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Eugenio Virguti

XBRL Italia Partner of SOVEGA IT Systems Rome, May 6 th 2014

Agenda

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CONFIDI’s – What They Are and How They Work



618 Confidis

operating on the Italian territory as at last December 

60 Confidis

(

Supervised

(approx 10%) are supervised by the Bank of Italy

Confidi’s

) and

account for 73% of all guarantee

volumes  Since the introduction of Basel II,

strong industry restructuring

, including mergers and acquisition, to put up with growing competition, lower margins and increasing capital requirements for banks, which in turn require better quality of guarantees issued 3

CONFIDI’s – What They Are and How They Work SME’s participate in Confidis by paying annual subscription fees

Confidis and Banks sign an agreement which covers all loans guaranteed by Confidis. The agreement defines terms and conditions.

Current issues

…however….

 assessment of borrowing firms is only carried out by the lending bank , with no proprietary evaluation on the part of Confidis  Confidis rely on banks ’ creditworthiness evaluation and they only look for counter guarantee mechanisms (albeit partial and/or subject to specific conditions)  Confidis not informed on the firm’s risk dynamics unless the firm defaults and the bank calls on the guarantee

Need to improve the guarantee-issuing assessment process and implement units to measure and manage profitability and credit risks

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Current Issues

 Need of co-operation between banks and Confidis  Use of IT systems to promptly identify early warning signs of distress (no relying on lenders ’ information)  More focus on internal controls (as required by Bank of Italy regulations)

Holistic approach to define flow of information between banks and Confidis

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An XBRL-driven Exchange of Information

Shared investments and higher efficiency to achieve critical mass of guarantees volumes

Banks Direct Data Management or Through Independent Third Parties Confidi Data Base

Certification of Reference Data Model

Confidi’s

Automated Data Flows (no manual activities and no misinterpretations)

Value Added Service Providers

ie. Galileo, SEC, OASI, HP EDS, Aubay ELSAG, CABEL, TREND Engineering, others

Higher independence of service providers

An XBRL-driven Exchange of Information

1.

Define a unique data model (

semantic data model

) complying with Confidis information needs in order to: a.

b.

Meet risk management and monitoring needs Meet supervisory reporting requirements 2.

Implement a project to define the means, the tools, the business units, the competencies, resources and structures required to develop a consolidated Banks-Confidis database that enables uploading, updating and maintenance of loan-related information 3.

Participation of all stakeholders involved (Confidis Associations, banking system, single Confidis, IT and regulatory reporting service providers, Bank of Italy, legal/operations consultants, etc.) 8

XBRL Confidi Project – Major Steps

The project is comprised of two phases: 1. a regulatory reporting phase, where banks and Confidis agree on a common reporting format and exchange data for the purposes of more accurately complying with regulatory reporting requirements 2. a risk management phase, where data exchange between banks and Confidis are XBRL-aggregated for better credit risk assessment 9

XBRL Confidi Project – Major Steps

1.

Definition of Data Point Mode l to meet Confidi’s needs in terms of risk management and regulatory reporting requirements 2.

Primary information required (definition of XBRL information hierarchies) • Master Data of Borrowing Firms • • • Loans received by single bank Loan status (active, distressed, etc.) Amortization Schedules 3.

Return information to banks 10

XBRL Confidi Project – Major Steps

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XBRL Confidi Project – Major Steps

Draft taxonomies have already been produced in February and instance creation is currently under way. First phase should be completed by the end of June 2014.

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Stakeholders Involved

1.

2.

3.

XBRL ITALY Italian Confidi Associations Promoting Confidi Associations 4.

5.

6.

7.

8.

Confidis Italian Banking Association (ABI) Banks Bank of Italy Partner Universities 9.

Software Partners • Infrastructure • Value Added Services 10.

Advising Partners • Legal/Regulatory • Organisation 11.

Others

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Eugenio Virguti

XBRL Italia Partner of SOVEGA IT Systems Rome, May 6 th 2014