Moody's: Strong Swiss macro features and borrower creditworthiness will continue to mitigate consumer deal risks

Switzerland's strong economy and institutions, as well as high borrower creditworthiness, will continue to mitigate credit risks to consumer securitisations, says Moody's Investors Service in a report published today.

Moody's report, entitled "Cross-Sector - Switzerland: Credit Positive Macro Features and Borrower Creditworthiness Will Continue to Mitigate Deal Risks," is available on www.moodys.com. The rating agency's report does not constitute a rating action.

"Swiss consumer borrowers and, therefore, the deals that contain those borrowers' loans benefit from the country's underlying wealthy, diversified and competitive economy, and strong macro conditions," says Greg Davies, an Assistant Vice President - Research Analyst at Moody's. "We therefore expect the performance of future securitisation deals whose collateral pools contain Swiss assets to be strong."

Wider weaknesses for consumer deals in Switzerland include the high level of household indebtedness as well as some credit negative consumer deal characteristics, such as revolving periods, high residual value risk, interest-only loans and the lack of backup servicers.

However, Switzerland's strong economy and institutions, even by its Aaa rated peers' standards, highly credible macroeconomic management, a healthy banking system and individual borrower credit profiles will continue to offset these weaknesses.

While Switzerland's household leverage, for example, is high compared with its European peers, the net household savings rate is also far higher than other countries and is forecast to remain the highest compared with other countries. As a percentage of household disposable income, net savings in Switzerland will represent around 18% of disposable income in 2017 and 2018, according to the OECD.