Salary Assignment Loans Show Resilience in a Volatile Environment

Salary assignment loans (SAL) allow employees and pensioners to borrow money and secure their payment obligations by assigning a fixed portion of their monthly income towards the payment of loan instalments. In this commentary, we explore whether increasing rising inflation and diminishing disposable household income, among several other factors, affect the Italian securitisation transactions backed by SAL portfolios.

“Although borrowers or (on aggregate basis) households are expected to exercise certain discretion in managing their monthly spending commitments, for SALs in general, the money corresponding to the loans’ monthly instalments comes from parties other than the borrower and is expected to be applied towards repayment of the loan; hence, it cannot be diverted to any alternative use by the borrowers and is actually out of their direct control”, said Paolo Conti, Head of European ABS at DBRS Morningstar.