Structured Finance: European Non-Performing Loan Securitisation Rating Methodology

Introduction & Overview

This document describes KBRA’s methodology for the assignment and ongoing surveillance of its ratings on European Non-Performing Loan (NPL) securitisations.

The definition of what constitutes an NPL securitisation can vary considerably by jurisdiction and asset type and can change upon the promulgation of new legislation. The methodology allows for a broad range of assets which can encompass performing loans (PL) that are at risk of default, reperforming loans (RPLs), NPLs, and real estate owned (REO) properties (hereinafter, collectively referred to as “assets”). These assets may be secured or unsecured loans to borrowers that are either individuals or corporations.

The majority of European NPL securitisations in recent years contained a mix of secured loans backed by residential and commercial real estate as well as unsecured loans which do not have collateral linked to the loan. Jurisdictional differences can occur with some transactions backed only by…