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Italian Central Guarantee Fund for SMEs: A Socially Relevant Public Guarantee with Credit-Positive Implications

This commentary, “Italian Central Guarantee Fund for SMEs: A Socially Relevant Public Guarantee with Credit-Positive Implications”, focuses on the Italian Central Guarantee Fund (CGF) – the guarantee scheme established to support small and medium-size enterprises (SMEs) in Italy that has gained momentum after its enhancement following the spread of the Coronavirus Disease (COVID-19).

Key highlights from DBRS Morningstar’s commentary include:

-- A summary of the most relevant features of the fund and its temporary enhancement as a government response to the economic shock caused by the coronavirus.
-- A description of our approach to determine expected recovery rates from loans that benefit from the guarantee.
-- An overview of the positive social impact of the scheme under the "DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings" methodology.

“We believe that the social impact of the guarantee remains in financing companies, which would otherwise not easily access the credit market or would do so at a higher cost,” said Ilaria Maschietto, Vice President of European Structured Credit at DBRS Morningstar. “The CGF scheme provides positive social impact to the Italian SMEs as it acts as liquidity support to their business activity as well as to the banking sector as a mitigant to credit risk,” Maschietto added.