OREANDA-NEWS. Prospects for reforms in the leasing market and its future development were discussed at the meeting of the RF Ministry of Finance Interdepartmental Working Group representatives and major Russian leasing companies, involving the Bank of Russia.

The need for reforms in the leasing sector stems from its importance for the real sector of the economy, with industrial, agricultural, transport enterprises and logistics, energy and constriction businesses operating as clients of leasing companies. However, the leasing market in 2015 showed a downturn as its total market portfolio declined 4% (on the reading of some 3 trillion rubles for the start of 2016), and new business showed a 27% decline. At the same time, in terms of credit exposure the Russian leasing market is second only to the banking sector.

Once built up, a transparent and comprehensive regulatory framework for leasing operations, consistent with best international practices, would help create a favourable operating environment, sustaining truly reliable and high-performance leasing operations.

The meeting participants noted that improved operational environment, along with increased transparency of the market as it migrates to international financial reporting standards will lead to reduced costs of leasing products for their consumers. Inadequate transparency of leasing companies and potential risks result in their borrowing costs being higher than those of other borrowers with similar credit ratings.

Increased transparency in the leasing market serves to reduce investment risks, cut down the costs of funding for leasing companies and, as a result, to lessen the cost of leasing services for final consumers. The other benefit from better transparency would be disclosure of information for lessees, including the total cost of leasing.

Leasing market representatives expressed interest in the setup of an electronic leasing register. Similar to bureaus of credit reports in banking and insurance, it would capture information on lessees and leasing agreements. In this way, the register would substantially reduce the risk of making transactions with an unscrupulous client, which would make a positive impact on the costs of leasing products.

The agenda also featured the issue of electronic interaction between leasing companies and authorities / governmental customers.

The RF Ministry of Finance Interdepartmental Working Group involving the Bank of Russia was set up in April 2016 in compliance with the National Council for Financial Stability. Preparations for reforms in the leasing market are expected to be complete this autumn.