Equinox EBA Scorecard Workflows

Project Finance Credit Risk Analysis may involve arbitrarily complicated tools and risk models, depending on the nature, size and complexity of the project being financed. As a common denominator, regulatory frameworks starting with Basel II Specialized Lending articulate a simplified (standardized scorecard). This Workflow discusses how Equinox provides a simplified workflow to implement a standardized scorecard workflow.

In the context of European regulation, the EBA Guidelines on Loan Origination and Monitoring specify concrete requirements:

Institutions should assess the primary source of repayment of the loan, which is the income generated by the assets (project) being financed. Institutions should assess the cash flow associated with the project, including future income-producing capacity once the project is completed, taking into account any applicable regulatory or legal restriction (e.g. price regulation, rate-of-return regulation, revenues being subject to take-or-pay contracts, environmental legislation and regulations affecting the profitability of a project).

All the required data points for deriving a score according to the regulatory assessment criteria are implemented in Equinox. The scorecard information is organized along Risk Factor Groups:

  • Financial Strength
  • Political and Legal Environment
  • Project Characteristics
  • Strength of Sponsor
  • Security Package

with each group including a number of Risk Factors and Sub-Factors. In equinox these data points are grouped according to an expanded ontology of parties (legal entities) and concepts involved in Project Finance:

  • The Asset being financed and associated revenue analysis
  • The Project Company (e.g SPV)
  • The Sponsor entity(ies)
  • Contractors and Operators
  • The Loan(s) and other products involved (e.g Swaps)
  • The Stakeholders

Data entry for numerical or text inputs is via convenient web forms. For example a segment of the Sponsor information:

Equinox Data Entry

Further Reading and References

Check out other Equinox use cases and Workflows