OREANDA-NEWS. Fitch Ratings says in a new report that French ABS transactions have shown strong resilience despite a weak economic environment.

Such resilience can be explained by a protective French consumer legislative and regulatory environment and also by strong structural features that characterise French consumer ABS transactions. The last consumer protection measures introduced by the Lagarde law and the Hamon law are aimed at limiting risk of over-indebtedness and at enhancing borrowers' affordability.

Further the short asset maturities and the high and stable prepayment levels in French ABS result in rapid note amortisation and consequently rapid credit enhancement build-up. This also implies that the most senior notes benefit from an adequate level of credit enhancement at issue and, due to the rapid and sequential repayment, the notes are protected against substantial economic deterioration.

As with other developed countries, France has suffered from the effects of the global economic recession since 2009. This has had a clear impact on the performance of consumer loans as seen in higher delinquency and default levels, despite a fairly cautious banking sector. Fitch believes the unemployment increase in recent years has affected borrowers and will continue to pose a threat to performance. The agency expects defaults to remain above pre-crisis levels over the next two years, though below 2009/2010 peaks.

Nevertheless, given the protective consumer environment and structural strengths Fitch believes that only a substantial further deterioration in performance would have an impact on the ratings of French consumer ABS transactions.