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

Consumer credit (Compass)Applications for finance are approved on the basis of a credit scoring systemtailored to individual products. The scoring grids have been developed frominternal historical series, enhanced by data provided by central credit bureaux.Points of sale are linked electronically to the company’s headquarters, in order toensure that applications and credit scoring results are processed and transmittedswiftly. Applications for finance above a certain limit are approved by therelevant bodies at headquarters, in accordance with the authorization levelsestablished by the Board of Directors.From the first instance of non-payment, accounts are managed using theentire range of recovery procedures, including postal and telephone reminders,external recovery agents, etc. After five overdue instalments (or three inparticular cases, such as credit cards), accounts are held to be officially indefault, and the client is deemed to have lapsed from the time benefit allowedunder Article 1186 of the Italian Civil Code. Between the ninth and the twelfthoverdue instalment such accounts are usually sold to Cofactor or to otherfactoring companies for a percentage of the value of the principal outstanding,which reflects their estimated realizable value.Mortgage lending (CheBanca!)Mortgage applications are processed and approved centrally at head office.Approval depends partly on the outcome of a credit scoring system, which islargely determined through individual appraisal of the applicant’s income andmaximum borrowing levels, as well as the value of the property itself. Risks aremonitored on a monthly basis, ensuring the company’s loan book is regularlyappraised in view of a wide range of indicators, such as amount, sales channel,loan-to-value, etc.A project is underway to implement early warning systems (with links topublic and private databases), to allow irregular customer behaviour to be pickedup as soon as possible.Irregular accounts are managed through monthly reports analysing thecommercial, personal and financial aspects of the accounts in order to flag uppromptly any potential problem areas. Procedurally mortgage loans with four ormore unpaid instalments are designated as sub-standard accounts, and after theeighth or ninth unpaid instalment become non-performing. Impaired accounts aremanaged, for out-of-court credit recovery procedures, by a dedicatedorganizational structure with the help of external collectors. If further signs ofdeterioration are noted, property enforcement procedures are instigated throughexternal lawyers.– 153