Also pushing forward, the European asset-backed commercial paper market showed record growth in 1999, exceeding $60 billion in outstandings. According to Jean Dornhofer a vice president at Moody's Investors Service (London), the year 2000 levels have remained at $60 billion (as of June 30), reflecting the flat growth curve trend seen in the U.S. as well.

"That's impressive considering the explosive growth the market had last year," Dornhofer said. "We expect growth to continue at a measured pace in the future, both on the entry of new sponsors into the market and based upon the untapped potential of many bank's balance sheets."

One of the major differences between the U.S. market and the European market is that European ABCP is less of a commodity, and looked at by investors on a deal-by-deal basis.

"Obviously this is a newer market, and [many types of] deals haven't been done before," Dornhofer said.

For example, in June, Compass Securitisation closed a L75 million equipment lease-backed transaction, according to a Moody's report reviewing the German structured finance market, co-authored by Dornhofer.

"The second driving factor [differentiating European ABCP from the commodity-like U.S. ABCP] is that the level of risk absorption by liquidity banks tends to be lower in this market," Dornhofer said.

Still at issue in European ABCP is the potential implementation of more stringent capital requirements, as detailed in the Bank For International Settlements Proposal (BIS), or the Basel Accord. "A lot of the concern has to do, in particular with whether or not some of these short term liquidity facilities will be subjected to a capital charge, and if so, on what terms," said George Miller, deputy general counsel of the Bond Market Association, who also serves as executive director of the European Securitization Forum. "This is one area where it's believed that the Basel changes will have a significant impact on that market."

The Basel commentary period expired in March, and the expectation is that another proposal will be published near the end of year. However, whether or not the next proposal is a final version or subject to another round of commentary is still in question.

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