Bank of Italy reviews large firm credit assessments, identifies common practices and uneven ESG and AI integration

The Bank of Italy has published a comparative review of methodologies for assessing the creditworthiness of large nonfinancial corporations. The paper examines selected international External Credit Assessment Institutions, banks’ Internal Ratings Based systems, euro area central banks’ in-house credit assessment systems and rating agencies operating in Italy. Despite differences in objectives and regulatory frameworks, the systems generally combine financial data with qualitative judgment, sector analysis, group-level assessments, override mechanisms and ongoing monitoring. The review is intended to support refinement of the Bank of Italy’s in-house methodology as Eurosystem central bank expert assessments increasingly concentrate on large firms. It identifies structured management engagement, clear governance for expert overrides and early warning processes as common practices suited to assessing complex companies. Methodological differences remain relevant because they can produce different outcomes for credit allocation, risk management and Eurosystem collateral eligibility. Environmental, social and governance factors are usually incorporated through qualitative assessments rather than statistical models, with the depth of integration varying across providers. Artificial intelligence is also used unevenly and mainly for supporting tasks such as data processing, anomaly detection and early warnings. Its application to core ratings remains limited by explainability, confidentiality, governance and regulatory constraints.