Atradius and S&P launch credit information service covering German SMEs
27 April 2004 | 553 views | 0
Atradius, second-largest credit insurer worldwide, is partnering with Standard & Poor's, a leading provider of independent investment research, ratings and indices, to launch a comprehensive credit information and modelling service covering nearly 200,000 private companies in Germany.
The jointly managed service, branded Credit Risk Tracker, provides the most comprehensive and consistent source of information available about the creditworthiness of small and medium sized enterprises (SMEs) in Germany. Combining Atradius' unbeatable intelligence and expertise about SME financial and credit risk with Standard & Poor's widely acknowledged credit scoring methodology, Credit Risk Tracker offers an independent credit assessment of German SMEs that will be accepted by banks and investors internationally.
Dr. Peter Ingenlath, Member of the Management Board of Atradius, commented: "Credit Risk Tracker will help to give financial institutions, which have previously relied largely on their own information about SME credit risks, more confidence in their decisions about lending to the sector and a greater ability to fine-tune loan pricing. That in turn should help broaden the range of financing sources available to SMEs. We have backtested Credit Risk Tracker and will apply it internally to complement our buyer underwriting."
Torsten Hinrichs, head of Standard & Poor's in Germany, added: "We are providing a new level of transparency - and an independent benchmark - for Mittelstand credit risk that will give banks greater comfort in lending to the sector. The extra transparency Credit Risk Tracker provides will also encourage more securitisation of SME loan portfolios in Germany, which again will release capital for additional lending to the sector."
Credit Risk Tracker will provide probability of default scores for the companies it covers, showing the likelihood of each company failing to meet its obligations over the coming year and the trend in these scores over the past three years. The scores are derived from quantitative analysis by Standard & Poor's performed on Atradius' enriched data sets on German Mittelstand firms. Those scores will be delivered through a confidential web-based subscription service to banks, financial companies and other organisations active in the private company lending market. Subscribers also have direct access to models allowing them to enter their own data to produce Probabilities of Default for firms that are not in the database or to create different scenarios for existing companies.
Atradius and Standard & Poor's have discussed Credit Risk Tracker with a number of the major German banks over recent months and the response has been very encouraging.
Banks and other creditors to the SME sector in Germany are likely to use Credit Risk Tracker to supplement their own risk analysis. In particular, the service can be used to help facilitate compliance with Basel capital adequacy rules, either by providing an input into a bank's own internal ratings of SME borrowers or as an independent means of benchmarking the outputs from a bank's own risk assessment models. This could help improve the economics of lending to the Mittelstand sector for many banks.
Unlike a traditional credit rating, Credit Risk Tracker produces probability of default scores exclusively modelled on the basis of high quality, predictive and independent data sets, without any subjective evaluation by Standard & Poor's of the companies covered.