The treatment of commercial real estate leasing by European commission's review of capital requirements for banks and investments firms and impacts of its application in France | |
| Author | Dang Thi Thu Huong |
| Call Number | AIT RSPR no.SM-03-115 |
| Subject(s) | Real estate business--France Real estate investment--France Lease and rental services--France Capital investments--France |
| Note | A research study in pa1tial fulfilment of the requirements for the degree of Master of Business Administration, School of Management |
| Publisher | Asian Institute of Technology |
| Series Statement | Research studies project report ;no. SM-03-115 |
| Abstract | The research first analyses the h·eatment of real estate leasing under the third consultative document of the European Commission's Review of Capital Requirements for Banks and Investment Firms. The distinction of leasing from other means of financing investments lies in the separation between the right of ownership and the right of utilisation of the financed object. This separation explains the risk associated to this special kind credit. However the European Commission consider leasing nothing more than a mortgage loan. There are several disagreements between the banks and the European Commission and the Basel Committee on Banking Supervision over the h·eatment of commercial real estate leasing. The specificity of this small market segment makes it difficult to obtain adequate attention in the review of capital requirements. Infmmation about the sector is so rare and inconsistent to sustain the position of banks. In the second place, the research analyses the possible impacts of the application of the new h·eatment on commercial real estate leasing business in France. In order to visualise the calculation of the capital requirement for commercial real estate leasing and quantify impacts, simulations on a commercial real estate leasing contract was conducted. The most striking results obtained are: (1) the capital requirement under the new directive is sensible to the probability of default and the value of the building taken as guaranty for the loan; (2) For the majority of the customers, the capital requirement will be higher under the new h·eatment; (3) in economic downturns, the capital requirement reacts significantly to the decrease in creditwo1ihiness of the customers. The qualitative impacts of the regulatory reform on leasing business in France includes impacts on commercial policy and strategy of the bank vis-a-vis to commercial real estate leasing. One of the most important impacts is that the pricing policy should reflect the increase in capital requirements and its sensibility to different risk components. Finally, the research suggests several technical recommendations relating to the calculation of capital requirement for commercial real estate leasing by banks. |
| Year | 2003 |
| Corresponding Series Added Entry | Asian Institute of Technology. Research studies project report ; no. SM-03-115 |
| Type | Research Study Project Report (RSPR) |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Broustail, Francois Joel |
| Examination Committee(s) | Truong Quang; Zimmermann, Willi |
| Scholarship Donor(s) | Government of France |
| Degree | Research report (M.Sc.) - Asian Institute of Technology, 2003 |