European securitization of SME financing has experienced strong growth since 1999. SME transactions reached 5.3% of total European ABS issuance in 2005; and in 2006 have represented 2.5% of euro asset-backed volume year-to-date. In a report last week, Sarah Barton at Morgan Stanley said that further growth is anticipated within this asset class going forward, particularly in Germany, aided by government sponsorship, cash transactions and securitization of mezzanine products.

The largest asset-backed SME markets in terms of issuance and risk transferred are Germany and Spain. Smaller volumes have been issued from Holland - 13.8 billion ($17.51 billion) is the total risk transferred - Italy (0.5 billion), Switzerland (3.4 billion) and Austria (1.0 billion). Italy and Portugal are relative newcomers - both brought their first SME transactions in 2004.

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