Daily News: June 18, 2012

Fitch: Structured Finance Survives Asset Stresses

Many structured finance sectors have survived intact through the global credit crisis of the last four years, though rising sovereign concerns threaten to overshadow the sector’s fragile recovery, according to Fitch Ratings.

Most asset types have proven their ability to withstand significant economic stress, as detailed in Fitch’s structured finance research compendium, ‘Credit Crisis: Four Years On’. For example, global consumer ABS ratings have delivered extremely strong rating performance through the crisis. The vast majority of ABS transactions outstanding at the onset of the crisis having been upgraded, affirmed or paid in full. The same holds true for European structured finance ratings as a whole, which showed significant rating stability across almost all sectors.

Now, as asset performance becomes more predictable, concerns have swung to two key areas:

  • Euro-zone sovereign stability; and

  • The impact of sovereign downgrades on structured finance ratings.

    Fitch’s recent sovereign downgrade of Spain to BBB, for example, resulted in the downgrade of most AAAsf Spanish structured finance ratings to AA-sf.

    Fitch’s compendium includes more than 30 research reports that examine structured finance’s performance in the aftermath of the 2008 credit crisis. In addition, various research pieces provide insight into Fitch’s structured finance rating process and comment on regulatory issues impacting the future of structured finance. Fitch believes that this research provides an essential balance to the broad brush comments about the weaknesses of structured finance performance before, during and after the global credit crisis.