2025-Update on the regulation of financial leases

At the start of 2025, there were several changes to the regulation of financial leases. We briefly outline these below:

1.    BaFin updates information sheet on financial leases

In December 2024, BaFin made a minor update to its guidance notes on financial leases, which is only apparent from its title. Comparing the guidance notes with the May 2021 version, the following changes have been made:

a) Update on actual-imputed amortization (faktisch-kalkulatorische Amortisation)

In its guidance notes, BaFin lists three basic types of amortization, which are the determining factors for the qualification as an licence-requiring financial lease:

• Full amortization: In this model, the lessor's total acquisition or production costs, financing costs and other costs are fully covered by the lease installments during the term of the contract.
• Partial amortization: Here, amortization is not only covered by the lease payments, but also by a payment or obligation of the lessee. This can take the form of a lessor's right to sell (put option), a contract extension option that the lessor can exercise, or a guaranteed residual value.
• Actual-imputed amortization: In this case, amortization is achieved by a combination of lease payments and the sale of the leased asset at the end of the contract. The BaFin refers in particular to mileage leasing in the automotive sector.

It is particularly difficult to distinguish actual-imputed amortization from a simple lease that does not require a permit. The BaFin guidance notes previously stated that no formal residual value guarantee from the lessee is required if the lessee has covered a significant portion of the lessor's costs through the lease payment and the amortization gap can be closed by selling the asset (without leasing it again). The lessor is protected because he can obtain the residual value on the market and is covered by the lessee's obligation to pay compensation in the event of excessive wear and tear.

In particular, for goods for which – in contrast to the automotive market – there is no liquid secondary market, the exclusion of actual-imputed amortization is obvious, since the necessary recovery cannot be reliably carried out here; but even in fundamentally liquid markets, strong fluctuations can be experienced, so that it has been shown that rigid reliance on a residual value is also part of the lessor's investment risk here, so that a lack of amortization may be appropriate.

The problem is that there are no clearly defined criteria that can be used to objectively determine the liquidity of a secondary market. Instead, the assessment always depends on the individual case. It is therefore recommended to develop a convincing arguments as to why there is no liquid secondary market in the respective case in order to protect against a possible qualification as a financial lease.

The part on actual-imputed amortization has now been adjusted by BaFin in its guidance notes. BaFin now requires that a “residual value to be offset (as a figure) must be specified” for the investment risk to effectively lie with the lessee. Only then would the contract be considered a financial lease.

The update of the BaFin information sheet therefore appears to restrict and specify the actual-imputed amortization, which is desirable in view of the problems with differentiation as described above. However, the change now leads to a lack of clarity in the differentiation of the individual basic types of amortization. The question arises as to how partial amortization can then be distinguished from actual-imputed amortization if a residual value is guaranteed in both cases.

Conclusion and practical implications: A clear distinction between the basic types of amortization is not necessary because they each have the same legal consequence. However, this raises the question of why the actual-imputed amortization should continue to be listed as a separate basic type if it overlaps with the partial amortization. It would therefore be desirable for BaFin to limit itself to two basic types (full and partial amortization), in particular to reduce the uncertainties described when evaluating the liquidity of a secondary market.

The update of the BaFin guidance notes also creates further legal certainty for lessors who only provide a simple transfer for use (and no financial leasing requiring a permit):

• Since BaFin now requires an explicit determination of the residual value as a prerequisite for financial leases, the scope of application of the actual-imputed amortization is reduced if no fixed residual value has been defined in the respective contract.
• Therefore, this change provides an additional argument for not qualifying a lease as a financial lease if the lessee does not assume a fixed residual value obligation.

b) Further changes to the guidance notes

In its guidance notes, BaFin has deleted the information on the European passport in accordance with § 53b KWG. However, the legal basis (KWG § 53b, in particular paragraph 7) has not changed recently. It can be assumed that the removal is only an editorial measure. In other guidance notes on individual financial services, the BaFin does not address the European passport in the context of exemptions from the licensing requirement – especially since the European passport is subject to the permission of the supervisory authority in the home state.

BaFin also deleted a paragraph in the information sheet on decisions in cases of doubt. However, this also seems to be only editorial.

2.    DORA

The European Regulation on Digital Operational Resilience in the Financial Sector (Regulation (EU) 2022/2554 - DORA) has been applicable to all EU-regulated financial entities since 17 January 2025. BaFin has therefore withdrawn its circular on banking supervisory requirements for IT (BAIT) insofar as it applied to institutions that are now obliged under DORA to operate ICT risk management in accordance with Articles 5 to 15 or Article 16 of DORA.
Financial leasing institutions are not financial entities regulated at the European level. The permission for financial leasing is a purely national act. Therefore, DORA does not apply directly to financial leasing institutions.

However, the German legislator has extended the scope of application of DORA with the Financial Market Digitalization Act (FinmadiG), in which it also implements DORA. DORA applies to financial leasing institutions accordingly with a few adjustments:

• Financial leasing institutions do not have to comply with the complete regulations for ICT risk management but may apply a simplified ICT risk management framework. According to the legislative reasoning, this simplified ICT risk management places fewer demands on financial leasing institutions than the currently applicable BAIT.
• The obligation to conduct threat-based penetration tests does not apply to financial leasing institutions.
• The requirements for ICT third-party risk management do not apply if the financial leasing institution is a micro-enterprise within the meaning of DORA. Micro-enterprises are financial entities that are not a trading venue, central counterparty, trade repository or central securities depository, that employ fewer than ten persons and whose annual turnover or balance sheet total does not exceed EUR 2 million.

The obligations of DORA are applicable since 17 January 2025. For financial leasing institutions, the application has been postponed to 1 January 2027, to allow for adequate preparation. The reporting requirements under DORA are excluded from this. These regulations will also apply to financial leasing institutions from 17 January 2025.

DORA does not apply to unregulated lessors who, for example, only conclude operating lease contracts (unless they qualify as ICT third-party service providers and provide ICT services to financial companies).