European aerospace group EADS may get its own banking license amid concerns about rating downgrades in Europe’s banking sector, departing chief financial officer Hans Peter Ring told German daily Financial Times Deutschland.
“The issue of a bank license is one of the options we are evaluating in light of the current market situation,” he said. “In many cases we have a better rating than our partner banks.”
Getting its own banking license would allow EADS to follow in the footsteps of engineering companies such as Siemens to tap the European Central Bank’s low-interest loans directly, skirting the banking sector and developing new sources of financing.
The potential move signals a further shift in the balance of power between the ‘real economy’ and the financial sector as the euro zone crisis roils markets.
“My main concern is the ratings downgrades of some banks, even ahead of any risks to the development of the A350,” Ring told the paper, referring to the next major aircraft development of the company’s Airbus subsidiary.
An EADS spokesman confirmed his quoted comments.
The banking license proposal reflects the scope and unpredictability of Europe’s sovereign debt and banking crisis and also comes amid changes in aircraft financing brought about by the lack of long-term dollar liquidity at some banks.
Airbus and rival Boeing both offer customer financing to support aircraft sales as a last resort — a quasi-banking activity that has so far barely been used as new Asian lenders step in to fill the gap left by once-dominant French banks.
The geographical shift was highlighted on Friday when Royal Bank of Scotland completed the USD$7.3 billion sale of its aircraft leasing business to a consortium led by Japan’s Sumitomo Mitsui Financial Group (SMFG).
Experts say experience in other industries suggests EADS would not be able to tap the European Central Bank for liquidity to fund development for its aircraft because the money involved would be primarily a bank facility for banking activities.
Carmaker BMW is only able to tap ECB liquidity for its financial services arm which does primarily auto leasing.
However any further access to public funding is likely to draw scrutiny from Airbus rival Boeing, analysts said, as the two companies remain embroiled in the world’s largest trade dispute triggered by mutual claims of unfair subsidies.
“Given the recent controversy I would expect Boeing to closely examine this to see if this is an end-run around the WTO subsidy rulings,” said Seattle-based aerospace analyst Scott Hamilton.
EADS has meanwhile set credit limits for each bank it deals with as a way to manage its exposure to the financial sector, Ring said.
On Thursday, Ring told a shareholders’ meeting that EADS had no significant exposure to Greece and only a limited financial exposure to Spain, although it did have hedging contracts with major Spanish banks BBVA and Santander.