It doesn’t seem to have phased the and equipment in 2015,” he added. thinking behind the tie up of the German “In fact, of the total asset finance Borse with the London Stock Exchange, The FCA renumeration assessements new business last year, almost 60%, or for example. and suitability papers might cause issues £16.6bn, went to support SME investment Seeing as most lessors approach sectors for current practice further down the track. in equipment. and assets, I can’t see a mass exodus from And across Europe there are threats to All good news. But there are a few chal- the UK on the cards if the UK voted to the leasing business, like cybersecurity or lenges on the horizon. leave. digital disruption, that have no respect for David Cameron announced a UK There are some who would argue that national boundaries at all. referendum on British membership of the the UK has enough concerns of its own, European Union for 23 June this year. as a nascent alternative finance market gets to grips with its identity, and pricing In my last editor’s letter I covered how Brian Cantwell goes under pressure from competition for this is affecting pipeline business. [email protected] funders. But it was interesting to see the opinions

Leasing Life editorial advisory board: Carmen Ene, chief executive officer, 3StepIT; Patrick Gouin, senior partner, Invigors; Lindsay Town, chief executive, IAA-Advisory; Chris Cooper, managing director, Challenge Consulting; Chris Boobyer, senior partner, Invigors; Tarun Mistry, partner, Grant Thornton UK; Dan Levy, head of financing solutions, BT Global Services,Robert Peterson, director of strategy & business development, ABN Amro Lease If you would like to become involved with the editorial advisory board, please email the editor.

Subeditors Leasing Life is available in print and Tom Langfield, Nick Midgley, online worldwide. Charles Wheeldon Leasing Life is published monthly by Financial News Publishing Ltd. MARCH 2016 VOL 22 NO 270 ADVERTISING No part of this publication may be Briefings services manager reproduced in any form whatsoever EDITORIAL Reporter Alex Aubrey without the express permission of Editor Sotiris Kanaris T: +44 (0) 203 096 2603 the copyright owner. Brian Cantwell T: +44 (0)20 7406 6538 [email protected] ISSN No 1351-3826. Printed in T: +44 (0)20 7406 6635 [email protected] [email protected] England by Progressive Media Group SUBSCRIPTIONS Group publisher Picture resources: Shutterstock Reporter 40-42 Hatton Garden, Ameet Phadnis Jonathan Minter London EC1N 8EB T: +44 (0)20 7406 6705 T: +44 (0)20 7406 6561 T: +44 (0)20 7406 6579 [email protected] [email protected] [email protected]

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LL270March 1 final version.indd 4 01/03/2016 15:19:12 EURO & GLOBAL ROUND-UP NEWS Rabobank considers €4.5bn DLL sale

Rabobank Group is in preliminary talks The Bloomberg source said that the trans- DLL reported net profit of €454m in with banks, institutional investors and pri- action could be concluded in the second 2014, while its profit soared by 13.9% year- vate equity firms that may bid for its leasing half of 2016 and that selling parts of the on-year to €257m in the first half of 2015. unit DLL, according to media reports. leasing unit is being considered. Earlier this month, DLL financed the Bloomberg cited a person with knowl- replacement of a fleet of 76 ferry port termi- edge of the process saying that the bank Asset cuts nal tractors in six ports in the Netherlands could raise as much as €4.5bn from the sale, Rabobank is seeking to cut as much as and the UK for ferry operator Stena Line. while Dutch newspaper Het Financieele €150bn of assets by 2020 in preparation A DLL spokesperson approached by Dagblad also reported the possible sale. for tougher European capital rules. Leasing Life declined to comment. < Leaseurope outlines credit and regulatory positions for European authorities

European leasing trade association Lea - issuances did not go beyond 2% of the • Leaseurope argued that lease finance, seurope has responded to calls for evidence total, and that it was key to avoid dou- lending facilities secured by durable and positions on a series of papers and con- ble transmissions in reporting. goods, and loans secured on salaries sultations regarding a slew of regulatory and and pensions should all be differenti- procedural research requests by European • The association warned that it was ated between when assessing banks authorities. “particularly concerned” that the Euro- capital requirements. “This should It has been a busy 2016 so far for Lea - pean Commission was not accom - be done by introducing a specific risk seurope’s newly appointed director general modating asset-backed securities in weigh category that reflects the reality Leon Dhaene, who has authorised a raft of the definition and development of of our specialised business model and positions and responses, including: transparent, simple and standardised low risk profile,” said the association. securitisation to build a sustainable EU • The association responded to the Euro- market for securitisations. • Leaseurope advised the Basel Com - pean Banking Authority (EBA) on the mittee on Banking Supervision about definition of credit default, agreeing • Leaseurope advised the European risk weighting for securitisations. It with the EBA that a technical default Commission at length on the EU regu- asked that loan or lease products occurred when an institution identi- latory framework for financial services, which depended on the realisation of fies that a defaulted status was due to stating that the right balance between the financed asset to be included in a data or system error. It said it was a sound prudential framework and redemptive cash flows, as repayment of important to remember that errors an efficient financing of the economy, the holders of the securitisation could could be made by the provider as well should mean regulation should be depend to a certain extent on the sale of as by the customer. adjusted in line with the ‘proportion- the asset. “Given that the risk attached ality principle’ (smaller organisations to the residual value is very low and • Leaseurope told the European Cen - should not be treated the same way as to avoid the exclusion of these loan or tral Bank that “proportionality is key” large systemically important financial lease products, on the basis of the cur- when allowing national central banks institutions) and that it strongly advo- rent wording, we ask for the revision of to grant derogations to small report- cated for a better recognition of physi- this paragraph to avoid the exclusion ing agents, providing these reporting cal collateral. of these loan or lease products.” < Bank of Ireland loans €5.3bn to SMEs

Bank of Ireland statistics claim the lender was agricultural sector lending, up 7% to anticipated to remain tight with increased has nearly 50% of the Irish SME lending €665m, driven up by regulatory changes to supplies coming onto the market in H2 market with €5.3bn in SME loans, accord- caps on dairy products and a commercial 2016 as a result of dairy herd growth, which ing to the Bank’s results. push for Irish beef exports. started last year. The market share figure is based upon sta- Bank of Ireland business banking manag- “Businesses are beginning to expand and tistics from the Irish Central Bank. ing director Mark Cunningham said: “The invest, and this is beginning to be reflected in According to the The Irish Times, the bank agricultural sector is an important growth increased demand for term loans. We expect said this was an 18% growth on 2014, and sector for Bank of Ireland and overall credit this trend to continue as the overall outlook did not include any restructuring of old debt. approvals in 2015 were up 7% on 2014 for 2016 is positive, with a number of indi- The lender said it received 66,000 credit figures, at €665m. While milk prices are cators pointing to sustained improvement applications from Irish businesses in 2015, expected to increase, the time frame for this in the general economy, including higher up 8% on 2014, and that it approved 88% price recovery has extended beyond initial consumer spending, continued employment of the 16,300 it received in Q4 2015. expectations to the second half of 2016. gains and increased business investment,” Bank of Ireland said a strong performer Beef supplies in the first half of 2016 are Cunningham concluded. <

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LL270March 1 final version.indd 5 01/03/2016 15:19:12 NEWS EURO & GLOBAL ROUND-UP New leases in Estonia near €1bn in 2015 LeasePlan profit The total value of new leasing agreements up 19% in 2015 written in the Estonian leasing market International fleet management company during 2015 grew by 9% year-on-year to LeasePlan saw its net profit rise by 19% €942m, according to Latvian news reports. (€70.5m) year-on-year to €442.5m in Latvian news agency LETA reported the 2015. According to the company the rea- Estonian Leasing Association, Liisingühin- sons behind the increase are: the 9% year- gute Liit, as saying the Estonian leasing mar- on-year growth of its fleet under manage- ket expanded by 7% to €2.12bn in 2015. ment to 1.55 million vehicles, a bullish The biggest increases were in the leasing of second-hand car market, in combination commercial vehicles – up 25%– and machin- with risk mitigating actions “paying off”. ery and equipment, which grew by 19%. In addition, net profit includes a €7m Cars were the most common asset positive impact of currency translation acquired by leasing, accounting for 46% of 22% year over year to €304m. Financing of effects. all assets, but down by 4% year-on-year. invoices of the commercial and manufactur- LeasePlan’s assets increased to €21.4bn The total value of the lease portfolio of ing sectors grew also by 22% to €2.51bn, from €19.7bn in 2014, primarily due to members of the association was €2.1bn, 7% surpassing the volume seen before the crisis the increase of its fleet. bigger than a year ago. of the late 2000s. The SME segment has become Lease- Liisingühingute Liit said the quality of the The Estonian Leasing Association has nine Plan’s fastest-growing client segment, with lease portfolio of association members had members which account for an estimated growth of over 12% in 2015. By the end kept improving and lease payments overdue 98% of the leasing market. of 2015, LeasePlan operations in 22 coun- by more than 60 days accounted for 0.4% of Leasing Life contacted Liisingühingute tries were serving SMEs and four more the total portfolio. Liit for comment but had no reply at the were in the process of setting up local The total factoring portfolio grew by time of going to press.< dedicated SME activities. < ING reports 23.2% jump in profit to €4.22bn Polish market up Dutch banking and financial services corpo- minutes. ration ING Bank has reported an underlying Ralph Hamers, chief executive officer net profit of €4.22bn in 2015, up 23.2% on at ING Group said: “In the fourth quarter, 2014. Poland introduced Moje ING, a platform According to the group, its strong which gives customers a compre - performance reflects higher inter- hensive overview of their finances est results and lower risk costs with the help of an easy-to-use “despite higher regulatory costs”. financial planning tool, and Regulatory costs increased by is based on a similar system The total value of new leasing volumes pro- 53.3% to €279m. in Spain. Twyp, our app for vided by the Polish leasing sector increased Underlying income rose by peer-to-peer payments using tel- by 16.3% in 2015 compared to 2014, reach- 8.2% year-on-year to €16.55bn, ephone numbers, was launched in ing PLN49.8bn (€11.2bn), according to while operating expenses increased Spain in December. In the new year Zwiazek Polskiego Leasingu. to €9.25bn from €8.98bn in 2014. we also launched Twyp in the Netherlands Vehicle leasing was the strongest seg - Positive growth was recorded across and announced an investment in the fintech ment of the market, with new leasing vol- both the group’s retail and wholesale bank- WeLab.” umes increasing by 20% year-on-year to ing. ING’s core lending book was 4.2% During 2015, ING completed the divest- PLN18.7bn in 2015. Equipment leasing (€21.7bn) higher compared to 2014. ment of its US insurance unit Voya and “sig- volumes increased by 12% over the same In 2015, ING introduced its fintech prod- nificantly” reduced its stake in Dutch insurer period to PLN15.9bn. ucts in more countries, which provides NN Group, which according to Hamers, In addition, heavy transport (aircraft, trucks consumer loans in China and Hong Kong brought the group closer to completing its and trains) new leasing volumes increased by in a fully automated process that takes just restructuring.< 18% year-on-year to PLN13.5bn.< Scania Financial Services’ portfolio reaches €6.1bn in 2015 Scania Financial Services, the finance arm The penetration rate was 42% in 2015 said Koen Knoops, head of Scania Finan- of the Swedish manufacturer of heavy in those markets where Scania has its own cial Services. trucks and buses, reported a customer financing operations. The increase was Aside from growth in the finance portfo- finance portfolio of SEK56.5bn (€6.1bn) mainly attributed to the “market mix” of lio, the company recorded an increasing in at the end of 2015. assets. demand for its insurance solutions. The portfolio was SEK0.9bn higher than Scania’s president and chief executive the value reported at the end of 2014. Emerging markets officer Henrik Henriksson said: “Our Operating income increased to “We have a stable market penetration in offer stands up well against other insur- SEK1.04bn during 2015, compared to Europe and are growing in emerging mar- ance alternatives in all regions and our 2014. According to the company a larger kets. For example, we have seen the effect customers perceive the advantages of tai- portfolio and higher margins had a posi- of expanding our local presence in Asia lored financing and insurance solutions for tive impact on earnings. by opening a regional office in Malaysia,” the transport industry.” <

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LL270March 1 final version.indd 6 01/03/2016 15:19:18 UK ROUND-UP NEWS FLA: asset finance funded one-third of all UK assets in 2015

Figures released by the Finance & Leasing ❙❙ % change ❙❙ 3 months ❙❙ % change ❙❙ 12 months ❙❙ % change Association (FLA) show growth in asset ❙❙ Dec 2015 on prev. to Dec on prev. to Dec on prev. finance new business (primarily leasing and year 2015 year 2015 year Total FLA asset finance hire purchase) of 12% in 2015 – the mar- 3,011 +18 7,772 +11 29,114 +12 ket’s second consecutive year of double- (£m) Total excluding high digit growth. The value of new business in 2,814 +19 7,399 +10 28,104 +11 December 2015 was up by 18% compared value (£m) with the same month in 2014. By asset New finance for commercial vehicles grew Plant and machinery 633 +11 1,488 +6 5,815 +7 by 42% in December, and by 14% in 2015 finance (£m) as a whole. Further strong growth was also Commercial vehicle 735 +42 1,939 +19 6,882 +14 reported by the IT equipment finance sector finance (£m) as new business grew by 23% in December IT equipment finance 347 +23 663 +16 2,248 +38 and by 38% in 2015 overall. (£m) Geraldine Kilkelly, head of research and Business equipment 198 +2 524 -7 2,076 -5 chief economist at the FLA, said: “2015 was finance (£m) another strong year for the asset finance Car finance (£m) 705 +6 2,217 +7 8,934 +11 industry, with new business reaching its highest level since the onset of the financial Aircraft, ships and roll- 83 +157 175 +61 557 +111 crisis. Our latest industry confidence survey ing stock finance (£m) suggests growth in new business of up to By channel 10% in 2016. Direct finance (£m) 1,456 +19 3,784 +11 14,102 +14 “The asset finance industry funded almost Broker-introduced 32% of UK investment in machinery, equip- 480 +19 1,349 +10 5,024 +9 ment and purchased software in 2015.”< finance (£m)

Sales finance (£m) 878 +18 2,266 +8 8,978 +9

By product

UK brokers plan Finance leasing (£m) 615 +52 1,272 +25 3,732 +5 record-breaking conference Operating leasing (£m) 615 +20 1,745 +10 6,659 +11 Lease/Hire purchase 1,296 +9 3,732 +8 15,077 +14 (£m) The National Association of Commercial Finance Brokers (NACFB) conference at the Other finance (£m) 484 +9 1,025 +5 3,646 +13 Birmingham NEC Pavilion on 15 June will target a record broker and funder attendance. Five Arrows Outsourcing Solutions rebrands Last year’s conference achieved a 1,700 broker attendance and this year’s is looking following acquisition by Paragon Bank to grow that number to 2,000, the NACFB Five Arrows Outsourcing Solutions has been ing Group, owned by Rothschild and Co. reported to Leasing Life rebranded as Paragon Bank Outsourcing The same process has occurred for Five A statement said the response from 132 Solutions, following the business’s acqui- Arrows Business Finance, which now oper- possible funders had been positive and there sition in November by Paragon Bank for ates as Paragon Bank Business Finance. would probably be more than the 100 that £117m (€157.7m). Paragon Bank is a challenger bank that attended last year.< It was formerly part of Five Arrows Leas- launched in 2014. <

Close Brothers Asset Finance acquires UK broker Finance for Industry

Close Brothers Asset Finance has bought ing director, Steve Gee. In the short term, it division. This acquisition will bolster our set Finance for Industry, a finance broker for will continue to operate under its own brand. of services, and is perfectly in line with our the engineering, print, plastics and machin- Finance for Industry’s sales team will remain strategy, enhancing our existing offering and ery sectors, for an undisclosed amount. unchanged, with existing customers able to providing access to a new customer base. Headquartered in Kings Langley, Hert- maintain the same contacts following the “The industrial market continues to evolve fordshire, Finance for Industry’s business deal. rapidly and we are always on the lookout covers the whole of the UK and is run by for opportunities to grow and to acquire three directors: Andy Curran, Stewart Ains- Exciting addition strong and ambitious companies that match ley and Steve Ackerman. Mike Randall, chief executive of Close our expansive business model. This acquisi- Finance for Industry will be integrated Brothers Asset Finance, said: “Finance for tion is evidence of this and will make a sig- into the industrial equipment division of Industry is an exciting and complemen - nificant contribution towards achieving our Close Brothers Asset Finance, under manag- tary addition to our industrial equipment long-term goals.” <

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LL270March 1 final version.indd 7 01/03/2016 15:19:18 NEWS UK ROUND-UP Profit more than doubles at 1pm to £1.66m UK finance provider 1pm saw its profit of its total portfolio stood at 0.28% (£160k). financial year continue the trend of profit- more than double year-on-year to £1.66m The results include a first contribution able growth delivered over recent years and, (€2.19m) in the six months ending from newly-acquired Academy Leasing from although only three months since its acquisi- 30 November 2015. 25 August to 30 November 2015. tion, the equally strong results of Academy Over the same period, lessor’s revenue It was announced that chief operating Leasing clearly justify the decision to expand soared from £2.56m to £5.25m, while its officer Maria Lewis was to leave the business the group. Investment in resources at 1pm asset finance and business loan portfolio but would return on an ad-hoc consultant. earlier in 2015 in Academy Leasing... mark grew from £24.3m to £57m. 1pm chairman, Ian Smith, said: “1pm’s the first successful steps towards our strate- 1pm’s bad debt write-off as a percentage results for the first six months of the current gic aims. <

British Business Bank agrees Hampshire SME finance with LDF loan book up The British Business Bank has agreed to ing with the British Business Bank on this Hampshire Trust Bank’s asset finance loan provide a £51m (€65.3m) facility to UK exciting initiative. Access to finance, par- book value increased by over 500% in 2015 finance provider LDF, to fund a portfolio ticularly for asset procurement, remains a to £56m (€72.62m) as of 31 December 2015. of newly originated small business asset critical barrier to success for many smaller A spokeswoman added that the asset finance receivables. businesses and making this more readily finance division completed over 3,000 asset The transaction, which is 50% guar- available is something that we are fully finance deals since it began operating in May anteed by the European Investment Fund, behind. 2014. was the second of the British Business Reinald de Monchy, managing director, In December 2015, the bank made its first Bank’s ‘Enable’ funding programme, wholesale solutions at the British Business profit since its management buyout in May which aims to increase significantly the Bank, said: “We now have provided two 2014, with total assets increasing by more supply of leasing and asset finance to facilities totalling £151m and we antici- than 400% to £243m, compared to £57m smaller businesses in the UK. pate further transactions throughout 2016. at the end of 2014. Customer deposits grew It followed a £100m facility provided to Our intention remains for these facilities by more than 800% to £189m, compared Hitachi Capital UK last October. to be refinanced through the capital- mar to £23m at the end of the previous year, and Peter Alderson, managing director at kets once we achieve a required critical customer numbers grew to 7,500, from 1,200, LDF, said: “LDF is delighted to be work- mass of circa £300m or more.” < during the same time period. < Regulator launches New Bank Start-up unit UK financial regulators, the Financial Con- for firms during the authorisation process at Andrew Bailey, deputy governor, pruden- duct Authority (FCA) and the Prudential both the PRA and the FCA. tial regulation, Bank of England and CEO of Regulation Authority (PRA) have launched According to the FCA, new banks will ben- the PRA, who takes over as FCA head in July, the ‘New Bank Start-up’, to assist newly efit from access to the New Bank Start-up said: “The New Bank Start-Up Unit builds authorised banks and those thinking of Unit helpline; access to supervisors at both on the work we’ve already done to reduce becoming a new bank. the PRA and the FCA via the helpline; regu- the barriers to entry for prospective banks, The New Bank Start-up unit will provide lar capital and liquidity reviews, if appropri- which has led to 12 new banks now author- these companies with the information and ate; monthly regulatory update emails; invi- ised since April 2013. These new banks are a materials they need to navigate the pro - tations to seminars targeted at new and pro- key part of bringing innovation to the sector, cess to become a new bank, as well as with spective banks and separately banks’ senior particularly where there’s a gap in the mar- focused supervisory resource during the management and non-executive directors; ket – whether it is the service they provide, early years of authorisation. and invitations to events, alongside other the customers they target, the products they The unit will provide named case officers firms, on key regulatory topics. sell, or the technology they use.” < Emissions crisis “excuse to raise fuel duty” The government will be tempted to use the tion” with government agencies such as the aggressive market strategies of certain recent VW emissions crisis as an excuse to Driver and Vehicle Licensing Agency and the OEMs who see their connected car plat - raise fuel duty in 2016, British Vehicle Rent- Driver and Vehicle Standards Agency will forms as a key opportunity to gain a direct al and Leasing Association chief executive grow as budget cuts result in them inevitably relationship with the customers of rental and Gerry Keaney has said. delaying the introduction of some digital fleet leasing companies,” Keaney said. “OEMs As part of his outlook for the next 12 services. are also trying to gain a bigger share of the months, Keaney said fuel duty may be raised Keaney also expects fleet owners will have vehicle repair and servicing, breakdown and as the government looks to eliminate its to deal with some manufacturers’ “aggres- mobility services markets, which competes budget deficit. sive” market strategies in 2016. directly with the offerings provided by rental He anticipates the fleet market’s “frustra- “Fleet owners will have to deal with the and leasing companies. <

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LL270March 1 final version.indd 8 01/03/2016 15:19:18 LL270March 1final version.indd 9 “additional opportunities, including acquisi M Asset Finance for an undisclosed amount. for an undisclosed Finance Asset Wilmslow, of quarter first the in Cheshire, £2m. £2m. www.leasinglife.com Finance Bank of London and the Middle has East acquired Renaissance Finance, Asset afteracredit line deal Fred Yue, director, head of leasing at Bank of Fisher, credit and compliance director Mark Frederick Yue join Renaissance’s board. with an average deal range from £10,000 to with an average deal size of £100,000, and a strong commercial focus and examine any or whether we funded the team.” away,straight teams business the acquired our fitted really them of none but acquire, couldwe that businesses potential 20 over director. manage his with Renaissance, of director as a separate legal entity. acquiring UK SME lender Renaissance Renaissance lender SME UK acquiring London and the Middle East said the bank Lester,non-executive Pusinelli, David and Rhodes and director and head of leasing of head and director and Rhodes Jervis banking corporate of head BLME plant and machinery,and plant commer agriculture, board with its new additions, will maintain business plans to open its northern office in last year as served an introductory process. ness plan and the market segments, and the had been looking for a move into the SME ness is currently approaching £60m (€76m), criteria. route to market exactly the way we want the market for over two years. ment team of operations director Vikki director operations of team ment management team, and maintains its status critical soft assets. business- and equipment visual audio cial the and 2016 of start the at 17 to grown tions the market may present”. the year. at Bank of London and The Middle and East Hugh Sigrist, managing director at Renaissance Asset small-ticket SME business to be, it stood out. some time,” Yue said. “In the end there were BLME surveys the market market the surveys BLME Smaller-ticket RenaissanceSmaller-ticket for BLME “Then it was a matter of whether we whether of matter a was it “Then “So when Hugh came along with his busi quite for businesses “WeSME at looked A statement from Renaissance said the said Renaissance from statement A Assets funded include all wheeled asset, wheeled all include funded Assets Renaissance is to retain its brand and brand its retain to is Renaissance BLME’s chief executive Michael Williams, Sigrist said the initial team of six has six of team initial the said Sigrist Hugh Sigrist will remain as managing as remain will Sigrist Hugh He adds that the Renaissance book of busi and the Middle East (BLME) has has (BLME) East Middle the and entered the small-ticket market by iddle-ticket lender Bank of London of London Bank lender iddle-ticket - - - - - Yue says the range in ticket size meant that with a wholesale facility initiative; Hugh had with that, giving them freedom to establish offering is that we’ve got capability between alongside a funding facility. a £35m-plus working capital facility, to go a bank hierarchy and everything that goesthat everything and hierarchy bank a Renaissance and ourselves to offer the mar BLME had strengthened its reach in the mar posal is that we provided Hugh and his team enabled me and my team to launch Renais Strengthened reach Strengthened from £10,000 to £25m,” says Yue. “So our funding line for Renaissance Asset Finance. Sigrist. ket hire purchase and finance operating leas ket. In August 2014, BLME provided a £35m a provided BLME 2014, August In ket, and I think that worked out very well. there in this sector that can cover ticket size the appearance of us being on top of them,of top on being us of appearance the team the focus on the market without having themselves.” of part been having without business the sance and achieve all our objectives” said objectives” our all achieve and sance so they could devote the business to its mar “There are not many lending businesses out “It was BLME’swas “It thatfacility £35m initial “We did it this way, as it gives Hugh and his “They were totally focused on building on focused totally were “They Yue says: “The way we structured the pro Brian Cantwel l talks to Fred Yue, director, head of leasing ------£35m facility, if we can’t actually work it the we’ve written with our policies, so they so policies, our with written we’ve way we need to work it,” says Sigrist. was also negotiated in terms of compatibility developing the business.” Confidence about response times.” approval, it wouldn’t work, because it’s all didn’twe if And brokers. the to service of and that it had proven itself. So in terms of finance business of the bank lies. purchase option, we knew the business, the knew we option, purchase Renaissance coming into the bank for credit es, which is wherestrategywhichtheassetes,isthe of from Renaissance’sfrom SMEthe of knowledge for approval, because everything is agreed.” integration it makes it that much easier and Sigrist worked together, as the credit line together,credit worked the Sigrist as was this do to confidence the says Sigrist have the credibility agreed upfront, with upfront, agreed credibility the have could give us the authority to get on with on get to authority the us give could market. market. that Renaissance needs to refer to its parent takes the risk out of acquiring a business. secured with the trust developed as Yue and “We wanted BLME to be happy with what “We said we don’t want you to give us a us give “Weto don’tyou we want said speed about all is business “Small-ticket “It means there are very few circumstances “In essence, it’s still a stand-alone business Yueourexercised we time the “By adds: ❙ ❙ Fred Yue, BLMEandHughSigrist,Renaissance March 2016 01/03/2016 15:19:21 M&A y 9

NEWS LL270March 1final version.indd 10 NEWS u sy tee r peeitn asset pre-existing are there says Yue with its own authority. So from the out the from authority.So own its with agreed credit policy. All operational policies Wetransactions. middle-ticket the across and then you get into the corporate jet end. Good match Good and down the ticket range. underwriting limit with BLME, subject to an erage of specialised sectors. fund classic cars up to £5m for one car, and knowledge of Hugh’s team at Renaissance.” helicopters. We’ve now got full market cov classic cars. name, documents, and processes; it would it processes; and documents, name, can cover some of the smaller aircrafts and covers the corporate jet sector; Renaissance classes that already have a good match, up remain pretty much as is. that’s also making use of the classic car classic the of use making that’salso tor coverage as well: the super cars and the to split into two: one at the small-ticket end, tion,” says Yue. “The aviation market tends shouldn’t be any change, for instance, with there business, the acquire we when side, M&A “Between us we can cover those sectors those cover can we us “Between “The deal is good for the specialist car sec “So one area of synergy is big-ticket, which “One of the sectors we specialise in is avia The business negotiated a £1m local £1m a negotiated business The Staines-upon-Thames, Surrey TW183HP|Registered inCardiff No:1630491. Hitachi CapitalBusinessFinanceisadivision ofHitachiCapital(UK)LtdPLC. Hitachi CapitalBusinessFinance| T: At HitachiCapitalwe: 08432082244|www.hitachicapital.co.uk on whatyousay. What’s importanttoyou? - - - -

£200m. We’re looking to deal with more cli would be able to seed into the SME mar SME the into seed to able be would and£24m, lend to expecting only were we directors. ents, more relationships, and to work more up facility, which is now over £50m, and £50m, over facility,now up is which for SMEs have been written by Renaissance book of about £100m over five years. We’re ket, and so we have renegotiated the top- the renegotiated have we so and ket, likemore of book a create to looking now closely together. the original proposition was to create a create to was proposition original the ❙ “We exceeded expectations on what we what on expectations “Weexceeded ❙ Hugh Sigrist,Renaissance Sigrist says: “By our second trading yeartrading second our “By says: Sigrist | Registered Office:HitachiCapitalHouse,ThorpeRoad, & - - which trades on an independent basis,” says demand from customers.” about raising the credit lines in tandem with develop a business in our marketplace is all again BLME have been really supportive. To agreed with the parent, which will providewill which parent, the with agreed of a real partnership: too often a big com big a often too partnership: real a of pany buys a few smaller businesses and then issues on the basis of our SME operation.” Sigrist. he’sthat autonomy the of proud is Sigrist its authority and identity in the market.” brand. because clients are familiar with a particular had alotmoreregulatorywork,becauseit company, which is part of the reason we’ve corresponding regulatory work done. have made sure that Renaissance won’t lose missions to have a business which it owns,it which business a have to missions requires BLME to obtain the regulatory per market, but has had to work hard to get the centralise the brand. This often doesn’t work they want to centralise all the marketing and speed of service and flexibility across the across flexibility and service of speed Renaissance independence “Renaissance will be a separate limited separate a be will “Renaissance “The marketing is another great examplegreat another is marketing “The compliance our all agree to have we “So “By keeping the brand intact Fred and I and Fred intact brand the keeping “By your success. and yourclients,contributingto created tomeet theneedsofyou Our inspired fundingsolutionsare is built. on whichourpersonalisedservice important toyouisthefoundation Finance understandingwhatis At HitachiCapitalBusiness to us. It iswhat’s important 01/03/2016 15:19:23 < - - LL270March 1final version.indd 11 A spokesman told of 1 January 2016of 1January Box hasbeenresponsible at HSBC where he spent 35 years, 22 of which at HSBCwherehespent35years,22ofwhich executive lastJune,Box heldanumberofroles makinghim officer eightmonthsafter departure ofMark Hartigan. departure position ofUKriskdirector untillastNovember, restructuring, whereDavid Postings remains was anewofsenior role designedaspart were inthereceivables financeandtrade supply chain business. supply chain People Moves from start-ups tofrom start-ups multinationals. for theUK. for operationsinCanada,theUS,India,Hong Bibby promotes Box andRamsden Ian Ramsden’spositionpermanent,after In additionto Bibby’s European businesses,as First joiningBFSin2005,Ramsden heldthe First BFS hasalsomadeinterim group riskdirector Kong, SingaporeandMalaysia. His mostrecentrole withHSBCwas global Prior to joiningBibby asEuropean chief European executive chief officer. (BFS)hasappointedBibby FinancialServices Steven Box to international executive chief than 25countrieswithbusinessesranging in therole executive ofglobalheadandchief he took therole inNovember following the head ofreceivables finance,covering more driving business to www.assetadvantage.co.uk 01256 316 200 Third Floor, Matrix House, Basing View, View, Basing House, Matrix Floor, Third Basingstoke, Hampshire, RG21 4DZ Efficient Finance is our Advantage our is Finance Efficient solution to our clients. clients. to our solution business processes to deliver the perfect perfect the to deliver processes business experience, expertise and uncompromising uncompromising and expertise experience, Our finance products utilise a combination of combination a utilise products finance Our via a premium panel of introducers. of panel apremium via asset finance and loans to UK based SMEs SMEs based UK to loans and finance asset Leasing Life owned, finance business which provides provides which business finance owned, Asset Advantage is an established, privately privately established, an is Advantage Asset pole position pole thepromotion confirm atthetimeofwritingwhether asset butcouldnot of itsoutstandingloanbook, development loans.Priorto thathewas a division managingdirector Paul Marston has risk functiononaninterim basis. managing director atNatWest RBS,where provides fundingfor SMEsandproperty when hetook-on responsibilityfor thegroup finance would be part ofitsproduct linesunder finance would bepart where hewas managingdirector ofthe securitisation ofitsloanbooklastyear. for corporate clients. P2P lender’s SMEdivision Ex-Secure Trust Bankdirector Marston joins In astatement, RateSetter saidcommercial BFS highlighted Ramden’sleadonthefunder’s Bibby saidRamsdenhas27 years’ experience Marston left challenger SecureTrust challenger Marston left Bank Marston’s leadership. Ex-Secure Trust Bankcommercial andfinance SME lending. to joiningBFS,heldthepositionofhead involved instructuringandmanagingfacilities large clientauditatBarclays, leadingateam in bankingandasset-based lending,andprior lending madeup£137m (€177.95m), or30% he was responsiblefor thebusinessand business andcommercial division,which joined P2PlenderRateSetter asitsheadof Follow the Asset Advantage Carrera Cup team @AA team Cup Carrera Advantage Asset the Follow “This is a very valuable willbe initiative. isavery “This Martin After thecompletionAfter oftheplacementat of Commercial FinanceBrokers (NACFB) and of EnglandandWales. Hewas alsopreviously commercial bankingintheSouthandWest alike,” wrote Adam Tyler, executive chief ofthe ofthisinitiative will,intime,be and theeffects Capital’s officesin Staines-upon-Thames The NACFB aimsto get between 10 and20 representatives from both theNACFB and new brokers from thisinitiative. with acommercial financebroker. Capital andNACFB scheme scheme betweenscheme theNationalAssociation First apprentice recruited for Hitachi felt by andBritain’ssmallbusinesses lenders Martin Nield is the first apprentice Nieldisthefirst to Martin Hitachi Capital,Nieldwillspendsixmonths Hitachi iscommitted Capital,which Hitachi to covering hissix-monthrotationNield started atHitachi CapitalBusinessFinance. Hitachi Finance. NACFB. the costoftrainingfor period. a12-month in January. Hewas selected by apanelof the market fullytrainedatthehighestlevel, ofmanythe first new brokers whowillenter be recruited for thejointapprenticeship head oftheSMEdivisionatLombardAsset r ace t eam PERSONNEL 01/03/2016 15:19:24

NEWS NEWS PERSONNEL

People Moves (continued)

Lindsay Town becomes first IAA-Advisory moved to Raphaels Finance as national sales Co and prior to that was CFO of specialist fund chief executive manager soon after the company rebranded manager Ecofin. from Southern Finance last October. The IAA-Advisory board has appointed Lindsay UTB said Ayres’ other roles have included head Town as its first chief executive as part of a Škoda UK appoints head of fleet of finance at Cazenove Capital Management major development of its business. Škoda UK has appointed Henry Williams as A statement from the consultancy firm said its new head of fleet, following predecessor the post had been created “to help lead the Patrick McGillycuddy’s appointment as head of company in these changing and challenging group fleet services for Volkswagen Group UK. times for the industry,” and that founder Derek Williams was previously Škoda’s head of plan- Soper would continue as chairman. ning and supply as well as national fleet sales Town joined IAA-Advisory in May 2014 as a manager. director. Duncan Movassaghi, brand director for Škoda Town’s 36-year career in the asset finance UK, was promoted to his current role in January, industry has spanned several organisations, after Alasdair Stewart moved to take up a sen- including Barclays, LloydsTSB, HBOS and PwC, ior assignment within Volkswagen Group UK. and across a range of roles from transactional Squire Patton Boggs partner joins TLT to initiating and leading material strategic Russell Kelsall has joined law firm TLT as a change, as well as acquisitions and disposals financial services regulatory partner from in both the UK and US. Squire Patton Boggs. ❙❙Jonathan Ayers, United Trust Bank Prior to taking early retirement in 2009, Town At Squire Patton, Kelsall was a partner in the litigation and financial services practice groups. and equity analysis at Goldman Sachs, and His areas of work include consumer credit, that he qualified as a chartered accountant products regulated by the Financial Conduct with Price Waterhouse where he specialised in Authority, payment services and savings, auditing banks and fund managers. disputes involving the sale and supply of goods Ayres is currently the chair of the British Bank- and services and asset recovery and conten- ers’ Association small banks technical panel tious and non-contentious financial services and a member of the BBA’s audit and oversight issues. committee. Shawbrook Asset Finance appoint Aldermore launches dealer services team McSweeney deputy managing director Challenger bank Aldermore has launched a ❙❙Lindsay Town, IAA-Advisory Shawbrook Bank has appointed Kieran dealer services team to provide dealers with McSweeney as deputy managing director of its stock, fleet and customer financing. asset finance business. was a managing director in Bank of Scotland’s According to Aldermore, the new team will look Corporate division, where he was responsible McSweeney was previously joint managing to provide alternative deal structures, schemes for leading a wide portfolio of asset finance director of Shawbrook’s wholesale division, and products to its dealer clients. and leasing businesses, which consisted at its which he jointly set up in 2013. The team is led by Tim Biddle, who joined peak of approximately £18bn of funded assets Shawbrook said McSweeney had extensive Aldermore two years ago from Siemens, where and over 2,250 colleagues. finance experience and has worked in the he supported the development of financing for In the period after 2009 Town maintained a banking sector for 15 years, recently specialis- manufacturers and dealers in the engineering presence in the European leasing market as ing in structured financing. industry. non-executive director at consultancy business More recently, Shawbrook said its focus has The bank has recruited Alan Yetts to the team The Asset Works, and at Kent Asset Solutions. been on growing its wholesale business, where from Volvo Financial Services. He has histori- McSweeney was credited with negotiating Former HPI director joins Raphaels Finance cally worked in providing finance for dealers funding for complex transactions. Raphaels Finance, the motor and asset finance and end-users of commercial vehicles, and will division of Raphaels Bank, has appointed Dar- McSweeney will report to Jim Cannon, the cover the east of England. ren Greenyer as deputy head of lending. managing director of the asset finance busi- Ian Smith, formerly of HSBC and CNH Capital He will be responsible for develop the compa- ness. will cover the North, Brian Warbrick, who ny’s relationships with lending partners in both United Trust Bank appoints Ayres as chief joined from BNP Paribas Leasing Solution, will its motor finance and asset finance sectors. financial officer cover the Midlands, and Russel Nicholls, who Greenyer joined Raphaels Finance from vehicle United Trust Bank (UTB) has appointed Jona- joined from CNH Capital, will look after the information provider HPI, where he held vari- than Ayres as chief financial officer, who has South West. ous roles including finance and insurance direc- joined UTB from English private bank C. Hoare As a launch offer, Aldermore said is it offer- tor as well as head of automotive finance. & Co. ing a free ‘FCA health check’ to all its dealer Greenyer joined Patrick Charlton who also Ayres was most recently the CFO of C. Hoare & customers. <

12 y March 2016 www.leasinglife.com

LL270March 1 final version.indd 12 01/03/2016 15:19:25 ABN AMRO LEASE FEATURE Dutch have courage to expand leasing The banking parent of the Dutch lessor has identified its leasing arm as a source of growth for revenue and as a good way to spread its risk on the balance sheet. Brian Cantwell speaks to newly-appointed ABN Amro Lease UK managing director Richard de Keijzer about its growth strategy.

t’s been a busy half year for ABN Amro. De Keijzer adds asset based finance, with In November its shareholder, the Dutch its high capital efficiency and lower risk pro- I State, brought the Dutch parent bank file is highlighted strategically, especially in back to the stock market. One of the stra- the Western European markets. tegic pillars of ABN Amro and part of what “Globally, our Corporate growth focus is the bank calls its IPO-story is the interna- on what we call ECT clients, (energy, com- tional growth of the bank in the markets it modities, and transportation). In Europe, the serves. Growth ambition is set both in pri- strategy is also geared towards asset based vate banking as well as in corporate bank- lending.” ing, the latter including asset based finance, “The goal is to become a recognized west- part of the bank’s ‘capability led’ approach, ern European leasing company, and this is where it plays to its strengths. how our London branch links to the strategy To underpin this ambition, the lease busi- group. ness of bank opened branches in London “In the last year, the lease book grew 43% ing of our customers’ assets. Our customers and Frankfurt in June and November 2014 in the UK, and the balance sheet grew to really appreciate that approach. Besides that, respectively. £430m. Also, the team grew 20% and the developments around Basel III and Basel As announced in Leasing Life last month, expects further growth. That shows the IV will further drive focus on asset based the bank appointed Richard de Keijzer as execution on our ambitions, portfolio-wise lending, which is exactly what we offer our managing director at the end of January and team-wise.” customers. 2016 after a competitive selection process, following the departure of George Ashworth Market comparisons Assets and coverage model for Virgin Money SME lending last year. ABN Amro’s growth strategy stemmed “We focus on mid-market companies with De Keijzer, who had been holding the post from the knowledge of the UK market’s a turnover above £25m, with a bias towards of interim managing director since Ashworth potential, says de Keijzer. the transportation, manufacturing and the left in October 2015, has been with the “The market in the UK is around £40bn a construction sector,” says de Keijzer. Dutch bank for the past 15 years in various year, similar to Germany, and ranges across “What we focus on in the UK is mainly managerial banking roles, including trade sectors from trucks and trailers to yellow hard assets: like trucks and trailers, yellow & commodity finance, commercial banking plant, containers and IT financing. plant, cranes, and containers,” he says. and sector advisory. “There are differences between the Neth- “As an asset based lender in the UK we “The growth of the bank’s leasing busi - erlands, UK and Germany, for example with look at both the assets and also the counter- ness in the UK is obviously a key part of the regards to the end of a lease. Does the title of party, because our strategy is long-term rela- bank’s strategy: international growth within ownership ultimately pass to the end-user? tionships. That means we are able to provide a moderate risk profile,” he toldLeasing Life Do they have an option to buy? Is there put- committed facilities, which is an exception in at the time. or a call option? is there the possibility of the UK market.” “Within the corporate strategy, there’s a extending the lease? In some countries the The Dutch bank has worked on driving lot of autonomy for local management; I’ve lessee is not allowed to buy the asset at the specific business in the UK by cooperating been with the bank for 15 years and I have end of the term, in other countries or other with a select group of introducers, besides a good idea of where the bank wants to go,” products, they are, “says de Keijzer. having its sales teams focussing on direct he said. Germany and the UK are attractive sales within our specified markets. because of their acquaintance of financing “ABN Amro Lease UK works with a Strategy their capital expenditure via a lease, says de selected group of introducers, which in the ABN Amro had its IPO at the end of last Keijzer UK totals around 15. This is all governed year, as 23% of ABN Amro shares were sold. “If you look at leasing in Europe, the lease well and within the groups policies. We reg- The expectation of its investors was that the quotas in Germany and the UK are rather ister all introducers; we perform all ‘know bank would spread its risk profile via Inter- high compared to the Netherlands, where your customer’ research, do the compliance national expansion. ABN Amro wants to a lot of companies finance their assets via a checks and we review them every year,” says grow its international business selectively in regular banking facility. In Germany and UK, de Keijzer. “Our coverage model is twofold: markets to 20 to 25% in 2017 at a group companies are more used to financing their we have our regional team, working across level, now 20% assets via a lease,” says de Keijzer. the UK, and we have a wholesale and struc- Currently, 80% of the bank’s revenue is “The lease-approach is in fact a more tured finance team. They look at syndicated generated in the Netherlands. ABN Amro’s customer centric approach than regular deals, club facilities and more structured international growth ambitions are aimed at banking. Because of the flexibility we offer deals. selective growth in markets where the bank around ownership and the fact that we are “All in all, with its high capital efficiency is already present, to bring in more diversifi- able to take on residual value risk, we can leasing is perfectly positioned to support the cation and spread risks. truly customize the structure of the financ- strategy of the bank.”

www.leasinglife.com March 2016 y 13

LL270March 1 final version.indd 13 03/03/2016 13:22:04 Driving business improvement with asset finance

Eggleston Steel wanted to reduce their carbon Funding non-traditional assets footprint and halve their electricity bills. They knew James Reid from Radar Finance adds; “LED lighting and they had to invest first and needed backing that looked solar panels are not the ‘hard’ assets that most companies beyond traditional ‘hard’ assets, at a realistic price. are financing. We needed a company to work with us on a non-traditional asset.” Illuminating asset finance with Aldermore Established in 1908, Eggleston Steel stock, process and “Having worked with Aldermore for over five supply a wide range of mild steels and non-ferrous metals years we totally trust them. They’re easy to throughout the UK. With virtually round-the-clock working do business with and they came up with a during the week, their electricity costs and carbon footprint no-fuss solution.” were too high. So they decided to invest £156k on LED lighting and solar panels, to deliver the desired cost savings, and improve their carbon footprint. About Aldermore Working with our network of introducers, Aldermore is Equipment finance to deliver funding the needs of SMEs right across Britain. For all your business benefits clients’ requirements – from small ticket to multi-million pound transactions, we’ve got the expertise to finance a Richard Hewitt, MD of Eggleston Steel comments: broad range of assets. We’ve already committed over “Environmental credentials are increasingly important to £2bn to support the investment of British businesses to our customers. We are very environmentally aware, have a help them grow. It’s all part of our can do approach to strong green agenda, and are aiming to get ISO14000, by business lending. installing solar panels, selling electricity back to the grid, and switching to movement and ambient-light based LEDs. For more information or to discuss your clients’ funding It’s good for business too – we’ve already almost halved needs with our expert team, call 0118 995 6600 or visit our electricity bills, as well as having much better lighting!” aldermore.co.uk/assetfinance. We offer finance for a range of equipment, from solar panels, IT and office equipment to forklifts, tractors and trucks.

0118 955 6600

aldermore.co.uk/assetfinance FOR INTERMEDIARY USE ONLY Aldermore Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. SME Champion Leasing & Asset Finance (Financial Services Register number: 204503). Registered Office: 1st Floor, Block B, Western House, Lynch Wood, Peterborough PE2 6FZ. Registered in England no. 947662. Asset Finance Invoice Finance Commercial Mortgages Provider of the Year Subject to application and availability. AAF167-0116-000293

LL269.indd 12 29/01/2016 11:25:55 409711.003 AF Eggleston Steel Can Do_DPS v2.0.indd All Pages 20/01/2016 11:33 Driving business improvement with asset finance

0118 955 6600 aldermore.co.uk/assetfinance FOR INTERMEDIARY USE ONLY Aldermore Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. SME Champion Leasing & Asset Finance (Financial Services Register number: 204503). Registered Office: 1st Floor, Block B, Western House, Lynch Wood, Peterborough PE2 6FZ. Registered in England no. 947662. Asset Finance Invoice Finance Commercial Mortgages Provider of the Year Subject to application and availability. AAF167-0116-000293

LL270March 1 final version.indd 15 01/03/2016 15:19:34 409711.003 AF Eggleston Steel Can Do_DPS v2.0.indd All Pages 20/01/2016 11:33 FEATURE STANDARDS FOR UK BROKERS Market response to the challenge of regulation The leasing market in the UK is devising a minimum set of standards for its commercial finance brokers, benchmarking a level of quality for the market. Brian Cantwell speaks to three key industry figures to find out more

he UK leasing market has undergone a mercial Finance Brokers (NACFB) changed a minimum set of standards for brokers to regulatory challenge to its broker dis- its code of practice for the first time since work to, that would enable greater transpar- Ttribution network, after the country’s 1993 to accommodate the regulatory chang- ency, trust and relationship strengthening for regulator, the Financial Conduct Author- es affecting the distribution network of the funders and brokers. ity (FCA), brought commercial finance UK leasing market. The brokers, represented by the NACFB, brokers which performed consumer credit, Within the changes was an acknowledge- and the funders, represented by the FLA, under its jurisdiction in October 2014. The ment that there was still a smaller number of are each coming up with their response to brokers are required to be fully regulated if unregulated brokers operating commercial be produced this year, by working in close they write any consumer business, even if the finance. The NACFB said some lenders con- association with FLA members and funders majority of the leasing business they write is tacted them at the time to refer brokers that in the market, including Shawbrook, Hitachi, commercial (unregulated) finance. they wanted to continue to deal with, but Aldermore, Investec and Close Brothers, In 2014 the result of this was conster - which were not able to gain FCA authorisa- among others, and with larger banks like nation among the broking community, as tion due to the business they conducted. Barclays and Lloyds involved from the smaller brokerages or one-man-bands faced At the September meeting according to peripheries, one source told Leasing Life. up to the daunting and unfamiliar task of the NACFB, one unregulated member ques- It’s important to note that the standards reporting to the FCA, and becoming educat- tioned whether patron funders would con- are non-binding, and are only guidelines to ed about the regulator’s requirements. tinue to support non-regulated business in benchmark good business practice. What During 2015 some brokerages consoli- the future, with one funder claiming the will be the minimum standard is to be con- dated with larger brokers, some retired, and change to the NACFB’s code of practice firmed, butLeasing Life spoke to Adam Tyler, some may have dropped consumer busi - make supporting brokers easier. chief executive of NACFB, Simon Goldie, ness. But the majority are expected to work Part of the answer was something that the FLA head of asset finance, and Mike Randall, through the regulatory challenge. NACFB, the Finance & Leasing Association CEO of Close Brothers Asset Finance, to get As part of that change, on 23 September (FLA), and funders in the market were work- an idea of how each party is preparing to last year the National Association of Com- ing towards in the second half of last year: work towards a joint document.

The FLA’s angle – Simon Goldie, head of asset finance, FLA

“The NACFB is an associ- appropriate way to the regulation. ate member of the FLA, “Really these things were happening in tandem, and the NACFB invited and we’re a patron of the me along to what they were doing, so they have seen the document as NACFB. well, because they are an associate member, they knew what we were Before the meetings the doing, and that also for me to understand what they were doing helped FLA was considering when we were redrafting our documents. The NACFB has also revised its the challenges of FCA code, referencing both our codes in its code. regulation, the mes- “The big picture is that both bodies are working to ensure that standards sages we can convey are at the highest possible level; to drive up standards, make our respec- to our members, and tive members aware of what they are doing, and to assist each other to the interaction between ensure the funders are saying all the things they need to say about FCA funders and intermediar- regulation to the brokers, and the brokers understand it. ies, which has got more “Obviously if a business is entering the market, if they join the association of a focus because of as a broker or funder, we want to make sure they understand exactly the FCA regulation. requirements of them. “Separately to the “The FCA authorisation process is coming to an end in March, although NACFB’s work we had been working on some non-binding, good practice they have time to extend if they need to, and then we’ll be into the super- guidance for our members to give intermediaries. We are framing it visory regime, and I think both organisations felt a responsibility to lay as an expectation. Nothing is in there that will surprise anybody, it's all out what is good practice. about treating customers fairly; about making sure information is clear “We had a group that has been looking specifically at good practice, so and so forth. they have done a lot of the work, but we also sent it to other groups as “We started at some point last year, just before the NACFB started those well, for comment and feedback. We wanted to be as inclusive as possi- meetings with the funders. They also were coming from a similar angle ble. It has been a productive piece of work, getting views from members. as us; how do we explain to brokers what funders are expecting? There’s The drafts have changed, inevitably. a duty on funders through the FCA regulation to ensure that brokers “We should be getting the joint document out in the next couple of are adhering to the regulations. The duty is that they adhere in an months.”

16 y March 2016 www.leasinglife.com

LL270March 1 final version.indd 16 01/03/2016 15:19:36 STANDARDS FOR UK BROKERS FEATURE

The broker’s angle – Adam Tyler, chief executive of the NACFB

“We changed the code of practice back in September, after an excep- has now got tional general meeting. There will be a further meeting in November. We both audits expanded the group to bring in Natwest, Bibby, and a couple of others. that are cur- And we agreed that we follow the NACFB code of practice, but on top of rently being run that we want to add in what we call a minimum set of standards for bro- by two different kers around regulation, so the brokers must comply with FCA regulation. compliance firms: Compli- “What we’re doing at the moment is trying to establish this minimum set ance Services of standards based around FCA regulation, our compliance partners, and which Hitachi our funders, and have consensus that it’s the same set of standards. is recom- “Part of this minimum set of standards would be an element of the mending, and NACFB’s pre-existing compliance services: so we’ve had 32 broking firms Simply Biz, and that have now had somebody in to look at them. They report back to the they’re working broker, and let them know what they need to work on. What we then plan together. We’re to do is to work with them to make sure the missing bits are in place. going to align They are then a fully compliant funder, and investors and customers those with recommendations from the funders that are involved.

know that broker is compliant. We need to set standards that brokers “Funders can then have assurance of uniformity across the NACFB brok- must adhere to; we’ll police it by performing audits on the broker annu- ing community that they’ll be doing one standard check on behalf of all ally, and that broker will end up with a tick to say I’ve been audited, and members.

the funder is quite happy to deal with them. That’s the plan. “The minimum set of standards are going to cover all brokers, because “Locke Lord head of asset and consumer finance (UK division) Jo Davis they’re all under the same regulation.”

The funder’s perspective – Mike Randall, chief executive officer, Close Brothers Asset Finance

“We have an obligation as an industry to help do the right thing. And I saw our experi- last year that there was a gap in the broker market for a quality standard ence of being while watching the brokers working on how to get their permissions. I authorised by thought that we could help them, as Close Brothers was more fully devel- the FCA into oped with the regulation because of the size of our business (Close also the broker mar- has a direct-to-consumer proposition). ket. We’re just “We have value to add to the standards and regulatory journey for the bro- evolving what kers. And so we’re not wishing to try and rule by the stick; we’re saying is required in that a regulated environment is where it’s going, and this is why you’re terms of behav- going to have to listen to us and all get in the same room and agree a set iour that bro- of behaviours going forward, so at least you know what standards you’re being measured by. kers will have to evidence. “I hear a lot of people in the leasing market talking about raising awareness. At the Leasing Life conference the idea was mentioned of the “So we’ve got a presence of a regulator being linked to reputation, and pushing the lot of funders reputations up as people from outside the market see it. So really if this and FLA members in the room; I invited 22 members in September to is a market response, then it’s a lot more persuasive. talk about the appetite to agree on a joint set of standards. “We’ve taken the initiative back in last September to get as many lenders “If a broker has 20 credit lines, 20 lenders are going to have to go and do in the room as possible, with Adam at the NACFB, and Simon involved at 20 health checks on that broker to understand those behaviours. They’ve the FLA, to say we’ve invested, as Close Brothers, loads of money, time, all got different behaviours; the broker is not going to be able to do its job and effort in understanding in our direct operation, with our direct sales or lend any money, because it will be busy satisfying the lenders that he’s force, how we evidence our behaviour, because we know that’s what the regulators require. doing the right thing. So the minimum set of standards is an answer to that problem. “And the broker market has spent the last year going through commis- sions review (by the FCA), so that was hard enough for brokers, because “The minimum standards are aligned to the NACFB code, and also the FLA they’ve never had to do that before. But I’ve said, well, we would apply code of lending. I think we’re making a huge step in the right direction.”

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LL270March 1 final version.indd 17 01/03/2016 15:19:38 FEATURE FLEET German lessor becomes part of ‘one-stop shop’ Rainer Laber, chief executive officer at Fleet Logistics, speaks to Sotiris Kanaris about the company’s full-year results, as well as the strategy behind the recent acquisition of two companies

erman fleet management company He explains: “It’s a nice chain of consult- Fleet Logistics has seen its fleet size ing in the first round, operative support with grow every year since its acquisition real fleet management locally from Fleet G Logistics in the second round, followed by by product certification and qualification services provider TÜV SÜD group in Octo- tool provision from TCOPlus, for instance, ber 2012. to budget and plan fleet costs. The company saw its fleet size grow by “I think it’s fair to call it a ‘one-stop shop’ 25% year-on-year in 2015. “At the begin- because it’s quite comfortable for the cus- ning of 2015, we managed 134,000 vehi- tomer to cover many of its challenges in one cles and we ended the year with more than place. This seems to be a competitive advan- 180,000,” says chief executive officer at Fleet tage, but others also have their own.” Logistics Rainer Laber. Laber adds that Fleet Logistics has already Laber says being an affiliate of a finan - benefited from these acquisitions by gaining cially stable group, as well as independent new customers. “It turns out that some cus- from the finance and automotive industries tomers who started up with fleet manage- has created an acceptance among customers, ment by installing the TCOPlus tool or by which in turn has boosted contracts. demanding the consulting services of Fleet “As an independent fleet management Vision, then got interested to shift part of provider we’re able to optimise the finance ❙❙Rainer Laber, Fleet Logistics their fleet management to us. offers to our customers through our multi- Despite being confident that Fleet Logis- bidding process. This is our online bidding revenues – which is expensive because it tics will have at least another 20% growth platform which we employ to find the best means paying to conquer the market – or in fleet size in 2016, Laber calls 2016 “a year package and price for every single vehicle to bringing down your costs. Fleet represents a of consolidation” and investment in the busi- be added to our customers’ fleet.” part of their spend which is high enough to ness. Laber also cites the broad geographical make it attractive for them to work with us “The growth this year will take care of coverage offered by the TÜV SÜD network to reduce those costs,” says Laber. itself naturally from the new regions and – which spans more than 70 countries – as a The changing tax rates on emissions and countries that we are expanding into. We reason behind the growth. corporate environmental obligations have have grown at such a rate over the last year “We have the ability to go wherever our triggered higher demand for fleet manage- or two that we do not wish to over-promise customer wants by following the existing ment in recent years. Laber says that tax on our service delivery to our customers. We TÜV SÜD network, with no need to create optimisation directly affects the customers’ need to ensure that we have in place the peo- a new company branch in each country. We P&L and that both large and medium size ple, systems and processes to ensure that we are in 27 countries physically and through companies are increasingly sensitive about deliver a consistently high, standardised level our operation in Singapore we serve 10 their environmental responsibility. of service.” Asian countries remotely, including Japan Fleet Logistics has to collect information In 2016, the company will make its first and India. Using TÜV SÜD infrastructure on individual country tax and environmen- “tentative” move operationally in the US, worldwide makes us very flexible in entering tal policies, companies’ strategic targets working with a large international chemical new markets,” he explains. and safety policies, as well as models of car company with a global fleet of around 8,000 Fleet Logistics’ strongest markets apart manufacturers together in order to support vehicles. from its home market of Germany are the its customers. “We need to bring this infor- Laber says the US fleet management mar- UK, Belgium, France and the Netherlands. mation together and that is very complex. ket is the largest in the world and one of the This global coverage has resulted in the This is the main challenge for fleet manag- most structured and segmented. However he company’s ‘typical’ customers being mul- ers,” says Laber. acknowledges that the US – with regards to tinationals, of which many belong to the He said that the company has prepared the financial services system – is quite differ- pharmaceutical, chemical and food and thoroughly for the new lease accounting ent from other parts in the world. drink industry. standards. “For the time being we do not In the first quarter of the year, Fleet Logis- Laber says multinationals are turning to expect significant changes to our business tics will also expand into the Latin American fleet management companies because they model or our product portfolio as we already fleet market. Operating from a hub in São want to have the same reporting systems manage both lease and purchase fleets.” Paulo, Brazil, the company aims to service and standards across the different countries In May 2015, TÜV SÜD’s Auto Service fleet customers in various countries of the in which they operate. He adds that the con- division acquired 100% of the shares of fleet region. It will initially use the existing infra- siderable cost of running a fleet makes fleet reporting tool provider TCOPlus and its sis- structure of its parent company. management attractive. ter company Fleet Vision which is an interna- Laber also identifies Mexico, Poland and “Companies know their fleet spend tional fleet consulting firm. These companies the Czech Republic as markets with big accounts for 4-6% of their operating cost operate TÜV SÜD Auto Service’s fleet busi- potential. and they see a potential to bring it down ness unit alongside Fleet Logistics. And he believes that customer recommen- and improve their carbon footprint. In Being part of the same company has creat- dations from around the world will be the whichever industry you operate, you can ed a ‘chain’ of services for customers, accord- best advertisement for continuing the com- earn profit in two ways: by increasing your ing to Laber. pany’s growth in the future. <

18 y March 2016 www.leasinglife.com

LL270March 1 final version.indd 18 01/03/2016 15:19:39 GERMANY COUNTRY FOCUS Sluggish growth in Europe’s strongest market The subdued nature of the German economy is reflected in the leasing sector, where the forecasts and predictions are for modest growth, reports Paul Golden

ccording to the IFO Institute’s survey, “In light of the considerably dampened growth. “The business climate is perceived which covers all companies operating investment climate, the leasing industry is as positive for the next few months and pro- Ain the leasing sector, the volume of new satisfied with the new business recorded in duction is set to be extended.” leasing and hire purchase business acquired 2015,” he says. “The driver of this growth Deutsche Leasing is convinced that SMEs in Germany in 2015 was €59bn, of which was vehicle leasing, with sales of passenger are increasingly looking for financial services €52.2bn was leasing. cars and commercial vehicles up by 6%, that are easy to access, Ostermann continues. This represented an increase of 3% on the while the second-largest segment – the leas- “Therefore, we started to systematically figure for 2014, down on the 6% growth ing of machinery – grew by 4%.” develop small-ticket business together with experienced between 2013 and 2014. Equip- The increase in demand for machinery was the savings banks. In this segment, we were ment leasing rose to €51bn last year from in double figures at the beginning of the year, able to achieve an increase of 11% over the €49bn in 2014, an increase of 4%. but that growth rate tailed off as the year past financial year and we intend to con - There was also a modest rise in the pen- wore on and new orders for machinery and tinue along this path in order to leverage etration rate for leasing equipment, which plant dwindled. additional potential with the savings banks stood at 22.9% last year compared to 22.7% The level of new business acquired in business with small corporate customers, in 2014 and 22.3% in 2013. The leasing through the leasing of computers, servers as well as industrial customers. The focus industry’s share of aggregate investment in and IT equipment has again been disappoint- is on streamlined and fast decision-making Germany (the overall leasing penetration ing, adds Fittler. and handling processes, which will help the rate) went up to 15.3% in 2015 from 15% “Demand was already weakening in 2014 in 2014. and last year saw a further decline (by 2%). ❙❙ Just over half of outside financed invest- IT investments are a seismograph of the pre- Kai Ostermann, Deutsche Leasing Group ment in Germany is realised through leasing, vailing economic mood since experience tells a figure that has remained relatively stable us that in times of uncertainty, companies since 2012. There’s been more movement in will first of all put the acquisition of new IT the breakdown of the market between cap- equipment on hold. The real estate segment tives, bank-owned leasing companies and has also been losing ground – new business independents, with the market share of cap- acquired through the leasing of offices, busi- tives having increased over the past few years ness premises and production facilities fell by in direct proportion to the percentage of the 29% to €1.21bn.” market controlled by bank-owned leasing Although economic data and develop - companies. ments give cause for optimism, Deutsche Road vehicles once again constituted the Leasing Group CEO Kai Ostermann most important segment of the leasing mar- acknowledges that fragile confidence has ket in 2015 – passenger cars and commercial impacted his company in a number of ways: vehicles accounted for 74% of all new equipment leased last year. The second-largest cat- • Low interest rates as the ‘new normal’ egory of capital goods in the equipment leas- sometimes have a short-term stimulat- ing sector was production machinery, ahead ing effect on the economy but create savings bank to work efficiently and assist of office equipment and IT systems. The two increased uncertainty and risk in the the customer who needs a fast and reliable largest sectors saw revenues rise by 6% and medium to long term; financing solution.” 4% respectively, while office equipment and Another major topic is international busi- IT systems fell slightly. • The low interest rate causes customers ness with savings banks. “We’re convinced The breakdown by customer type shows to use their own resources for invest- that the savings banks could benefit even fur- that services account for 37% of the market ments if they invest at all (willingness ther on an international level,” Ostermann (up 4% from last year) followed by manu- to invest has stabilised, but it is still says. “We offer the savings banks access to a facturing at 19%, a 5% rise on the previous low compared with the period before team of experts for these corporate custom- 12 months. the global financial crisis); ers active overseas, who will advise savings Most new lease business in Germany is bank customers within local institutions acquired through agreements concluded • The economic situation in emerging together with their own corporate customer with manufacturers and dealers – around countries has become distinctly more adviser; are familiar with the legal frame- 55% of leased-equipment business was uncertain in recent years, with the works and specific cultural characteristics acquired through vendor lessors last year. decline in commodity prices, credit within the target country; and are able to Leasing is firmly rooted in the German cycles and political unrest curbing offer or arrange additional services through Mittelstand (small and medium-sized enter- confidence in expanding within these collaborations within the investment coun- prises) – more than 85% of leasing custom- countries. try, for example, help in opening accounts or ers in Germany belong to this sector of the contact with public officials.” economy, explains Horst Fittler, secretary When asked whether he expects the mar- Over the last financial year, Deutsche general of the German Leasing Association ket to grow this year compared to 2015, Leasing has also developed country strate- (BDL – Bundesverband Deutscher Leasing- Ostermann says it should be noted that the gies and market development concepts for Unternehmen). German SME segment is showing robust and with the savings banks. “The reinforce-

www.leasinglife.com March 2016 y 19

LL270March 1 final version.indd 19 01/03/2016 15:19:40 COUNTRY FEATUREFOCUS GERMANY

ment of our long-standing cooperation with of France, though somewhat behind the Helaba [the commercial bank Landesbank UK, adds Landwehr. “Research published in Hessen-Thüringen] – which is now focusing 2015 by Leaseurope illustrated the growing much more on international business – is importance of leasing to SMEs in Germany, also geared towards the growing needs of the with an estimated 68% of SMEs now choos- savings banks and their customers for inter- ing leasing, compared to 36% in 2010.” national investment support,” adds Oster- He says there’s a growing demand for mann, who says the company will continue additional service offerings, particularly for to work on regulatory requirements this year. assets that are not part of a client’s core busi- “Significant investments are required in sys- ness activities. “In cases like these, the inclu- tems and data management in order to com- sion of additional services such as installa- ply with current requirements and resources tion, maintenance, service and training are need to be committed to this. We’re paying also appreciated by customers.” more attention to ensuring our information The secretary general of the BDL agrees technology and processes are designed to be that customers expect more from leasing future-proof and we’re investing in the devel- than financing investments. “Complemen- ❙❙ opment of additional markets and customer tary service features which facilitate the Horst Fittler – BDL groups.” use of vehicles or IT equipment are impor- Jurgen Mossakowski, CEO at CHG tant arguments for leasing,” Fittler notes. equipment in order to benefit fully from Meridian says business in Germany has risen “Maintenance, inspection, around-the-clock the developments around what is often by more than the central European average hotlines and claims management are fre- referred to as the fourth industrial revolu- and refers to the potential of new products quently requested by customers.” tion. in the fields of IT (cloud services), health care According to Landwehr, the indications According to BDL president Martin and industry. are that leasing in the health care sector Mudersbach, the leasing industry is well There is a trend in Germany towards com- will continue to grow, with 30% of health placed to help with the realisation of these bining system integration and the leasing care companies planning to expand their investments, because leasing companies product on the technology side and a higher use of leasing as a financing tool. “Addi- employ engineers who have the know- level of digitalisation in both the origination tionally, developments around the digitali- how to assess new processes and business of business and the processing of transac- sation and automation of production pro- models, and, if necessary, to oversee their tions, explains Elmar Lukas, managing cesses are expected particularly to drive implementation. director, GE Capital Equipment Financing demand for tailor-made financing solutions However, Fittler acknowledges the invest- Germany. in the manufacturing sector in Germany.” ments required may prove to be quite a “The leasing industry continued to expe- When asked whether the German gov- challenge. Companies will be investing not rience regulation and consolidation last ernment has taken any direct or indirect only in capital goods but also innovative year and the announcement of the IFRS action to support the lease finance industry, processes, with so-called soft investments accounting standards might potentially Fittler replies in the negative. In terms of in intangible assets such as software and impact the way leasing will be seen in the what his organisation is doing to encour- patents gaining in significance. future,” he adds, a point taken up by Kai- age growth in leasing activity in Germany, “To be in a position to help investors Otto Landwehr, head of commercial finance he says the BDL supports companies devel- realise their investment ambitions, leas- at Siemens Financial Services Germany. oping new markets and segments. ing companies need clearly defined frame- Landwehr says: “The new accounting “The leasing industry sees considerable work conditions,” he says. “Legislators standard IFRS 16 published in January 2016 potential for growth in the ‘Industry 4.0’ will also have to make sure that appro- by the International Accounting Standards project, which is revolutionising not just priate technical standards and norms are Board requires companies to include leasing the production process, but the entire in place. These are critical considerations commitments from operating leases in their economy,” he observes. “Many companies for industry as a whole and clarity in this balance sheets from 2019 onwards. This will lack the kind of financing models that area would certainly make the remarket- have an impact on accounting and reporting would allow them to hold down their ing process more straightforward for the procedures and will increase transparency capital expenditure to a minimum. The leasing sector.” on companies’ lease assets and liabilities.” leasing industry can provide them with Fittler is cautious about the prospects for In addition to the new IFRS standard, the financing solutions tailored exactly to their growth in 2016. “The economic forecasts German Federal Ministry of Justice pub - requirements and must not be held back offer little cause for optimism,” he con- lished a draft law on insolvency proceedings from doing so by poorly defined operating cludes. “Companies remain reticent about in March 2015 which promises substantial conditions.” investing – investments in equipment are relief for leasing firms. The new law decreas- Deloitte defines Industry 4.0 as refer- expected to increase by no more than es business risks for lessors, as the frame - ring to a further developmental stage 3% and levels of investment in Germany work conditions for payment clawbacks in the organisation and management of remain much too low. But this is the cli- through liquidators are set to be defined the entire value chain process involved mate that the leasing sector lives in and more clearly. in manufacturing industry. According to there’s no evidence to suggest there will Based on current available leasing associa- recent research commissioned by Siemens be a surge in growth any time soon. The tion data for 2015, Germany’s lease penetra- Financial Services, businesses are reporting increase in demand for equipment in 2016 tion and growth rates in 2015 were ahead a strong need to upgrade or acquire new will be in the region of 3-4%”. <

20 y March 2016 www.leasinglife.com

LL270March 1 final version.indd 20 01/03/2016 15:19:41 PRIVATE CLOUD LEASING FEATURE Wind picks up for cloud financiers Flexible finance products can boost the take-up of private cloud, while data protection regulatory agreement changes can influence the market.Sotiris Kanaris investigates

loud computing has been without access to, some of the cloud products, where have no control over service provision. a shadow of a doubt one of the buz - perhaps price is a limiting factor. “From a risk perspective, you need to Czwords of the decade. Businesses have However he says that upfront costs pose ensure that in your contract you are very been investing heavily in cloud technolo - a challenge not only to SMEs but also cloud clear in terms of what you are doing,.” says gies, with International Data Corporation finance providers. White. “You are not providing the service predicting that half of all IT spending will “It is all very well selling the dream of ‘£20 and you need to ensure that all of the risks be of this type by 2018 and 60-70% of all per user, per month’, but in order to get the associated with that are very firmly with the software, services and technology spending full benefit of these products there are often software of the cloud provider.” by 2020. associated upfront costs,” White says. If the Costelloe says that under any lease or loan The private cloud, the type of cloud com- finance provider sells the cloud at £10 per contract, payment liabilities are there wheth- puting which involves a distinct cloud-based user, per month, but tells the customer it’s er or not there are issues with performance. environment operated only by a specific cus- going to cost £15,000 to implement it, then However, he specifies that if there are tomer, has been gaining popularity. the provider sells a ‘spend to save’ model issues with the service provided it’s likely to “I think the demand for private cloud is which creates barriers to entry.” impact a customer’s payment performance. growing and the requirement for funding is White says finance companies have an going to grow as well,” says Neil McLaren, important part to play in SMEs accessing Disruption rights financial services, treasury UK, Ireland and a private cloud, by funding the upfront ser- White says that disruption rights can be a Nordics at Fujitsu. vices associated with cloud implementations way to tackle default on payments. EMEA vice-president at Dell Financial and amortising that cost over a period equal “If you are partnering a cloud provider Services Cormac Costelloe explains that to the licence or subscription term. you want to try and encompass some kind companies operating on outdated platforms According to White, in the SME space of disruption rights,” explains White. “In realise they have a “real competitive disad- there are end-users with wildly differing the event of a non-payment you’ve got the vantage” to rivals that moved to more up-to- views and interpretations of what constitutes threat of reducing access to the services that date platforms. the cloud. He believes the inconsistencies they are buying. Clearly that’s something According to IBM, businesses that access give rise to confusion, where customers try you have to do in conjunction with the seller. cloud computing are able to transform their to look at the return on investment model It needs to be a robust and well-established customer interactions and capture more and where the tipping point is in that equa- software provider.” business. tion. In addition, the fact that IT equipment is “Cloud is powering business growth to He says: “If you take software as a theme, ‘mission critical’ for a business can act as a enable new business strategies, speed the research on cost of ownership shows that safeguard against such default. delivery of new products and services and the tipping point in the equation is 4.5 years “If you strip out the IT platform that the access new services that improve business where subscription no longer necessarily business operates on, you really don’t have processes,” writes IBM. becomes the most economical way of access- a business anymore,” says Costelloe. “The ing products. essential use nature of the asset provides you High cost “This clearly varies depending on the uti- with a level of insulation that maybe you The private cloud’s high cost, which includes lisation of the business application. How- don’t get for non-technology assets.” implementation costs like training and data ever, if you take a mid-market enterprise Despite captive finance companies migration, in combination with customers’ resource planning product as an example, having an advantage over their own prod- changing buying behaviour has increased the accumulative and inflated costs eventu- ucts, a number of bank-owned and inde - demand for the consumption-based payment ally become prohibitive as organisations end pendent finance companies are operating in model over the ownership model. up paying much more over the lifetime of “The old traditional model of companies the solution. buying their infrastructure and paying for it, “As a result many leading cloud-based inde- maybe with some kind of finance lease over pendent software vendors see an increase in a period of time, is still there,” says Costel- attrition rates after 12 months as their cus- loe. “However, we’re seeing more demand tomers become aware of the ‘elephant in the for finance products with a greater level of room’,” adds White. flexibility built into them and aligned to how Costelloe says upfront costs make the pri- the customer uses or consumes.” vate cloud less viable for SMEs, as they don’t Stuart Hall, regional manager UK and Ire- have the investment capability to build it. land at Cisco Capital, explains that the consumption-based and pay-as-you-use models Risk mitigation not only help customers mitigate some of the White says cloud financiers have to under- potential financial and technical unknowns, take far greater due diligence around the but also help dramatically improve cash seller than perhaps they would ordinarily flows. do when engaging in ‘traditional’ end-user Managing director at Syscap Philip White finance. says cloud financing can reduce the barriers Finance companies contractually insulate ❙❙ to entry for SMEs for the acquisition of, or themselves from performance risk, as they Stuart Hall, Cisco Capital

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LL270March 1 final version.indd 21 01/03/2016 15:19:42 FEATURE PRIVATE CLOUD LEASING

the market. in the cloud financing space in the future, ❙❙Cormac Costelloe, Dell Financial Services Dell Financial Services’ Costelloe says where deals will be created by the vendors being part of an overall technology busi- and banks will remain involved. ness confers advantages compared to more “Payments will be agreed with the custom- traditional finance companies in relation to ers and then sold down into the banking financing in the technology space. market and these solutions will become more Costelloe says that captive finance busi- sophisticated in what they are actually offer- nesses may get insights on what is happening,” explains McLaren. “I think the banks ing in the space that non-technology-owned will still perform an important role because finance companies wouldn’t have. He adds essentially they will be using their balance that a better understanding of the product sheet in order to fund quite a lot of these tar- evolution makes them more able to take get business for all sorts of vendors and they residual positions. will increasingly have to work with them,” “Traditionally, banks wouldn’t be keen McLaren says that a challenge faced by the on taking residual positions on technology industry is for the customer to understand equipment,” says Costelloe. “As a captive the economics for a vendor of providing the finance business we’re probably in a position cloud platform and accept a certain level of to be more aggressive about that, because we committed payment. “This will enable ven- have a better understanding of what’s hap- dors to continue investing in the solution,” obligations on companies in the US to protect pening in terms of product evolution.” he says. the personal data of Europeans and strong- Costelloe says that the requirement from er monitoring and enforcement by the US banks to carry greater amount of capital has Unsafe harbour Department of Commerce and Federal Trade shifted their attention away from financing In October 2015, following a two-year-old Commission, including through increased technology. case taken to the European Court of Jus - cooperation with European Data Protection “As banks need to put more capital in place, tice by Austrian privacy campaigner Max Authorities. they have to make choices around where Schrems, the court ruled that ‘safe harbour’ EU Commissioner of Justice, Consumers they are going to deploy capital, and for – the European Commission’s transatlantic and Gender Equality Vera Jourová com - many banks, financing into the tech sector data protection agreement – was invalid. ments: “For the first time ever, the US has wouldn’t be considered core. We see cases Companies had relied on this agreement to given the EU binding assurances that the where financial institutions like banks are transfer data legally across the Atlantic to the access of public authorities for national secu- pulling back from this space,” Costelloe adds. US since the year 2000. The ‘safe harbour’ rity purposes will be subject to clear limita- The capital challenge faced by banks has was based on a promise from US companies tions, safeguards and oversight mechanisms. changed the vendor finance market, with to protect European citizens’ personal data. Also for the first time, EU citizens will benefit some businesses linked with banks being Cisco Capital’s Hall says the decision taken from redress mechanisms in this area.” “not as active”, according to Costelloe. by the EU to override the pact has been the Costelloe believes that if a new agreement He says that some non-bank aligned ven- most recent reminder of the impact that regu- which permits European data to be held in dor finance businesses are coming back into lation can have on cloud service adoption. US-based data centres and vice versa was not the market, typically financed by private Hall believes the invalidation of ‘safe har- reached it could have created serious chal- equity firms. bour’ can increase demand for cloud deploy- lenges to cloud providers. Despite Dell’s decision to move away from ment models. He says: “The net result in this “I think if the transatlantic data flow a vendor finance arrangement three years ago, case can be that of increased demand for haven’t been permissible there would have to one where it has its own captive capability, cloud deployment models – such as on-prem- undoubtedly been some challenges in terms Costelloe believes there is a role for vendor ise private cloud – that allow organisations to of certain cloud providers trying to deliver finance businesses in the market. better control placement of data and associ- their services on a global level, or at least Fujitsu Financial Services’ McLaren ated intellectual property without sacrificing across the US and Europe,”says Costelloe. “I DRAWING ON MANY YEARS OF EXPERIENCE IN HIGH-TECH, believes there will be more vendor finance the benefits that cloud can provide. think there’s been a compromise agreed on TRANSPORT AND INDUSTRIAL EQUIPMENT SECTORS, “In essence there will continue to be a that so I think it’s less of a challenge than per- OUR ADVISERS ARE AS FAMILIAR WITH YOUR BUSINESS number of data privacy, data sovereignty haps people first thought it was going to be,” ❙❙ Phillip White, Syscap concerns that will most likely favour private On the other hand, ElasticHosts – a UK- AS THEY ARE WITH INSURANCE AND VENDOR PROGRAMMES. cloud deployments, hosted or on-premises, based company with 10 data centres around with local data centre presence.” the world – says that the new framework EQUIPMENTFINANCE.SOCIETEGENERALE.COM In February, the European Commission doesn’t end the uncertainty around data and the US agreed on a new framework for transfers. transatlantic data flows, the ‘EU-US Privacy The uncertainty created by the change in Shield’. agreement could have an effect on European Commenting on the failure of the EU and business’s choice of private cloud provider, US to reach an agreement for ‘Safe Harbour which could also affect the finance market. 2.0’, Mark Thompson, privacy practice lead- ElasticHosts advises European companies er at KPMG, says: “Given the fundamental to store data within the region. “To com - different cultural views on privacy between pletely negate any possible backlash, the the EU to the US, it is not a surprise that best course of action for any involved com- there have been challenges getting to a “Safe pany would be to work with European host- Harbour 2.0” solution in the allotted time ing providers to store data generated in the frames.” EU or set up data centres themselves in the The new arrangement will provide stronger region,” the company writes. <

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LL270March 1 final version.indd 22 01/03/2016 15:19:44 DRAWING ON MANY YEARS OF EXPERIENCE IN HIGH-TECH, TRANSPORT AND INDUSTRIAL EQUIPMENT SECTORS, OUR ADVISERS ARE AS FAMILIAR WITH YOUR BUSINESS AS THEY ARE WITH INSURANCE AND VENDOR PROGRAMMES.

EQUIPMENTFINANCE.SOCIETEGENERALE.COM

LL270March 1 final version.indd 23 01/03/2016 15:19:44 COMMENT IAA-ADVISORY/LEASING FOUNDATION Leasing redefined IAA-Advisory director Nick Gallop looks at research produced in conjunction with the Leasing Foundation

he first phase of this research was com- the IT equipment and the key contract terms Massive investments in technology to sat- pleted in 2014. It examined the wider are similar. isfy hugely variable and sometimes unpre- Tcontext of all kinds of hire, rental, man- Thinking along the lines of the circular dictable demands encourage a shared solu- aged service and subscription agreements. It economy affects product design, building tion. Pay per use of a high-capacity infra- developed a current definition of the term in re-usability from the start. It also affects structure shared between multiple users, will leasing and looked at the ways the leasing approaches to funding equipment for use, offer more attractive economics than cost industry is maintained with a wide and refresh and re-use. This way of thinking recovery via single user agreements. This is evolving range of products. The research demonstrates an obvious role for captives, essentially what cloud computing offers. The showed there was a wide variety of leasing and it’s a role in which specialised lessors supplier also obtains the additional ‘no pay arrangements and an even wider range of can participate. – no use’ credit benefit. leasing-like activity. While some questions It will be interesting to see how this trend Consumption pricing seems to be growing. were answered, the research raised more evolves. Around the same time that the inter- Interviews explored examples in equipment that needed answers. views were conducted, DLL began to use it as diverse as lighting, hospital equipment, Value in this kind of research comes from as a theme to promote its financing, and the bus manufacture and power generation; car both the breadth and depth of opinions World Economic Forum stated leasing as one sharing exits somewhere on the consump- embraced. IAA-Advisory exploits its exten- of a few approaches to the circular economy tion pricing spectrum, even if the service con- sive network of senior contacts, to continue that could endure. Lessors’ advantage lies sists of serial leases of very short duration. this research. There were over 40 individual in their ownership of the product, and end While the providers all agreed their offering interviews for this second stage research proof lease terms which ensures the goods are had leasing characteristics, none used the ject, as well as group discussions with the collected, potentially for re-use, rather than term leasing, nor was this financing reported Captives’ Forum and the High Value group. simply being dumped or recycled. For enter- as a lease. The questions to explore included: Do we tainment, rather than information value, the know the size of the market? Can we define graph shows how the term ‘circular econo- Evolving services the products being offered? Is the industry my’ is now as popular as ‘sliced bread’, at Services have long been included in financing merging with other forms of financing? Or least as a Google search term. arrangements and it’s a growing trend. Cap- is it maintaining a distinctive and identifiable tives in particular, offer their parent position? Is the growth in financing services ❙❙ Interest is building: the circular economy is nearly as a way to assure high service pen - and subscriptions recognised? Do industry popular as sliced bread etration From the users’ perspective statistics reflect the changes that have taken it’s a logical extension: if financing place? eases investment in an asset, then financing services and software with Evolving offerings the asset eases investment in a com- Many institutions call their lease-like prod- plete solution. ucts by names other than leasing. Whatever Pure services are also financed, the name, there’s widespread use of rental with the usual cash flow benefits for or hire as a way to circumvent investment customers. Funding can be done by hurdles and encourage consumption of ser- loans, or perhaps invoice financing

vices or equipment. Cloud service providers, 2007 2009 2011 2013 2015 with an instalment payment plan, for example, don’t use the word leasing, and with the advantage for the end-user whatever they call it, the user doesn’t own Source: Google trends – Feb 2016 that the invoiced amount remains

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LL270March 1 final version.indd 24 01/03/2016 15:19:46 IAA-ADVISORY/LEASING FOUNDATION COMMENT

on the supplier balance sheet. ❙❙ Indicative guide to leasing and leasing-like volumes participants in the industry

However it’s done, financed 3 and more reporting of leas- services are regarded as ing-like activity. financing business, and nei- A collective name for these ther thought of, nor reported 2 safer-credit activities would as, leasing business. help to break into the virtu-

After this report was 1 ous cycle. The report suggests published, the new Lease the industry adopts the phrase Quasi leasing by banks Accounting Standard was ‘leasing and asset financing’ 0 103 104 105 106 107 108 finally released. It’s con - Quasi leasing by affiliated and uses it consistently. cerned with defining when leasing companies The report attempts to

a contract is for a lease volume Relative -1 Non-affiliated leasing companies measure the market that and when it’s a service, and exists today for safer credit,

changed the accounting Affiliated leasing companies leasing-like financing (and practice for leases. Lindsay -2 recognises that the unreport- Town of IAA-Advisory car- ed numbers need better esti-

ried out many of the inter- -3 mates). Even so, unreported views, and organised discus- safer credit lending, in all its sion with the High Value forms, is significantly higher Group. Town speculates on -4 than reported numbers; and the implications of this dis- as the chart shows, under-

tinction: “We found there’s a -5 reporting grows, as transac-

services continuum. It starts Transaction size (£ or Euro) tions get larger. The state with a contract that’s mainly of reporting in our industry for equipment financed with resembles an iceberg. some services, and goes all Inevitably, the answers the way through to pure services. The new a capital markets and securitisation perspec- raised more questions in turn: some were accounting standard may give impetus to tive. Leasing and rental accounts for a sig- about the way governments, regulators and service integration in asset financing.” nificant proportion of ABS issuance. Broad commentators approach this market, and Town goes on in the vein of the old joke: statistics show European ABS outstanding at differentiate it from traditional bank lend- when is a lease not a lease? When it turns $17.6bn (€16.2bn) for leases and $73.7bn ing. Others were about the value that is, or into a service. Now there’s a new incentive for auto at the end of 2014, representing should be, attributed to the ‘safer lending’ for asset financing to be repackaged as a ser- 35% of the ABS market. Where leased assets heritage of the leasing and asset finance vice. There are meetings and conferences to have been securitised, the entities investing industry. The report suggest challenges for discuss accounting implications of the new tend not to record the activity as ‘leasing’. the industry now and for further research: standard, but I think they’re missing the Transactions written under sharia law First, the industry should agree on an point. The interesting questions are how the are also systemically excluded. Over $34bn inclusive name for safer lending via leasing- new accounting standard will affect the way of Islamic bonds, called sukuk, have been like financing (for example ‘leasing and asset asset financing is offered in future? What issued on the London Stock Exchange. financing’) and start using it consistently. opportunities does that create for a financing Most commonly the sukuk relates to partial Second, we should investigate under- business? What are the implications for the ownership of an asset (sukuk al-ijarah). Ele- reporting more rigorously: the true size of way the industry develops? IAA-Advisory ments of the lease transaction mirror those the leasing and asset financing business is plans to offer a seminar, or single company required under sharia law: the lease rental large enough to justify specific regulation, to workshops, to explore these questions.’ payment being a natural alternative to repay- its advantage. ment of capital and interest. With attractive Finally, we should commission work to When is it a lease? growth rates, developing a sharia-compliant demonstrate the better outcomes of leas - Much lease-like financing is reported to reg- lease business seems like a natural oppor- ing and asset financing, compared to other ulators as part of ‘total lending’, rather than tunity for an organisation familiar with the forms of lending. This would support discus- broken down by activity, or characterised as leasing market, rather than one representing sions with regulators about its safer credit ‘safe’ and ‘less safe’. banking products. characteristics. Asset-backed security (ABS) financing in transportation offers one example of Risks and regulation Facinating and frustrating substantial and systemic exclusion: There Leasing enjoys risk advantages that make it Derek Soper, IAA-Advisory’s chairman, sum- appears to be a wide gap in the reporting of a safer form of lending, and this advantage marised the research as fascinating and frus- statistics between the end-user of equipment, is dispersed as leasing is under-reported and trating in equal measure: “We made some who has a lease, and the lender, who may leasing-like lending grows. Given the safer interesting discoveries, and we laid down have an alternative lending product and who credit quality of leasing, it would probably some challenges for the industry. And then is not a lessor. Statistics are usually collected be helpful if regulators were to focus on it. it’s like peeling an onion: answers to one set from the providers of the lending product There’s a virtuous cycle more where leas- of questions go on to reveal the next set of and not from the users of the facilities. Many ing and leasing-like activity will attract regu- questions. large transactions are under-reported: in the lator and policy-maker attention. Given the “That said, the report has helped take transport sector, aircraft, rail and shipping safer credit qualities of leasing it’s reason- thinking about the industry forward; it stim- the under-reporting is billions of dollars able to suppose any differentiation would ulated discussion about challenges for the annually. favour leasing compared to other forms of industry at the Leasing Life conference. We This under-reporting is corroborated from lending, which would in turn attract more must keep the momentum going.<

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LL270March 1 final version.indd 25 01/03/2016 15:19:47 L/R/T WATSON FARLEY & WILLIAMS It’s the start of the railroading towards the Luxembourg Protocol Watson Farley & Williams asset finance partnersRuth van Lare and Alexia Russell, based in Paris, take a look at the effect the Luxembourg Protocol will have on rolling stock

omentum to adopt and implement ❙❙Ruth van Lare ❙❙Alexia Russell the 2007 Luxembourg Protocol to Mthe Cape Town Convention on Inter- national Interests in Mobile Equipment on matters relating to railway rolling stock (the Convention), which aims to make it more attractive for private financiers to finance railway equipment worldwide, has finally started to take hold. Railways have traditionally been heavily state-controlled, meaning sector pro - jects have tended to be highly dependent on government priorities and budgets. Conse- quently, they have not always benefited from investment as and when required. While there has been a clear move towards • A manufacturer’s serial number which clearly to encompass all vehicles used as a liberalisation of the market worldwide in the will not normally change throughout means of physical transportation: past few years which has certainly attracted the life of the asset but will be struc- (i) running on a fixed railway track and private financiers, issues remain which will tured differently in different parts of (ii) running directly on, above or below a need to be resolved if greater investor inter- the world; and guideway. est in rolling stock is to be generated. • A running number providing a Creditors will need to be aware that the Private financiers typically require security description of the asset type and Protocol also provides for different “alter- to be taken over rolling stock assets they are other relevant information which natives” in case of debtor insolvency, from financing, so they can repossess them in case can change throughout the life of the which each member state can choose its pre- of default and/or insolvency by debtors. A asset. ferred procedure (likely dependent on belief special statutory mortgage regime common The Protocol creates a framework for the in rail as a “public service”). in ship and aircraft financing, is not gener- registration and recognition of security inter- Debtors will need to be located in a state ally available in respect of rolling stock how- ests of financiers, lessors and certain types which has ratified the Protocol in order for ever, meaning sector investors must rely on of vendors in transactions involving roll- their creditors to be able to register their other less secure security, such as a chattel ing stock. It also aims to create a common interests in the central registration database mortgage or a pledge over the rolling stock, system for repossessing rolling stock assets and therefore benefit from the rules set up assignments of earnings, account pledges, on default and/or insolvency by debtors, by the Protocol. Of course, the more states shares pledges and/or parent guarantees. thereby achieving a similar position to the to ratify the Protocol, the more effective the As these types of security are predominant- Aircraft Protocol. system will be. ly unregistered, there’s usually no common The central registration database created The Protocol has been signed and ratified database to turn to in order to view creditors’ by the Protocol will be an international reg- by both the EU (a prerequisite for ratifica- rights over a rolling stock asset and therefore istry accessible online at all times, allowing tion by member states) and Luxembourg. It the ranking of priority of such creditors in financiers, lessors and relevant vendors to has also been signed (though not yet ratified) respect of said asset. register their interests in rolling stock, and by Italy, Switzerland, Germany and Gabon. Further complicating matters, for cross- third-party prospective creditors (among At a recent briefing organised by the Rail border operating rolling stock assets, secu- others) to view registered interests. Working Group in the House of Lords, the rity created under one set of local laws may It is important to note that the Protocol Protocol was introduced to the UK rail and not be recognised in the jurisdiction where applies to all rolling stock, the definition of finance communities. With attendees includ- the asset is located at the time of enforce - which is set out in Article I (e) of the Proto- ing key rail companies, banks, MPs and ment of the security. Financiers should, prior col and includes “all vehicles moveable on Transport Select Committee chair Louise Ell- to completing any financing, effect due dili- a fixed railway track or directly on, above man MP, ratification and signature should gence in any jurisdiction where the rolling or below a guideway, together with traction progress rapidly. stock is likely to be operated during the term systems, engines, brakes, axles, bogies, pan- In other countries (EU or otherwise), dis- of the financing to ensure that the security tographs, accessories and other components, cussions are currently ongoing regarding which is being granted is, to the greatest equipment and parts, in each case installed signing the Protocol. As it needs to be rati- extent possible, enforceable wherever rel- on or incorporated in the vehicles, and fied by four states before entering into force, evant. This can be extremely costly however together with all data, manuals and records work remains to be done. and can rarely encompass all jurisdictions relating thereto”. Nevertheless, clear progress has and is where rolling stock might potentially be Although there is no particular guidance being made and ratification of the Protocol is located during the financing term. in the Protocol as to the meaning of the term surely imminent, heralding an exciting new There is also no uniform way of describing “vehicle” and doubts remain as to the eligibil- era for private investment in the railway roll- rolling stock. Each asset will have: ity of certain types of assets, the intention is ing stock sector. <

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LL270March 1 final version.indd 26 01/03/2016 15:19:48 SHOOSMITHS L/R/T The end of Safe Harbour for leasing and finance as it becomes a Privacy Shield Shoosmiths partner Anastasia Fowle considers the changes in data sharing arrangements between Europe and the US

he European Court of Justice ruled last Harbour programme, the company’s US- adheres to the principles agreed with the US October that the data sharing frame- based structure made it nonetheless vulner- in relation to the protection of the rights Twork between the EU and US, referred able to the NSA’s mass surveillance. The Safe of EU citizens may be one factor to con - to as Safe Harbour, is no longer valid. On Harbour scheme was unable to protect EU sider. The court ruled that the Safe Harbour 2 February 2016, the EU and US authorities citizens’ data from increasingly invasive US scheme is inadequate, but this does not mean agreed in principle on a “new” Safe Har - surveillance once the data has been trans- that all US registered companies are inade- bour arrangement, known as the Privacy ferred stateside. EU privacy laws were being quately protecting personal data in their pos- Shield. overridden by US national security, public session. That said, self-assessed adequacy is Principle 8 of the Data Protection Act interest and law enforcement requirements a risky option for many as it does not auto- (DPA) 1998 requires that personal data once the data is transferred to the US. matically mean compliance with Principle 8. must not be transferred outside the EEA With many leasing and financing business- One method which could be used to evalu- without adequate protection for the rights es using the Safe Harbour scheme to transfer ate the risks in this context would be to con- and freedoms of individuals. The Safe Har- data to the US across subsidiaries, to partner duct a Privacy Impact Assessment, allow- bour scheme was designed to ensure that the companies or as part of their IT infrastruc- ing the business to weigh up the potential transfer of EU citizens’ data to the US was ture, the industry needs to ensure that it is hazards of sharing the data for the rights of adequately protected in line with Principle 8. protecting personal data relating to custom- individuals, against the legitimate business With a major shake-up of EU data pro - ers and employees when it leaves the UK. reasons and benefits of doing so. Businesses tection legislation expected in 2018, which must have visibility into exactly what data means businesses could soon face fines of up A state of uncertainty is moving outside of their organisation and to 4% of their global annual turnover for a Until the Safe Harbour replacement comes audit data transfer processes to ensure that breach, the change to Safe Harbour is the into force, the Information Commissioner’s they are putting the privacy of their custom- start of a greater transformation in the com- Office has encouraged companies engaged in ers first. plex world of data protection compliance inter EU-US transfers to consider their other Furthermore, the corporate mindset must that leasing and financing businesses simply options in order to comply with Principle change to build data protection compliance can’t afford to ignore. 8. In particular, we suggest that leasing and into the planning of projects, rather than as financing businesses should consider: an afterthought. Safe harbour – not so safe • Does the information really need to Leasing and financing businesses must The Safe Harbour framework worked by be shared with the US entity? Is there not forget their other obligations under the allowing US companies to self-certify their another method of achieving the same Act. Key among these is ensuring the suit- adherence to a number of principles of com- objective? ability and robustness of security methods pliance with EU data protection legislation. • Can the data be anonymised without used to protect personal data processed by The scheme meant that information could losing its usefulness? If so, the DPA will the organisation. Encryption is an effective be easily and routinely transferred to US not apply (it only applies to data which way to achieve data security and may be companies who were Safe Harbour regis- can identify a living individual, either one way to safeguard data being transferred tered, without the need to obtain consent or itself or in conjunction with other data between the EU and US, as it makes the data put in place other methods to comply with in the organisations’ possession). Effec- unreadable without access to a secret key or Principle 8. tive anonymisation can be difficult to password that enables decryption. In the wake of revelations of mass surveil- achieve in practice. lance operations by the National Security • Can model contract clauses be put A new Privacy Shield? Agency (NSA), Safe Harbour came under the in place? These clauses have been There have been ongoing discussions microscope of the European Court of Justice approved by the EU Commission as between the EU and the US about replacing who ruled the Safe Harbour framework to ensuring adequate protection for the the Safe Harbour scheme since the October be invalid as it doesn’t adequately protect rights of individuals and can be used decision. On 2 February, a new “Privacy the privacy rights of EU consumers. for intra-group transfers or transfers to Shield” replacement was announced and The court’s decision stemmed from a com- other businesses. aims to provide a workable solution – but plaint made to the Irish Data Protection • If the transfer is intra-group, can you is not likely to be in force for a few months. Commissioner that US registered companies apply for approval for binding corpo- While this has been welcomed by many, operating in Europe were being forced to rate rules? The application process can there’s much uncertainty around whether make the personal data stored on their US be cumbersome, but the result is better or not Privacy Shield will be any better than servers (including that of EU citizens) availa- flexibility for companies with complex Safe Harbour. ble to US intelligence services. The complain- and ever-changing group structures. The issue of transfers of personal data ant was concerned that European citizens’ If businesses choose not to comply with from the EU to the US continues to be in the fundamental privacy and data protection the above, they can evaluate their compli- spotlight. rights were at risk once their data was trans- ance by way of “self-assessed adequacy”. Until the Privacy Shield framework is ferred to, processed, and stored in the US. This involves consideration of a wide range finalised, leasing and financing businesses While Facebook, the company involved of factors. The fact that a US company has should take additional measures to protect in the matter, had signed up to the Safe been Safe Harbour registered and therefore themselves and their customers. <

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LL270March 1 final version.indd 27 01/03/2016 15:19:48 COMMENT DLL How technology will drive the next wave of circular and service-based economics

Technology unleashes new potential underpinned by the Internet of Things, will ❙❙Rob van den Heuvel Harvard professor Michael Porter, a glob- boost customer engagement: “The ability to ally recognised authority on competitiveness, remain connected to the product and track believes the Internet of Things is reshaping how it’s being used shifts the focus of a com- business and society. The rise of smart, digi- pany’s customer relationship from selling – tally connected products will, he writes in often a predominantly one-time transaction Harvard Business Review, “generate real- – to maximising the customer’s value from time readings that are unprecedented in their the product over time. This opens up impor- variety and volume. Data now stands on par tant new requirements and opportunities for with people, technology, and capital as a marketing and sales.” They will maintain core asset of the corporation and in many ownership of the product and will often be businesses is perhaps becoming the decisive responsible, as part of the deal, for servicing asset.” it during use. The Internet of Things means While technology might unleash a new that most suppliers will be able to monitor industrial revolution, we are also living in and keep in constant touch with their equip- an age where our economic activities are ment digitally, facilitating an enhanced ser- threatening the planet on which we all vice: they can optimise the equipment, pre- depend. The great challenge, therefore, is for dict problems before they occur and fix them business leaders also to develop models that without breakdowns and radically improve draw less and less on finite, non-renewable minute by minute, their understanding of resources such as metals and minerals, and customer behaviour and needs. that reduce carbon emissions, offsetting two The second thing this service model does is of the biggest environmental challenges we enable the producer to maintain control over Indeed, Lacy and Rutqvist explain that face: resource scarcity and global warming. the assets in service and plan for their return companies thinking of adopting a service- and next life cycle. They will be incentivised based model may “need to think creatively Sustainable economic growth is circular to make things that are durable and perform about financing, potentially collaborating There is a way forward which addresses well and that can be remanufactured, refur- with financial institutions such as banks and both these issues and could help busi - bished or recycled at the end of their first life insurers to make it practically viable.” nesses both to engage their customers cycle. The process is profitable, competitive At DLL we are seeing that financial insti- and develop a more environmentally and environmentally responsible. Peter Lacy tutions can do more, working as collabora- friendly approach to commerce known and Jakob Rutqvist, authors of the new book tors and partners in the journey to circular- as the circular economy, in which goods Waste to Wealth see such service-based mod- ity. Lacy and Rutqvist add that more than are designed to be recycled, reused, refur- els as one of the clear routes to the circular 80% of the service-based models they have bished or remanufactured, extending their economy and describe how manufacturers studied are “blending it with one or more product life cycles. The circular economy should “consider the entire product life circular business models”, often paired with concept, informed by such ideas as cradle cycle when setting strategy”. In this scenario, product life cycle extension models to repair to cradle, is also about driving towards a products “must be designed for optimal use, or upgrade products. low carbon economy and utilising healthy maintenance, re-use, remanufacture, and Indeed, we have built a life cycle asset materials to make products, all of which recycling to avoid issues such as fast quality management division, which facilitates rev- lends itself to creating positive closed loop degradation, short lifespan, low utilisation enue generating second and third life refur- manufacturing systems. rate, and low recycling/return, which can bishment business models. It is here that we This is the ideal. But how do we get directly impact the company’s bottom line.” have been expanding our capabilities to pro- there? The answer could be through devel- vide asset data, giving our customers more oping service-based models, facilitated by Making the service economy a circular one insights into the usage of their assets through ‘servitisation’, in which customers demand too the whole product life cycle. This service- smarter, added value services. Instead of Putting together these deals is, however, based model helps customers reduce the selling an asset in a one-off transaction, more complex than a straightforward sale costs of ownership, get more efficient usage the supplier provides a service such as sell- of an asset. First, you need to decide on the of their assets, and is beneficial for business ing the service of light rather than supply- model to be used such as pay for use, leasing and the environment. ing lighting products or providing ongoing and rental, and then find ways to agree on In this brave new world, financial solu- medical scans rather than a scanner. This terms that are viable for both parties, and tions like our own life cycle asset manage- model is already familiar in some sectors enable the supplier to take back the asset ment division can provide the wiring for this such as office technology. at the end of use and recapture its value in new infrastructure: the Internet of Things a second or third life cycle. This is an area and service-based models linked to the cir- Customer service is at the heart of the new that DLL has been heavily involved in and cular economy. And this is driving a revolu- economy from our experience, we can see that the tionary shift in the way we do business. But the revolutionary shift is that more and right financial solutions will drive forward more suppliers can go down this road. Por- these new customer-centric circular economy ❙❙ Rob van den Heuvel, is senior vice-presi- ter describes how the service-based model, models. dent global asset management at DLL

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LL270March 1 final version.indd 28 01/03/2016 15:19:50 SIEMENS FINANCIAL SERVICES COMMENT A better gender balance and its link to improved business performance

he financial services industry does not oversaw financial results, on average, that ❙❙Kerry Huntley, SFS typically conjure up an image of diver- beat the stock market (103.4% versus 69.5% Tsity, particularly in terms of gender return for the S&P 500 stock index). How- balance. It’s undeniably a male-dominated ever, while women comprise nearly 60% of industry. Yet in a world that is experiencing employees in the financial services industry, a radical rebalancing of economic matu - less than a fifth (19%) progress through to rity and power, giving rise to considerable hold more senior management roles. opportunities for the role of finance in an When we examine the relative position of expanding world economy, to under-utilise gender diversity in a selection of countries the talents of women seems short-sighted. across the globe, a picture emerges that may At the moment, in Siemens Financial Ser- surprise some readers. A ranking of the top vices (SFS), we currently have a gender bal- 50 countries shows that all the Scandinavian ance of 51% female and 49% male. At SFS, countries hold places in the top 10. Germany, we take a critical view on the diversity topic the US, Spain, the UK, China, France and and we would like to share our experience Russia sit in positions from 11th to 31st. and insights on this issue to stimulate further Poland and Turkey are 34th and 48th respec- discussion on this topic. Breaking with cor- tively. porate cultures, and indeed national social Not all is doom and gloom, though, on responsibility, building and leading strong norms, may require regulations, rules and gender diversity. Women’s board partici- teams, anticipating and managing change quotas in the first instance. But such policies pation in many Asian countries is close to and resilience in the face of adversity. Behav- are only the start and further action is need- that in some European economies (although iour-based assessment systems are useful in ed. The purpose of diversity in the workforce both are significantly behind the US). More- this context, in that they measure not only (and that means right through from junior over, female board participation is likely to the business achievements, but also how workers to board directors) is very practi- increase significantly as regulatory require- they are achieved, a critical factor in build- cal: to produce the most effective, capable ments come into force. For instance, India’s ing and leading sustainable business success. and high-yielding workforce and leadership parliament has passed a new Companies Act For example, at SFS a specific leadership that is humanly possible. It is not a political requiring certain types of public company to programme is the catalyst for the continu- standpoint. have at least one woman on the board. And ing development of excellent leadership at companies listed on the Hong Kong Stock the company, offering a series of leadership The gender divide – where we stand Exchange now have to report on a new learning programmes to a selected group of The proportion of women who have climbed mandatory provision on diversity in their managers. the corporate ladder and made it to main annual reports, including gender representa- Evaluate the leadership development board level varies widely between countries. tion at all levels. pipeline and process: While succession While progress has been made, business in planning at board level is common, the same general, and the financial services sector Leveraging diversity – key steps cannot be said of middle-tier management in particular, must make further efforts to What, then, are the essential steps to develop progression. Organisations need to ensure a recognise, capture and foster female talent. a diverse talent strategy across the organisa- viable internal talent pipeline that embraces Norway was the first country to introduce tion? diverse talent before casting an eye elsewhere. legislation making a female board quota A review of the various expert sources on For instance, at SFS we use a management mandatory for publicly listed companies. this issue reveals consensus over three key tool designed to align people strategy with Alongside Sweden, Norway is now known steps: business strategy. It gives a fast and accurate for having the highest percentage of female Build the business case for diversity: Sub- overall picture of relevant key functions and board members, 23% and 26% respective- stantial evidence of the business benefits of the current succession situation as well as ly. The situation in Norway is of particular gender diversity exists but such information identifying high potentials. interest when considering the role govern- must become internally recognised. It should ment policy plays in narrowing the gender be presented to the board, to management, Conclusions gap. and to the shop floor. The search for talent that can provide such It would seem that in the initial stages, The company should publicly make a com- compelling competitive advantage is not a legislation may hold the key to fundamen- mitment to diversity and publish updates in modern, idealistic fad; it is simply good busi- tally changing attitudes. However, it is not its annual report, all the while presenting ness sense. Progress still needs to be made on sufficient in the long-term simply to enforce the issue as part of the strategy to grow the this front, but the tide is turning, slowly but such measures. Evidence of long-term com- business, not merely as politically correct surely. And further progress will be achieved mercial benefit has to accrue if the change is tokenism. by firms acknowledging the considerable to be permanent. Some evidence is emerg- Implement a common standard for tal- body of evidence indicating the high level of ing. Studies have demonstrated a positive ent assessment: Accurate assessment of performance by organisations successfully correlation between women in leadership talent and potential is a crucial component embracing diversity. positions and a company’s financial per- of leadership development. Candidates formance, with one study revealing that need to demonstrate skills in areas such ❙❙ Kerry Huntley is HR business partner at Fortune 1000 companies run by women as risk taking, owning profit and loss Siemens Financial Services

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LL270March 1 final version.indd 29 01/03/2016 15:19:51 Untitled-2 1 LL270March 1final version.indd 30 LL266 November 2015.indd26 COMMENT Account Switch Service exists, but recogni but exists, Service Switch Account 3% of customers switched their PCA in 2014 (BCA) at the same bank where they have they where bank same the at (BCA) you’re not even going to look for bank for look to going even not you’re and, more indefinably, just 16% “looked at” saves it term short the in because this do quickly enough. bank SME the in problems competition of Have you looked atanalternative bankaccount? personal bank for your business loans, business your for bank personal enough competitive pressure, which is in the ucts and new banks do not attract customers look, they’re not easy to find. The Current The find. to easy not they’re look, individual consumers). interests of the bigger high street names and under put not are banks that mean ing switch customer of levels Low market. ing keeps new customers away from new prod comparisons. And when you do go to go do you when And comparisons. tion and awareness are reportedly low. Only them time and effort. their personal current account (PCA). They accounts current business their open they consumer. the of interests best the tomers, and that state this of is not affairs in smaller companies (and, for that matter,that for (and, companies smaller towards scales the tilt to aiming stance, T

COMMENTNACFB W 26 INovember 20 On the road to success with the aid ofasset finance Euros. Euros. dates. dates. shipping prompt and deliveries quick of goods ordering consumers from delivery a boost too. The ongoing strength of sterling anticipated this year. figures. lending finance asset own have We finance for vehicles is also reflected in our in reflected also is vehicles for finance LCVs (vehicles up to 3.5 tonnes) than we than tonnes) 3.5 to up (vehicles LCVs from all over the world, businesses are now now are businesses world, the over all from in cars and vans bought on finance by busi look for the UK economy, thanks to a com by the recent Finance and Leasing Associa Leasing and Finance recent the by bination of slowing GDP and reports and GDP slowing of bination better value for their money, and they’llmoney, and their for value better nesses this year. This surge of firms securing have significant bargaining power due to the courier and delivery services as highlighted to challenged keep up with the demand high means that UK buyers are able to achieve to able are buyers UK that means majority of vans in the UK being priced inpriced being UK the in vans of majority tion figures which revealed a 10% increase seen double the business of firms buying firms of business the double seen What happens with many SMEs is that is SMEs many with happens What The thinking here matches the FCA’sthe matches here thinking The The investigation has identified a number If you’re determined to stick with your with stick to determined you’re If MARK SISMEY-DURRANT, HAMPSHIRE TRUST BANK As a result, many companies are boosting The wider economy has given companies However,out gloomier potential a with (CMA) has decided that banks do notdo banks that decided has (CMA) have to work hard to compete for cus for compete to workhaveto hard he and Authority Competition Markets one hour delivery service and the the and service delivery hour one increasing expectation of next day day next of expectation increasing Amazon’s of introduction the ith 15 Tel: 01277215355Fax:203350Email:[email protected] Website: www.renaissanceaf.com * in in Broker Lines - - - - - Facilities for Asset Finance BrokersfromRenaissance - - - - Tel: 01277215355Fax:203350Email:[email protected] Website: www.renaissanceaf.com Renaissance Asset FinanceLtd,RFCHouse,137HighStreet,Brentwood,Essex, CM14 4RZ. There’s a nationwide interest at stake if stake at interest nationwide There’sa 90% 90% go to their BCA provider when they are years. The investigation also discovered that alternative accounts. (I have no idea what idea no have (I accounts. alternative accounts which are more expensive and expensive more are which accounts a personal current account, more than 90% have they which with bank the at account is a small one, presumably based on honest functioning market. looking for business loans. involved arestillsmallincomparisonwith ing fast – and they are, but the total values below average quality are not losing cus losing not are quality average below banking period comes to an end, and around that fact the by highlighted is banking have been with their PCA provider for more more than half of start-ups choose an SME growth is being stifled by absence of effec of absence by stifled being is growth this really means, but the point is, the figure than 10 years, and 37% for more than 20 than more for 37% and years, 10 than the rate that would be expected in a well- a in expected be would that rate the tomers to cheaper and better alternatives at the established banks. expand they’re that message positive the tell you, because they’re looking to send out to gain a foothold. That’s not what they will tive competition. Smaller banks find it hard self-reporting). stay with their BCA when the initial free initial the when BCA their with stay years, means we need to adjust our focus our adjust to need we means years, what the country needs to ensure UK firms expected to slow down in the next three next the in down slow to expected is the road to accelerating UK growth. can compete on a world stage. We stage. world a believe on compete can cant investment in British business is exactly that focusing on the UK’s smaller businesses to business-led economic growth. Signifi growth. economic business-led to is spending consumer that month past the The lack of competitive pressure in SME This is why the CMA feels it has to act. to has it feels CMA the why is This The CMA published an initial list of list initial an published CMA The Broker Lines Research shows that 57% of consumersof 57% that shows Research Facilities for Asset FinanceBrokersfromRenaissance Mark Sismey-Durrant Specialists inFinance,LeasingandRefinance For many multi-national firms a few a firms multi-national many For Renaissance Asset FinanceLtd,RFCHouse,137HighStreet,Brentwood, Essex,CM144RZ. Specialists inFinance,LeasingandRefinance Registered office:10 Towerfield Road,Shoeburyness,Essex,SS39QE. Registered inEnglandand Wales Companynumber8885289. Registered office:10 Towerfield Road,Shoeburyness, Essex,SS39QE. Registered inEnglandand Wales Companynumber8885289. Renaissance Asset FinanceLimited Renaissance Asset FinanceLimited - - -

- Our message has been an even-handed one, Midata, an industry online tool allowing tool online industry an Midata, NACFB has been involved in consultations. whether SMEs truly are in charge of their of charge in are truly SMEs whether which has to be addressed.” when we know the outcome. detailed discussions with all interested par interested all with discussions detailed as the break-up of larger banks, saying “the as we work with both high street banks and problems in the market are unlikely to be to unlikely are market the in problems is the underlying issue of lack of switchingof lack of issue underlying the is its final report in May 2016. I’ll report back but that they’re under-informed. A market of banking. The NACFB’s view is that they are, clear choices has to be the aim. choice in retail banking markets by alerting comparison website which can then analyse consumers to access their banking data from challenger banks. resolved by creating more, smaller banks; it remedies last November, and since then the ties, including the NACFB. It aims to publish their needs better. them to available bank accounts which suit their transactions. When revised, this web this revised, When transactions. their their bank and input it directly into a price site could have a big impact on consumer on impact big a have could site y

we work with have experienced difficul experienced have with work we works hard to provide leasing finance and are able to help. Our asset lending teamlending asset Our help. to able are demands. demands. financial impact. Many of the companies the of Many impact. financial finance it’s our job, as challenger banks, challenger as it’s job, finance our peting against larger and online competi online and larger against peting extra car or van can have a significant a have can van or car extra much,like seem not might vehicles extra ensure they’re not left behind when com- when behind left not they’re ensure ing an increasingly flexible approach toapproach flexible increasingly an ing however for a small business buying anbuying business small a for however has been decline due to a ‘tick-box’ sys ‘tick-box’ a to due decline been has hire purchase for SMEs across the UK so right road to success and the banking indus right finance to make the most of consumer to champion SMEs across the country and That’s tem. banks challenger the where financingand banks larger the with ties tunities available to them. Through offer oppor the maximise can businesses these tors from across the globe. to ensure these companies can access the access can companies these ensure to try and government needs to work together y The CMA is consulting and holding and consulting is CMA The The FCA rejected radical solutions such solutions radical rejected FCA The Adam Tyler isCEOofNACFB One possible remedy would be to relaunch Deep down, this is an argument about argument an is this down, Deep

* ficer atHampshire Trust Bank UK businesses are undoubtedly on the on undoubtedly are businesses UK Mark Sismey-Durrant, EY Item ITEM Club Autumn Forecast www.leasinglife.com Chief executive of 01/03/2016 15:19:52 20/11/2015 16:43:51 01/03/2016 16:50 ------

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