Fiat Asks for Permission to Turn FGA Capital into a Bank
According to direct sources, Fiat after having agreed to take the control of the U.S. unit Chrysler has asked the Bank of Italy their permission to turn financing unit FGA capital into a bank in order to cut the funding costs.
If they are able to obtain a banking license it would help Fiat to become more competitive against rival car makers such as Volkswagen and Peugeot, which already have their own internal banks. They are able to access cheap loans which are offered by the European Central Bank (ECB) during the euro zone crisis, stated the source.
The source had told Reuters that “Fiat was not able to access ECB funds during the two Long Term Refinancing Operations because it did not have a bank.” This confirmed a report in the Italian newspaper II Sole 24 Ore. The request for the banking license was presented to the Bank of Italy earlier this year itself.
The FGA Capital had been set up in 2006 as an equal partnership between Fiat and French bank Credit Agricole, which also has a large retail banking network in Italy. Last year Fiat and Credit Agricole extended their joint venture till 2021.
Fiat is trying to find a way to cut costs and improve their margins as they have high funding costs which is given its “junk” credit rating.
Courtesy : Reuter News Agency