Analytic models spotlight risky loans
SAS enables the MEF to easily monitor fund performance to provide up-to-date reporting.
Improved systemic liquidity and risk management
Italy's Ministry of Economy and Finance achieved this using • SAS® Solution for Stress Testing • SAS® Analytics on SAS® Viya®
Italy’s Ministry of Economy and Finance uses advanced analytics on SAS Viya to quickly calculate risk on financial guarantees
As the economy began to falter when the COVID-19 pandemic hit, Italy’s Department of Treasury at the Ministry of Economy and Finance (MEF) needed a quick response.
One of the critical measures it adopted was the extension of state guarantees. These guarantees ensure that a debt to a lender will be paid if the borrower is unable to repay their debt for any reason. As people and businesses struggled financially, the MEF needed to ensure that the government could fund its public programs.
At the onset of the pandemic, the Italian government introduced a set of tools to support the economy, wanting to help ensure the liquidity of small and medium-sized businesses by taking advantage of the opportunities offered by the European Temporary Framework.
The speed of the government response is thanks to an internal project of the Department of Treasury, which used advanced analytics capabilities from SAS to improve risk assessments by refining the methodology MEF uses to estimate risk when issuing public guarantees.
SAS Viya allowed us to constantly monitor the performance of the funds to provide an updated business intelligence report – which was simple and easy to understand with SAS Visual Analytics – necessary for the technical structures of the Treasury during the various phases of the pandemic.Michele Petrocelli Head of the IT Coordination Office, Department of Treasury Ministry of Economy and Finance
Technological innovation enables rapid risk assessments
The MEF and fund managers created a system to constantly monitor guarantees based on the main risk factors associated with them. The agency quickly developed risk models for the main state guarantee funds. This allowed it to monitor the exposures, insolvency risks and the related enforcement risks for the government guarantees, and provided the treasury with risk updates in real time.
Calculating risk as good stewards of public funds
“The risk models made it possible to estimate expected losses by calculating the probability of occurrence of certain events,” says Michele Petrocelli, Head of the IT Coordination Office at the Department of Treasury. “For guarantees, that means assessing and mitigating the risks of insolvency and bankruptcy for the companies receiving funds.”
The models and scenarios are a blend of prevailing macroeconomic trends but also microeconomic events, such as the ever-shifting phases of the pandemic. These scenarios can then go on to assess risks in the future. The models also allow the MEF to accurately assess the effects of enforcement on public finances (i.e., deficit and debt tolerances).
Italy's Ministry of Economy and Finance – Facts & Figures
€162.9 billion
worth of loans were applied for small to medium-size businesses
€96.5 billion
of guaranteed debt attributable to the guarantees connected to COVID-19
Up-to-date reporting is a must have
“Using a disaggregated approach by single loan, we were able to obtain very accurate estimates with the possibility of assessing the estimated risk for each sector of economic activity and geographical distribution,” Petrocelli says. “SAS Viya allowed us to constantly monitor the performance of the funds to provide an updated business intelligence report – which was simple and easy to understand with SAS Visual Analytics – necessary for the technical structures of the Treasury during the various phases of the pandemic.”
Building better, less risky future
Short term, the bank’s risk assessment platform will contribute to the management and monitoring of the state guarantee funds. Long term, the objective is to evaluate the more extensive use of the platform. The analysis will be carried out as part of the integrated management of financial and non-financial risks based on international guidelines.
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