The performance outlooks for ABS and RMBS in Europe, the Middle East and Africa (EMEA) are Negative, said Moody's Investors Service in its review of 2008 and outlook for 2009 report.

Banks' reliance on central bank operations will ensure ABS/RMBS issuance in 2009, but investors' appetite will not rebound.

Of the securitizations that were implemented in 2008, the rating agency believes that the majority were designated for use as collateral for central bank liquidity operations or government program that are designed to inject liquidity into the financial system.  

Banks are still facing difficulties in obtaining funds, and considerable bank refinancing is due in 2009, which means that liquidity support from central banks is likely to continue, said the report.

Moody's said that the rating implications for most asset categories remain limited at this
stage, because performance is not expected to deteriorate significantly beyond what has been assumed in the ratings for most asset sectors.

Structural protections — such as large credit enhancement and strong excess spread -- provide additional resilience to rating changes for some asset sectors.

Nevertheless, the rating agency cautions that some asset categories may face more pressure than others, depending on the performance deterioration versus Moody's assumptions and the extent of structural protections.

"The deterioration of economic conditions does not bode well for the performance of underlying assets in most structured transactions, hence the Negative outlook for most asset sectors across ABS and RMBS (with theoutlook horizon defined as 12-18 months)," said Nitesh Shah, an Moody's economist and report author. 

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