Instruction No. 20/2020
BO No. 7/2020 • 2020/07/15

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Topics
Statistics :: Internal Credit Assessment System

Index

Text of the Instruction

Text of the Instruction

Subject: Amendment to Instruction No. 2/2017

Whereas:

a) The developments that have occurred in the Internal Credit Assessment System (SIAC) of Banco de Portugal since the publication of Instruction No. 2/2017, namely the implementation of the two phases referred to in point 1.4;

b) The approval, on 8 June 2020, by the ECB Governing Council, of the third wave of amendments to additional credit claims, following its decision of 7 April 2020 on a package of temporary measures to ease collateral requirements. With regard to Banco de Portugal's SIAC, these amendments materialise in (1) the use of an extension of the SIAC to an assessment of the credit quality of non-financial corporations carried out through a statistical process (Statistical SIAC), without the intervention of an analyst, as a new source of credit assessment for individual credit claims, additional short-term debt instruments and portfolios of corporate credit claims and (2) acceptance of the SIAC with the intervention of an analyst for portfolios of credit claims.

Banco de Portugal, under the terms of Articles 3 and 16 of its Organic Law, hereby amends Instruction No. 2/2017, published in Boletim Oficial No. 3/2017, of 15 March, as follows:

1. Deletion of point 1.4.

2. Amendment of point 2.3, which now reads as follows:

2.3 Within the scope of the previous paragraph, the SIAC applies to marketable assets without a credit rating assigned by external credit assessment institutions eligible for the Eurosystem, as established in Instruction No. 3/2015 of Banco de Portugal, and to non-marketable assets (individual credit claims in the form of bank loans, portfolios of credit claims and additional short-term debt instruments), under the terms indicated in Instruction No. 7/2012 of Banco de Portugal.

3. Introduction of a new point 3.1.1, with the following wording:

Instruction No. 20/2020 BO No. 7/2020 • 2020/07/15 Topics Statistics :: Internal Credit Assessment System
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3.1.1 The assessment of the credit quality of non-financial corporations by the SIAC may also be carried out through a statistical process. This process differs from that set out in the previous point in that it does not require the intervention of an analyst in the qualitative assessment phase. The credit rating of non-financial corporations without the intervention of an analyst corresponds to the credit rating obtained in the quantitative assessment phase with some adjustments. These adjustments include the automatic events contained in the qualitative assessment phase and correction factors intended to mitigate the absence of an analyst's intervention during the assessment process or the lack of information.

4. Introduction of a new point 3.1.2, with the following wording:

3.1.2 With the exception of non-financial corporations classified as micro-sized in light of Commission Recommendation (2003/361/EC) of 6 May 2003, a credit rating may be assigned under the statistical process to non-financial corporations that do not have a credit rating assigned under point 3.1.

5. Amendment of point 3.2, which now reads as follows:

3.2 Assessments in which an analyst intervenes are subject to the "four-eyes principle", i.e. they are always subject to analysis by two parties, the assessor and the approver.

6. Amendment of point 5.4, which now reads as follows:

5.4 Within the scope of the access provided for in the previous paragraphs, the identification of the companies that are its clients (debtors/guarantors of loans and issuers of securities in portfolio) that have a credit rating assigned under the SIAC shall be available daily for consultation by each counterparty.

7. This Instruction enters into force on the day of its publication.