In Fitch, Moody’s and S&P admitted the refusal to work with Russian investors

Fitch Ratings does not exclude that it will stop to assign to Russia national scale rating, writes Bloomberg with reference to the head of analytical service of the international rating Agency Linnell yen. This means that Fitch likely will not create a subsidiary company (now Russia has a mission of the Agency) and be accredited under the Central Bank, as required by the adopted last year act on rating agencies.

Thus national ratings Fitch will “lose power” in Russia, the Agency will continue to assign the international ratings of the Russian companies.

From accreditation and, as a consequence, assigning national ratings are also likely to refuse in Russia and two other international agencies — S&P and Moody’s. This was told by a source close to the Central Bank. A source close to S&P, confirmed that the Agency is inclined to abandon the creation of “daughter” in Russia. Can do and Moody’s, according to a source close to this Agency.

“This issue was discussed at a meeting of the Central Bank in October [2015], — said at the end of last year, a source in one of the international rating agencies. — The reason as to the requirements of the Russian law and the installation of the European regulator to delocalization”. “The Bank of Russia is continuing negotiations with all three agencies. We all still have time to make an informed decision,” said a source close to the Central Bank.

The law on rating agencies enters into force in 2017. It requires all international agencies to establish subsidiaries in Russia, if they want to put ratings on the national scale are those that are used inside the country, such as the accommodation of public funds or lending by the Central Bank.

The law also prohibits the agencies to withdraw the credit ratings assigned at the national scale, in connection with the decisions of the authorities of foreign States. This requirement of the law leads to conflict: international agencies are forced to choose between the execution of the Russian legislation and legislation of the countries where their headquarters (US and UK). “We, as a global company that should abide by the laws of the United States, in the situation when in the case of sanctions against Russian customers violate either the Russian or international legislation,” said Linnell in an interview with Bloomberg.

By law, entering into force in 2017, foreign rating agencies can operate in Russia through branches and assigning international ratings, or to create in Russia “daughter” that will meet the new requirements of the Russian legislation and to assign ratings on a national scale. Because of the requirements of the new law, the expenses of the international agencies must rise substantially, which can be economic feasible in a situation where there are no preconditions for the growth of the market.

Deputy General Director of National rating Agency (NRA) Alexey Venchikov believes that some of the requirements of the new law does not fit the business strategy of the international rating agencies. However, in his opinion, it seriously does not change the market share of rating services from the major players as international Agency will still be able to assign the contact reliability ratings and credit from overseas offices. “Major churn in Russia will take place at the expense of companies that used the rating agencies for regulatory purposes: to be able to invest pension savings, manage insurance reserves and other”, — explained Venchikov.

Comments of official representatives of Fitch, S&P and Moody’s are expected.