The recently appointed head of capital markets at PMI Europe urges caution in the European asset-backed sector, as the industry begins slowly to return to form. Richard Sullivan, a former Dresdner Kleinwort investment banker who moved into the newly created position at PMI Europe less than three months ago, believes that lenders will build stronger businesses if they allow third parties, such as specialist insurance companies, to help mitigate the risk associated with new business growth, especially at the riskier mezzanine level.

"The liquidity problem started with the manifestation of risk," said Sullivan. "Over the past few years, the model for structured finance had become more volume driven and less risk driven." In fact, other market observers have echoed Sullivan's comments that the European ABS market underwent changes as far back as two years ago that may have directly contributed to the current credit crises. Banks are also currently continuing to show reluctance to return to the primary market, as the general sentiment is that no single financial institution wants to be the first one back to market. However, in six to 12 months, the market could begin to gain momentum as more competition is generated by a growing base of investors.

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