Bank of Italy Feedback

Feedback from the Central Bank: what it is and how it works

Upon receipt of information from institutions, the Bank of Italy generates monthly and quarterly reporting to be submitted to the reported entities: these reports constitute the so-called Bank of Italy feedback.

There are two feedback categories: statistical and nominative

• Statistical feedback conveys the information received from credit and financial intermediaries and on interest rates, as well as the data from the Central Credit Register. The feedback thus returns aggregated disclosures, which can be useful for the completion of banking databases.

In this way, institutions can improve in quantitative and qualitative terms their information assets and the related management and monitoring tools.

The main feedback types include:

• 1-year probability of default (default rate)
• Multiple periods probability of default
• FINREP
• Negative trend monitoring of cash financing

Some of these feedbacks are produced by the Bank of Italy and particularly by the Central Credit Register and Statistical data base; with respect to FINREP data, they are aggregated and disclosed by the Bank of Italy upon receiving the relevant information from the European Central Bank.

• Nominative feedback is customised and derives from data included in the Central Credit Register.

Each intermediary will receive a nominative feedback containing information on the total lending granted to every entity, in order to determine the total debt or ‘global risk position of a company’ towards the system.

Nominative feedback reports to institutions the total debt exposure of their customers, also considering any assets with other credit institutions.

Banks can therefore rely on a general overview of the global risk situation of their customers, which can be used by the financing company in assessing potential customer defaults and the risk of repayment failure incurred by the bank.

Involved functions within the Bank

The Bank of Italy feedback engages different roles within a credit institution. These are, in particular, the functions responsible for supervisory reporting and loans divisions (Chief Lending Officer), as well as for risk monitoring (Chief Risk Officer).

Credit and risk control functions are most affected by the results of the feedback reports from the Bank of Italy, as risk monitoring – both nominative and statistical – is one of the major attention focuses on the dangers faced by institutions while carrying out their activities.

 

The role played by IT infrastructures in managing the feedback

The banking system handles Bank of Italy feedback using specific dedicated software applications. The IT infrastructure plays a crucial role in the data management process and in providing the required outcomes during data processing.

The TIGREARM suite features a module designed to implement disclosures and directed to the Business-System comparison, which is a key component of information management.

 

The Bank of Italy feedback module includes:

• Probability of Default – 1-year default rate
• Probability of Default – Multiple periods
• FINREP feedback
• Negative trend monitoring of banking loans

The module structure, based on busines intelligence, is designed to dynamically adapt to future disclosures developed by institutions or the Authorities (ECB, EBA, Bank of Italy, etc.).

 

The advantages

• Data navigation (drill-down)
• Determination of qualitative reference indicators for internal analysis (data mining) of data assets and the bank’s positioning degree relative to such dimensions.

Like every other TigreArm module, this module is web-based and can be used also for remote working