OREANDA-NEWS. In a new special report, Fitch Ratings examines the common traits and differences in risks, structures and legal frameworks across most active EMEA auto ABS jurisdictions, including France, Germany, Italy, Nordic countries (Finland, Norway and Sweden), Spain, Switzerland and the UK.

The analysis shows that auto transactions across EMEA share many key building blocks (eg, asset characteristics and origination practises) and risk drivers (eg, obligor default risk and car market value risk), but that each country also has unique features that can influence the transaction performance. This includes, among others, tax risks in Germany, voluntary termination risk in the UK, and unsecured recoveries in Italy.

EMEA auto ABS has performed strongly through and since the crisis. Negative rating actions have been limited, with losses near to zero for investors. Fitch's expected portfolio default rates remain at the low end for EMEA structured finance (SF), typically ranging between 1% and 5%, depending on the country of the assets.

In Fitch's view, short-term, granular and standardised assets supported collateral performance. At the same time, mostly simple structures with fully sequential amortisation and healthy levels of excess spread, quickly increased credit protection available to noteholders.

Key challenges come in the form of increased exposures to residual values, an increased appetite for longer revolving periods, and a potential relaxation of underwriting standards as the crisis abates.

Both term issuances and outstanding warehouse facilities of EMEA auto ABS reached their highest level to date in 2014, at EUR25.5bn and EUR8.5bn, respectively. Term issuances accounted for around 15% of total SF (including prime RMBS, ABS and Structured Credit) issuance in the year. In Fitch's view, this was largely due to renewed investor confidence in core EU auto ABS countries, ECB support, and issuance from 'new' jurisdictions, such as Nordic countries and Switzerland.

The report, entitled EMEA Auto ABS Primer - Structure, Risks and Country Comparison, is available at www.fitchratings.com or by clicking the link above.