European Investment Platform Mintos Implements Changes in Methodology of Risk Scores

The latest Mintos Risk Score updates based on developments and data from the second quarter of 2023 are now live on the Mintos platform.

Mintos has shared the general summary of the most recent quarterly changes. An overview of historical changes in the Mintos Risk Score through the quarters is also “available as a spreadsheet on the updates page.”

This quarter, Mintos implemented several changes “in the methodology of the Mintos Risk Score subscores.”

Here are the main updates:

The revised Loan portfolio performance methodology “will now incorporate a more comprehensive evaluation.” They’re introducing additional criteria “for non-performing loans (NPLs) in order to observe the trends of delayed loans within lending companies.”

The primary adjustments for the Loan Servicer efficiency subscore “involve shifting the data source for the country risk metric to Allianz Trade.” They also relocated most of “the financial soundness ratios to the Buyback strength subscore and placed a greater emphasis on the operational processes, such as procedures, controls, and reporting quality.”

Several sub-factors were recalibrated “for the Buyback strength subscore revisions, which include focusing on the most pivotal indicators, reflecting the company’s financial stability, cashflow generation capability, and efficiency.”

The main ratios such “as Equity/Assets, EBT/Assets, and ICR are now closely monitored. Alongside financial evaluation, attention is more concentrated on the company’s capacity to attract public funding, which is seen as enhancing the company’s transparency and growth potential.”

There were 57 subscore changes of 0.7 or greater for Q2 2023.

When it comes to loans from lending companies from Russia and Ukraine, their status remains unchanged since the last update, “with Mintos Risk Score and subscores withdrawn for these companies.”

To see detailed comments about “all the latest changes in the Mintos Risk Scores and subscores, visit the Mintos Risk Score updates page.”

The regular schedule for the Mintos Risk Score updates is quarterly. Exceptions will be made in some cases when there is “a significant material improvement or deterioration for specific Notes on the platform, in which case the changes are introduced as necessary.”

For Mintos Custom portfolios, if you’d like “to adjust your investment preferences based on the most recent Mintos Risk Score updates, you can do so in the portfolio settings.”

The Mintos Risk Score is “an aggregate of four subscores that are assigned to four different aspects of particular loans underlying a Set of Notes.”

These subscores rate:

  • loan portfolio performance (the portfolio health and historical performance of the loan book),
  • loan servicer efficiency (the operational efficiency of the loan servicer evaluated through
  • its procedures and controls during loan issuance and collection processes),
    buyback strength (the buyback obligor’s ability to fulfill contractual obligations, meet
  • liquidity needs, and capital sufficiency), and
  • cooperation structure (the legal setup between the loan issuing company and Mintos).

According to the significance they see “in each subscore, the weights of the subscores are loan portfolio performance 40%, loan servicer efficiency 25%, buyback strength 25%, and legal structure 10%.”

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