Extension of restriction on profit distributions at leasing companies

Having extended and adjusted the macroprudential measure restricting profit distributions by banks and savings banks, Banka Slovenije has also extended the recommendation providing similar guidance to leasing companies. Amid the continuing economic and financial uncertainty caused by the Covid-19 epidemic, the aim in extending the recommendation is for leasing companies to maintain the highest possible level of capitalisation. The recommendation is expected to remain in force until the end of September.

The economic and financial uncertainty caused by the Covid-19 epidemic, which was the reason for the adoption of the measures last year, still persists. Banka Slovenije’s purpose in extending the recommendation is ensuring that, like banks and savings banks, leasing companies also retain the highest possible level of capitalisation. Retained earnings represent the most important resource for increasing their regulatory capital. Extending the recommendation will help to maintain financial stability, and to prevent any disruption to the functioning of leasing companies.

The recommendation applies to leasing companies that generated at least EUR 1 million in new leasing business in 2019 and 2020, where finance leasing accounted for at least 50% of the total new business, and whose total assets exceed EUR 10 million. It includes a temporary restriction on profit distributions to shareholders/members, the distribution of paid-up capital surplus related to capital instruments, retained earnings, accumulated other comprehensive income, other reserves and provisions, and the use of earnings for other purposes, e.g. bonuses for members of the senior management.

The recommendation is expected to remain in force until September. Banka Slovenije will nevertheless closely monitor the situation, and will tailor the recommendation as appropriate to any significant increase or decrease in risks.