ESMA approves modeFinance as a Credit Rating Agency
modeFinance announces that ESMA has approved today its application for registration under Article 16 of the European CRA Regulation.
With such Registration, modeFinance Srl, based in Italy, is allowed from July 10th, 2015, to issue corporate credit ratings of non-financial corporations, public and/or distributed via subscription. modeFinance will issue such ratings on a subscriber-pays model (the ratings are paid by the subscribers and not by the rated entities).
The Registration was approved by ESMA upon an intensive period of examination of requirements such as transparency, governance and avoidance of conflicts of interest; in order to comply with such requirements, modeFinance adopted and implemented strict and rigorous internal policies and procedures.
In addition, another fundamental requirement for the registration is to rely on methodologies that are rigorous, systematic, continuative and subject to validation based on historical experience.
Corporate ratings issued by modeFinance in compliance with the CRA Regulations are the result of two methodologies: the first, purely quantitative, is the “MORE” Methodology, widely tested during scoring activity; the second methodology implies the intervention of modeFinance team of rating analysts, which is responsible for the activity of issuance and monitoring of credit ratings.
The ratings are issued on a scale of 21 classes identified by an alphanumeric code which range from A1 (highest creditworthiness) to C3 (lowest creditworthiness), apart from classes reserved to companies which defaulted or which are under bankruptcy procedures.
Before issuing each rating, modeFinance is required to notify the rated entity. This regulatory requirement protects the entities subject to rating allowing them to draw the attention of modeFinance to factual errors contained in the information used during the rating process, if any.
modeFinance credit ratings issued in compliance to the CRA Regulation may be used for regulatory purposes in any country of the European Union. modeFinance is now recognised as an ECAI (External Credit Assessment Institution) according to art. 135(2) of the Capital Requirements Regulation.
ModeFinance is a young company, spinoff of the University of Trieste – Italy; the two CEOs Ciprian, 38, and Pediroda, 42, commented: “we are extremely happy that ESMA recognized the quality of our procedures: our organization grants we can assess the credit quality of the company in the most transparent, innovative and transparent way possible."