On behalf of the Italian Government – Department of Economic Development, the National Innovation Fund was created to fund Italian innovative SME’s via structured securitization techniques

In the midst of a harsh financial crisis and of a general credit crunch situation IPI, the technical agency of the Italian Department  of Economic Development decided to set up an innovative government grants scheme for Small and Medium Enterprises in order to fund firms intending to commercially exploit patents and trademarks.

The National Innovation Fund (NIF) was meant to be an innovative funding instrument that intended to reward SME’s investing in patents and trademarks via debt capital and leveraging the risk mitigation techniques embedded in the tranched cover securitization methodology, recently provided for by the Basel Committee’s New Capital Accord of June 2014.

The final goal of the NIF scheme was to provide government grants to eligible banks that they could use to issue lower-interest-rate loans to SME’s that were better rated by the bank. For the very first time in Italy, the idea of a loans portfolio to SMEs’ was being introduced in a government grants’ scheme and securitizations techniques were for the first time adopted for such purposes.

Numbers

The government grants scheme, which included a cash collateral provided to the banks of about € 40 million, allowed eligible banks to issue loans in the amount of € 375 million.

Prof. Virguti’s contribution turned to be fundamental in two ways: 1)in defining the instrument that was supposed to rule the relationship between the Government Department and the select credit institutions on the “debt capital” line of credit, including defining the templates to be used with regards to monitoring the fulfilments and obligations following the awarding of grants to eligible banks; 2) in providing his support in the assessment of specific technical and regulatory requirements.

We were able to appreciate prof. Virguti’s skills, competencies and expertise in being able to apply to the public sector complex instruments that were typically used in the corporate and banking industries.

Francesco Morgia –Executive Italian Department of Economic Development

The success of the National Innovation Fund wasprimarily a result of prof. Virguti’sparticipation in the project team. His competencies, flexibility and expertise allowed us to implement an innovative government grants scheme that was totally compliant with national and supranational bank supervisory regulations and directives.

Stefano Maria Della Corte (Invitalia S.p.a.)

Prof. Virguti’scontributionwasfundamentalsince the “debtgovernmentgrants” line of public fundingbased on securitizationtechniqueswas an absoluteinnovation in thoseyears.Due to the factthatitwas a “pilotproject”, some extremelyimportantfacets of the transaction, suchas the compliance with prudentialrequlations in force, the impact on banks’ capital requirementsstemming from the governmentgrants, the drafting of contracts, agreements and forms, weredealt with the skills and competencies of Prof. Virguti.

Nicola Buonfiglio (Invitalia S.p.a.)