Public Guarantee: the API-based tools to verify the eligibility to the Fund

These days banks and credit institutions are faced with an important challenge: the rapid implementation of the liquidity support measures adopted by the Italian Government to stem the economic downturn caused by the Coronavirus epidemic.

Among the first measures announced, there was the strengthening of the Italian Guarantee Fund for SMEs. The Cura Italia decree-law has increased the fund's endowment by 1.5 billion and streamlined the evaluation criteria for accessing the public guarantee. A task force formed by the Ministery of Economy and Finance, Bank of Italy, the Italian Banking Association, and Mediocredito Centrale bank is currently working to make banks and other financial institutions aware of the new evaluation procedures for calculating the rating required to access the Guarantee Fund (MCC rating).

Working closely with Mediocredito Centrale, modefinance developed a set of analysis tools for the calculation of the MCC rating in a few minutes. The tools are available via API or within modefinance’s Rating-as-a-Service platform and allow users to automate the entire creditworthiness assessment process by entering only one data: the company’s VAT number.

The MCC rating evaluation process is divided into two modules:

• the economic-financial module: it assesses the company from the economic and financial point of view by analyzing the last two financial statements;
• the credit history module: evaluates the company’s credit history by examining the Central Credit Register, the Italian public credit bureau, and the data collected by private credit bureaus.

You can download the balance sheet data required for the economic and financial module by entering the VAT number of the company to be analyzed in our Rating-as-a-Service platform. The platform is connected via API with Italian Chambers of Commerce and with international data providers and automatically calculates the company's credit score through MORE, modefinance’s certified rating methodology. As the analysis proceeds, the company’s credit score is automatically updated according to the result of the ensuing modules.

The Guarantee Fund aims at supporting SMEs’ access to bank credit. The SME service is conceived to determine whether a company falls into this category according to the SME definition established by the EU Commission.

Relying on public data only, the service traces the entire corporate group from the VAT number of the company analyzed, identifying partner and linked enterprises. Data on total assets, turnover, and the number of employees of the corporate group are then downloaded and proportionally added to those of the company analyzed (in compliance with the guidelines issued by the European Commission) in order to determine whether it can genuinely benefit from the SME status.

According to the new measures, we would already have all the information needed to calculate the MCC rating. The Cura Italia decree provides that, until December 2020, the rating for accessing the Fund shall be calculated on the information included in the economic-financial module only. For the time being, therefore, the credit history data provided by credit bureaus are no longer required.

Within modefinance's Rating-as-a-Service platform, however, it is possible to automatically evaluate the credit history of Italian companies through the Central Credit Register model. Thanks to Natural Language Generation algorithms, the model automatically reads the pdf file issued by the Central Credit Register. The model identifies overdrafts, non-performing loans, and contested claims and measures the financial stress of self-liquidating, committed and uncommitted credit lines. The analysis results affect the credit score of the company analyzed.

We can now calculate the MCC rating through the MCC analysis model.

The model is connected via API to the Guarantee Fund and provides the rating assigned by Mediocredito Centrale to the company according to the data collected by the platform. The rating scale consists of 12 classes grouped in 5 categories. According to the Operating Provisions introduced in March 2019, the highest guarantee rate is allocated to the intermediate classes. The class and the category to which the company belongs are determined by its probability of default, calculated by the platform. This allows to verify in a few minutes the eligibility to the Fund of entire portfolios by entering only the VAT number of the companies that belong to them.

What we have just described is the process for calculating the MCC rating within the Rating-as-a-Platform. All the tools we have described are also available via API and can be integrated with proprietary business applications. For more information, please contact us at info@modefinance.com.