WASHINGTON - The Office of the Comptroller of the Currency is thinking of easing restrictions on personal property leasing by national banks.
In a proposed regulation published in today's Federal Register, the agency asks for comment on whether it should let banks rely more on the residual value of leased property - and less on the creditworthiness of the lessor - in deciding whether to enter into a lease. Also up for comment is the amount of time banks have to dispose of property after the lease on it expires.
A national bank is allowed to buy and then lease out personal property such as cars, tractors, airplanes, and factory equipment - but only if the bank expects to recover the full cost of buying and financing the property during the course of the lease, and gets rid of the property within two years after the lease expires.
That holds as long a bank's investment in leased property accounts for less than 10% of its assets. For leases above that 10% limit, there is another restriction: The bank can't count more than 25% of the original price of the leased property as residual value toward recovering its costs.
"The theory behind the leasing authority (is that) from the perspective of the bank, the transaction is functionally very similar to any kind of credit transaction," said Julie Williams, the agency's chief counsel. "If you are relying too much on the remaining value of the item you are leasing, then the transaction begins to look less like a loan."
But the Comptroller's office is thinking of raising the 25% limit. "We're looking for input as to what would be an appropriate level," Ms. Williams said. Comments are due Nov. 5.