Financiers to feel the squeeze with higher rates, Basel 3 and derivative regulation

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Increased interest rates, along with other regulatory implications, could spell stressful times ahead for aviation financiers looking to refinance, says a source.

"Some players, notably lessors, will definitely feel the squeeze with interest rates on the rise, particularly in terms of refinancing. The impact of Basel 3 and derivative regulation will also eat up more capital, making the cost of borrowing a lot more expensive," he says.

Yesterday, the European Parliament's economic affairs committee gave the green light to derivative legislation, which is widely believed to have contributed to the global financial crisis. The new EU legislation is designed to bring greater safety, transparency and stability in the over the counter derivatives market, which was valued at around €425 trillion in 2009. However, across the pond, the House Financial Services Committee, which is US Republican lead, voted, unsurprisingly, to delay until September 2012 regulations for derivatives.

A draft was approved with amendments by the European economic affairs committee and will now go to the full Parliament for a vote in July. The result of the vote was 36 in favour, 1 against and 2 abstentions.