The Adaptation of Off-Balance Sheet Financing Techniques in Leasing after the Financial Crisis

A distorted assessment of risk, based upon misleading credit ratings, was one of the main causes of the financial crisis. One mechanism responsible for biased credit ratings is off-balance-sheet financing techniques, used by corporations and banks to optimize balance sheets in order to increase credit ratings. The market for leasing is one of these markets which still offers the opportunity to increase de facto indebtedness without impacting the equity ratio despite regulatory initiatives. The central objective of this research project was to understand how the leasing industry and its regulatory advisors mitigate the impact of regulatory initiatives and reconfigure their offer to corporations to maintain attractive off-balance-sheet treatment.