Joint Press Release
PERUGIA – 4 March 2021 – Recent months have seen a series of measures implemented to guarantee access to credit to support the real economy. The most recent announcement spoke of a series of long-term auctions in 2021 and the extension of the Pandemic Emergency Purchase Programme (PEPP) until 2022.
A series of major incentives is the highlight of the various measures taken to enable performing credit to be allocated to an ever-increasing range of banking counterparties. These incentives include a series of measures, which have already had a considerable impact on various aspects. More specifically, the haircuts for ABACO portfolios (Additional Credit Claims, ACC) were halved from 40% to 20% on average, in order to ensure risk equivalence among all categories of collaterals. Such a significant cut puts the process of credit collateralisation almost on equal footing with other medium/long-term, credit-related instruments, such as ABS and covered bonds. Moreover, increased limits of probability of default provide an opportunity to also use higher-risk loans as collateral. Furthermore, the time schedule for data collection has increased from monthly to quarterly in order to guarantee more time for the counterparties to achieve the required data quality. Lastly, the introduction of new technical forms, which allow consumer credit (including salary-secured loan) and factoring with recourse among others to be allocated, also significantly supports the so-called product banks.
Many banks, especially small and medium-sized entities, have taken advantage of these favourable measures and have selected ad hoc portfolios or are about to do so. There are certain obligations to fulfil in order to use this instrument, including short-term data collection with additional data quality checks and a check on data consistency between IT systems and hard copy documentation. In practice, it takes six months to cover the entire eligible portfolio, with an initial data upload to the European DataWarehouse EDITOR platform, followed by checks on Pegaso_2000’s ABACOCDM, in addition to approximately a month for contractual and legal formalities.
From a statistics viewpoint, the repercussions of these measures are crucial, as shown in the Bank of Italy’s report on financial stability, published at the end of November 2020. The extension of loan types has enabled banks and/or other parties controlled by those banks (third-party pledgers), to leverage an additional channel for refinancing from performing credits. Although these are temporary measures (some of them subject to the duration of the PEEP), the banking system hopes they may be extended over time.
The objective remains clear: to continue to guarantee a swift monetary transmission of pledges in favour of the real economy.
European DataWarehouse and Pegaso 2000 have always been at the centre of this “virtuous circle”. They are now working in close synergy to ensure ACCs are a solution of virtuous liquidity, by increasing data quality and cost efficiency and exploiting the incentives provided with new criteria of eligibility.
European DataWarehouse (EDW) is the first and only centralised data repository in Europe for loan-by-loan collection, validation and distribution for securitisations (ABS) and private loan portfolios (Additional Credit Claims). EDW stores data and relevant documentation for investors and other fixed income market players. Working as a designated infrastructure, EDW aims to increase data transparency, standardisation and quality, based on information on underlying risk exposures. Users are able to analyse loans efficiently and systematically based on EDW’s public data.
Sandro Cicogna – Money Markets Manager di Pegaso 2000