News Column

Moody's publishes approach to originator assessment for EMEA ABS auto/consumer loan

May 18, 2014

Moody's Investors Service has today published its

cross-sector rating methodology for originator assessment (OA) in rating

asset-backed transactions (ABS).

The methodology covers transactions where the underlying asset pool

comprises auto and consumer loans, granular small and medium-sized

enterprise (SME) exposures, and multi-pool and equipment financial lease

receivables in EMEA. Publication of the cross-sector methodology will not

result in any changes to outstanding ratings of EMEA ABS auto/consumer

loan, SME and lease transactions.

The report, "Originator Assessment in EMEA ABS Auto/Consumer Finance, SME

and Lease Transactions", is now available on Moody's

subscribers can access this report via the link provided at the end of

this press release.

Moody's completes the originator assessment at the closing of a

transaction, whenever applicable. Moody's approach to OA analysis is

twofold, evaluating (1) originator ability, or the relevant entity's

ability to effectively perform its tasks as an originator; and (2)

originator stability, assessing the factors that define the originator's

operational and financial stability over the life of the transaction.

"Excluding factors such as the macroeconomic environment, we hone in on

the entity's originator and underwriting practices, as well as the effect

of these practices on asset performance," says Valentina Varola, a

Moody's Vice President - Senior Analyst. "We also assess quality control

and audit functions, along with technology infrastructure."

In line with Moody's existing methodologies for rating EMEA auto/consumer

loan, SME and lease transactions, OA analysis could result in an

adjustment to the rating agency's asset-based inputs and thus its

assessment of collateral quality for the relevant transactions.

"The credit impact of such an adjustment could be positive, neutral or

negative for the expected loss on notes and the current ratings on

notes," says Virginie Marraud des Grottes, a Moody's Assistant Vice

President - Analyst.

Furthermore, Moody's translates its OA analysis into an OA score, which

accounts for originator ability and stability, to compare originators of

the same product type across various markets.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: EMBIN (Emerging Markets Business Information News)

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