EBA欧洲银行-28Mapping-Report-modeFinance29_10页_334kb

Summary of modeFinance's Credit Assessments Mapping under the Standardised Approach

Core Content

This report outlines the process by which the Joint Committee (JC) determined the mapping of modeFinance S.r.l.'s (modeFinance) credit assessments under the Standardised Approach (SA) in accordance with the Commission's Implementing Regulation (EU) 2016/1799 and the Capital Requirements Regulation (CRR). The mapping is intended to align modeFinance's rating categories with a regulatory credit quality scale (CQS) for prudential purposes, rather than as a direct comparison with other ECAIs or ESMA's reporting.

Main Points

• Purpose of the Mapping:
  The mapping is used to determine the appropriate credit quality step (CQS) for modeFinance's credit ratings, allowing institutions to calculate risk weights under the SA. It reflects the correspondence between modeFinance's rating categories and a regulatory scale, with prudence applied where necessary.

• Methodology:
  The mapping is based on the methodology outlined in the Implementing Regulation, which combines quantitative and qualitative factors. Quantitative factors include long-run default rates, while qualitative factors relate to the meaning and relative position of rating categories.

• modeFinance's Eligibility:
  modeFinance is an eligible External Credit Assessment Institution (ECAI), having registered with ESMA on 10 July 2015.

• Rating Scale:
  modeFinance uses a single rating scale, the Global long-term rating scale, which is used for corporate credit ratings.

• Initial Mapping Based on Quantitative Factors:
  The initial mapping was based on the long-run default rate, calculated using the data from ESMA's Central Repository of credit rating data (CEREP). However, due to the lack of sufficient data, the calculation was based on the benchmark default rates from the international rating scale.

• Qualitative Review:
  A qualitative review was conducted to ensure that the mapping aligns with the meaning and relative position of the rating categories. No changes were proposed to the mapping after this review.

Key Information

• Credit Quality Steps (CQS) Mapping:
  The final mapping for modeFinance's rating categories is as follows:

  Credit Assessment	CQS
  A1	1
  A2	1
  A3	2
  B1	3
  B2	4
  B3	5
  C1	6
  C2	6
  C3	6
  D	6

• Quantitative Factors:

  • The long-run default rate for each rating category was calculated using the benchmark rates from the international rating scale.
  • For rating categories with no observed defaults, the JC used the benchmark CQS as a proxy.
  • The minimum number of rated items required for a rating category was not met for any of modeFinance's categories, hence the use of benchmark data.

• Qualitative Factors:

  • The qualitative factors were used to validate the initial mapping, particularly for categories with limited quantitative data.
  • No changes were made to the mapping due to the qualitative analysis.

• Definition of Default:
  modeFinance defines default as the occurrence of missed payments on financial obligations, or the rated entity being under liquidation, bankruptcy, or administration. This definition is consistent with the benchmark definition in the Implementing Regulation.

• Updates to the Mapping:
  The mapping may be updated in the future if additional quantitative data becomes available.

Conclusion

The mapping of modeFinance's credit assessments under the Standardised Approach is based on a combination of quantitative and qualitative factors, with the latter being particularly important where data is limited. The final mapping aligns modeFinance's rating categories with the regulatory CQS, ensuring consistency with prudential requirements. No adjustments were made during the qualitative review, and the mapping remains valid for the current level of available data.