European securitizations have managed to show substantial muscle against a challenging economic environment, according to a Fitch Ratings report.
The report said that European securitizations, particularly those backed by residential mortgages and consumer loans, have shown resilient performance despite the deteriorating bank credit quality and a decrease in eligible counterparties.
Most of the deals the agency rates that have portfolio concentrations in the U.K., the Netherlands and Germany are stable.
However, the peripheral European countries face a less-optimistic fate if confidence does not return to the market and there is no resolution to the eurozone sovereign debt crisis, they said.
But, Fitch said the market is recognizing the benefits of a flight to the underlying fundamentals of securitization and the stable cash-generating ability of certain asset classes, specifically residential mortgages and consumer loans.
"Investors are increasingly seeking security and it would seem premature under these circumstances to discount securitization as an alternative funding source on account of its association with failures in what was a small percentage of the market," analysts said in the report. "Market participants, including regulators, are becoming aware of its encouraging potential to become part of the solution to the crisis rather than go down in history as its primary cause."
