Canada has shut the door on attempts by the country's chartered banks to enter the auto leasing business, says the association representing car dealers.
Canada's Finance Department held consultations in 2009 on the prospects of lifting a ban on bank involvement in car leasing, on concern lease financing sources might shrink in the aftermath of the credit crisis. And in a briefing last year, banks asked that restrictions on competing in auto lease financing be lifted.
Michael Hatch, chief economist of the Canadian Automobile Dealers Association, told Dow Jones Newswires Tuesday that the organization received a letter from Finance Minister Jim Flaherty indicating the ban on bank involvement in auto leasing would remain intact. The government reviews its laws governing financial institutions, or the Bank Act, every five years and lenders were looking for expanded auto leasing powers in the present round, culminating with legislative changes in 2012.
Hatch said his group objected to bank entry because the country's chartered banks would have an unfair advantage. Dealers rely on banks for financing to acquire inventory. "To then turn around and let banks compete with dealers on leasing while banks have access to the most intimate details of the dealers' business creates a fundamental conflict."
Auto dealers provide leases to customers, as do specialty finance units of automakers.
A spokesman for Flaherty was not immediately available. Robin Walsh, a spokesman for the Canadian Bankers Association, said banks were notified "some time ago" that Flaherty did not intend to change the banking rules as they pertain to auto leasing. Walsh said the association made the recommendation as the Finance Department was already reviewing auto leasing laws.
Even though they are banned from car leasing, banks have always been able to offer purchase financing for cars. But the bankers argued in a 2010 briefing to Flaherty that the ban is a "perplexing anomaly" in an otherwise competitive marketplace.
Banks have also been frustrated in efforts to get the Canadian government to liberalize laws regarding the sale of insurance products through their branch network, and even on their websites.
