Standard & Poor’s forecasts a modest rise in investor-placed securitization in Europe this year, the agency said in a report.

But the continent is not out of the woods, with “significant downside risks” still dogging the industry.

Issuance last year was fairly broad-based in terms of asset classes. While the overall volume of investor-placed in Europe slipped — totaling €63 billion from €67 billion in 2012 — the agency pointed out that this was fundamentally caused by a sharp drop in activity out of the U.K., which has been a large swathe of the market.

U.K. banks retreated from the mortgage securitization market as they deleveraged and found cheaper sources of funding through the Bank of England’s Funding for Lending Scheme. S&P believed this effect would be short-term. Among the major drivers of issuance this year will potentially be German auto ABS and U.K. credit card ABS.

But risk is still very much present in the form of regulations and regulatory uncertainty, the agency said, adding that these “represent the greatest risk to issuance volumes.” The possibility of more downgrades is also looming large, with nearly 60% of Western European banks carrying a negative outlook from S&P.

As for residential mortgage backeds, issuance in Europe last year reached €20 billion in the first eleven months of 2013, the lowest figure for more than a decade. The U.K. retreat was the main catalyst. But 2014 could be different. “We anticipate that the revised terms of the…Funding for Lending Scheme, and the ongoing rebound in mortgage lending volumes, could lead U.K. RMBS issuance to rise.”

On the commercial-mortgage backed front, the agency believes that maintaining the momentum of the greater activity posted in 2013 will be difficult. Investor-placed CMBS volumes in Jan-Nov. 2013 reached about €8.2 billion from €2.7bn in 2012.

But issuance was buoyed last year by the refinancing of only a few large legacy German multifamily transactions, the largest pre-crisis deals have already refinanced, according to S&P.

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