Moody's reports that the European ABCP market is likely to remain stable, with potential for growth through product innovations.

"Whilst we have not returned to the halcyon days before the credit crisis, the market has reached a new equilibrium, reflecting the fact that ABCP remains both an important source of funding for banks and their clients and a core product for investors," says Masako Oshima, Moody's credit officer. However, she warns that the sector continues to face certain challenges, particularly in sponsors' ability to meet investor demand regarding maturities.

Although Moody's rated ABCP issuance levels declined steadily during the credit crisis from US$488.4bn at year-end 2006, total issuance has stabilised during 2010 and stood at US$183bn as at August 2010. Oshima notes that the increasing shift to fully-supported structures has highlighted the link between the ratings of ABCP programmes and the ratings of supporting banks.

Moody's vp Oscar Heemskerk says that the phasing-out of bank support schemes across Europe will put debt ratings under pressure. "The strengthening of unsupported ratings is crucial to avoid long-term rating downgrade pressure."

A panel of senior representatives from European conduit sponsors speaking at Moody's eighth annual ABCP conference were optimistic about the medium-term outlook for the ABCP market. They agreed that the attractiveness of other types of financing is a key determinant of ABCP issuance levels, particularly in light of the new regulatory environment for banks. Panel members also commented on the importance of the US commercial paper (USCP) market for European conduits, particularly when swap rates are favourable.

Recognising this need, Denis Struc, Moody's analyst, discussed the new format of and the enhanced disclosure to be provided by the agency's new ABCP Performance Overview. "The new Performance Overview reports include an historical comparison of the programme's portfolio, an analysis of the ten largest transactions in the portfolio and qualitative analysis of key ratings drivers, written by the lead analyst for the programme," Struc explained.

The agency concluded that this greater disclosure will help investors in analysing and monitoring programme performance.