Italian Central Guarantee Fund for SMEs: Servicer’s Management of Socially Relevant Public Italian Guarantees within SME CLO Transactions

The Italian Central Guarantee Fund (CGF) is a guarantee scheme established to support small and medium-size enterprises (SMEs) in Italy. In March 2020, following the spread of the Coronavirus Disease (COVID-19), the Italian government recently widened its scope to the temporary enhancement of the framework.

Key highlights from DBRS Morningstar’s commentary include:
-- An overview of the scheme’s positive social impact under the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings methodology.
-- A description of how originators and servicers ensure the correct management of the activities and formalities necessary to preserve the Fund’s guarantee and enforcement within SME CLO transactions.
-- An update on the temporary enhancement and on securitisation transactions where DBRS Morningstar considered the presence of loans assisted by the guarantee into its analysis.

“DBRS Morningstar believes that the CGF scheme provides a positive social impact to the Italian SMEs as it acts as liquidity support to their business activity” said Ilaria Maschietto, Vice President of European Structured Credit at DBRS Morningstar. However, “the effectiveness of the CGF guarantee is strongly connected to the originators and servicers’ policies and procedures, which are aimed at ensuring the correct management of the activities and formalities necessary to preserve the guarantee and its enforcement”, Maschietto added.