Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

PART E - INFORMATION ON RISKS ANDRELATED HEDGING POLICIESSection 1Banking Group risks1.1 Credit riskQUALITATIVE INFORMATIONBasel II projectIn compliance with the Basel II New Capital Accord transposed into theItalian regulatory framework under Bank of Italy circular no. 263 issued on 27December 2006 (“New regulations on capital requirements for banks”), theMediobanca Group has set itself the objective of measuring credit risk usinginternal ratings.A specific project has therefore been launched with a view to obtainingratification by the Bank of Italy of the internal rating models to be used incalculating the capital requirements for credit risk. The internal rating modelsregard the following customer segments: Banks, Insurances, Large corporate,Holding companies and Specialized lending (customers mostly targeted byMediobanca S.p.A.), Mid corporate and Small businesses (customers targetedmostly by the leasing companies) and Private individuals (targeted by Compassfor consumer credit and CheBanca! for mortgage lending). In addition, a plan isbeing implemented to comply with the experience requirement for the models tobe ratified, which will involve the existing procedures for approving, monitoringand renewing loans (described below) being gradually revised to incorporate therisk parameters calculated via the internal models that have been developed.Given the above, and considering the uncertainty due to the current turmoilon financial markets and the finalization of the reference regulatory framework atthe international level, the timeframe for submitting the application for the IRBsystem to be validated to the Bank of Italy is currently being reviewed; and untilthe system has been validated, the Mediobanca Group will continue to use thestandardized methodology it has adopted since 1 January 2008.– 151