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					GE Capital




Consultation Document

Department of Finance
Canada

Supporting Stable Financing - Consultations on
Leasing




Josee Gravel, Senior Vice President. Legal. Canada, GE Capital

Jeon-Froncois Bertrand. Senior Vice President. Capital Markets
Canada, GE Capital



May 8,2009



GE Capital
1250 Rene-Levesque Blvd. West
Suite 1100
Montreal, QC H3B 4W8 Canada




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Key messages

•	   GE is in favor of a strong financial sector with diversity of funding sources to serve
     Canadian businesses.
•	   This funding diversity can take different forms by:
             o	 Offering a wide range of financial products,
             o	 Using different underwriting approaches, and
             o	 Ensuring a sufficient number of suppliers
•	   In 2007, "regulated entities" {domestic banks, foreign banks and insurance
     companies} represented 87% of the Canadian business borrowing market, while
     "finance companies" (non-regulated financial suppliers) only 13% based on
     Statistics Canada.
•	   GE Capital provides financing to 60,000 companies across Canada.
•	   "Regulated entities" have access to direct or indirect government support (such
     as: deposit and bond guaranties, residential mortgage support, term PRA
     extensions, term loan facilities for non-mortgage loans, etc) and are already
     offering the full spectrum of leasing products with the exception of leasing on 21
     tonnes or less vehicles.
•	   On the other hand, "finance companies" in addition to not having the capacity to
     fund their activities from deposits, do not have access to the same government
     support with the exception of the $12B temporary CSCF facility ending on
     December 31st, 2009.
•	   In addition, "finance companies" like GE Capital Canada are different than
     "regulated entities" in the way that they underwrite transactions. Typically, they
     place more value on the equipment, allowing for higher advance rates, lower
     payments and additional alternatives to business borrowers.
•	   The Problem: Government support for "regulated entities" and the current
     economic crisis are limiting the traditional role of "finance companies" in helping
     Canadian companies operate and grow.
•	   On April 30th, 2009, GE Capital Canada presented to House of Commons Standing
     Committee on Finance its views and recommendations regarding the current
     crisis.
•	   The sources of funding of "finance companies" have dried up over the last few
     months. Since July 2007, non-bank finance CP market and ABCP market alone
     have decreased by $83 B.
•	   GE'S recommendations would bring back investor confidence and provide larger
     access to much needed capital to Canadian businesses across the country
     helping them cope with the current challenging economic environment (see the
     document in appendix).
•	   GE Capital Canada is not a player in retail car financing to consumers (about
      24,000,000 cars registered) but is player in the financing of vehicles registered by
     Canadian businesses (about 2,600,000 vehicles).
•	   Commercial fleet management services represents approximately 17% of the
     vehicles registered by Canadian businesses.



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Commercial fleet management services segment

•	   Fleet management services companies help businesses with private and "for-hire"
     fleets run their vehicles more efficiently, both from an operational and an
     ecological standpoint. For the majority of these customers, fleet financing
     represents a very small portion of their total financing needs - which explains why
     only 17% of these vehicles are financed by Fleet management services
     companies.
•	   In this case, customers are interested by enhanced services: purchasing power
     resulting in better car prices, outsourcing of maintenance management,
     performance reporting thru telematics, license renewals, fuel management,
     replacement and remarketing, etc.
•	   Customers usually prefer to transfer the ownership risk to the fleet lessor
     (including residual risks) as the customer benefits from higher remarketing values
     and therefore lower rental payments.
•	   Condition for success in this market are: high level of equipment expertise, service
     quality, strong systems, remarketing channels, and purchasing power.
•	   GE Capital Canada welcomes competition and is unaware if "regulated entities"
     will be interested to pursue previously described activities that are non-core to
     the traditional financial services expertise.

Suggestions

•	   GE believes that the long term prospect of the leasing industry is good, but that
     Government should intervene in the immediate term in order to restore market
     confidence as suggested in GE's presentation to the House of Commons Standing
     Committee on Finance. The recommendations will have short term and long-term
     impacts:

         Short term:

            o	 Restore market confidence by buying and selling secured and
               unsecured CP and term debt on the secondary market - with a focus
               on "finance companies".
            o	 Provide liquidity alternatives, for instance the $12B CSCF program
               should be opened for BBB rated transactions.
            o	 Temporarily remove thin capitalization rules, which would allow
               finance companies with a non-Canadian parent to access funds
               quickly without an income tax penalty.




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        Long-term:

           o	 Encourage more transparency in the ABCP market by making available
              critical market information by segments such as: outstanding,
              issuance, volume, pricing, etc.


•	   The proposed recommendations would bring back liquidity to the entire market
     including car-leasing segment. They would also provide temporary relief to
     "finance companies" which would help them provide stable financing to their
     customer base.

Conclusion

•	   It is a mistake to rely exclusively on the banking system to deploy capital to
     Canadian consumers and business borrowers. Non-banks and financial
     companies are important players in ensuring a healthy economy that should not
     be overlooked.




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